by Noel D. Sturtz, Client Program Manager and Kristie Kline, Lead MSA Analyst

Transparency in Pricing
Transparency in healthcare has historically been defined as the “making available to the public, in a reliable, and understandable manner, information on the health care system’s quality, efficiency and consumer experience with care, which includes price and quality data, so as to influence the behavior of patients.”[1] While at first glance the concept seems simple, transparent pricing is an issue that has long confounded regulators, administrators, and consumers alike. Historically, hospitals have been reluctant to embrace transparency, arguing that (among other things) disclosing price information would lead to higher costs. Proponents, on the other hand, contend that unpredictable pricing can reduce efficiency, erode trust in healthcare systems, and diminish overall outcomes. As argued in the article, Price Transparency: A Gift to Americans in the New Year, consumers need accessible and reliable data to make informed healthcare choices.  In support of this argument, proponents point to an abundance of stories of consumers who, after seeking healthcare treatment, find their mailboxes overflowing with surprise medical bills – often with disastrous financial consequences.[2]

Responding to Concerns
Recognizing the mounting attention given to hidden fees and surprise billing, on June 24, 2019, former President Trump signed an executive order (EO) directing the Department of Health and Human Services (and additional agencies) to take steps to improve price and quality transparency in healthcare. The outcome of this EO was the Hospital Price Transparency rule, which after some legal wrangling, became effective January 1, 2021. The rule, which applies to Medicare and non-Medicare hospitals, requires facilities to publish a machine-readable, online data file that includes a description of all items or services offered and charge/rate data for both negotiated rates and discounted cash prices. As stated in The National Law Review article, The Ongoing Saga of the CMS Hospital Price Transparency Rule, this requirement seeks to allow more sophisticated parties access to comprehensive pricing data. Hospitals are also required to publish a consumer-friendly list of standard rates for at least 300 “shoppable services,” defined as services that can be scheduled by a healthcare consumer in advance. The Centers for Medicare & Medicaid Services (CMS) has identified 70 services that must be included in the list. Hospitals are free to choose the remaining 230 services to be included. In doing so, CMS hopes to leverage the competitive marketplace to improve healthcare value and outcomes for consumers. While it is still too early to determine whether these goals will be realized, it is clear the rollout has not been without issue.

Tracking the Rollout
Health Affairs Journal sought to determine the extent to which hospitals were complying with the regulation and took a sample of the largest 100 hospitals in the U.S. for the period of January 2021 to February 2021. They found 65 clearly noncompliant, with omission of payer-specific rates. Earlier this year, in an April 13 letter to the U.S. Department of Health of Human Services, the bipartisan congressional Committee on Energy and Commerce urged “vigorous oversight” and enforcement of full compliance with the Rule.  And in a release on July 19, CMS announced the proposal of a minimum penalty of $300 per day for smaller hospitals (30 beds or fewer), for noncompliance; an additional $10 per day for greater than 30 beds; and with $5,500 the maximum daily amount.

However, it has been argued that compliance issues may be related to such issues as perceived ambiguities in the Rule’s language, or with the machine-readable file requirements. Also with no current central pricing repository , consumers need to visit each hospital’s website to obtain pricing information. Moreover, not only do prices for health services differ across the U.S., but pricing for a particular health service within the same hospital may vary widely, depending on the payer. In addition, pricing estimates are subject to change.

Medicare Set-Aside Considerations
For MSAs intended for CMS submission, short-term changes associated with the Rule are unlikely, as pricing is based on state fee schedules or Usual and Customary Rates. For MSAs not submitted to CMS, there could be a greater opportunity to realize cost savings for published procedures. For example, pricing for a lumbar fusion procedure may cost significantly less in a hospital in a claimant’s local area compared to the cost for that same procedure in a major medical center (cross-referenced to the claimant’s zip code in accordance with CMS guidelines). In contrast, prescription drug prices could be high in some instances, as pharmacy benefit managers may not be getting the best pricing for drugs from a particular pharmacy.

Given the fact that the rule was announced recently, its ultimate impact on MSAs remains uncertain. We will continue to monitor the situation and offer our insights as it unfolds.

 

[1] Fletcher, Terry. (2020, February 24). New Healthcare Price Transparency Rule – The Best, Worst, and Most Realistic Case Scenarios. https://www.icd10monitor.com/new-healthcare-price-transparency-rule-the-best-worst-and-most-realistic-case-scenarios

[2] Himmelstein, et. al. (2019) Medical Bankruptcy: Still Common Despite the Affordable Care Act. American Journal of Public Health, 109(3). https://ajph.aphapublications.org/doi/10.2105/AJPH.2018.304901?eType=EmailBlastContent&eId=a5697b7e-8ffc-4373-b9d2-3eb745d9debb&=&