Media coverage of recent actions by both the Centers for Medicare & Medicaid Services (CMS) and Congress has turned the nation’s attention, again, to hospital charges.


The coverage has turned the spotlight on hospital chargemasters, but a national focus on the chargemasters will not, by itself,  lead to rational pricing or actionable transparency.

There’s no question that providers do need to restructure their pricing to make it more rational. However, restructuring chargemasters so that prices better reflect the cost of all of the inputs necessary for care, the quality of care delivered, and the local market conditions where care is provided is difficult to do in a vacuum. For the results of such an effort to be useful for purchasers and patients, a thoughtful discussion about what constitutes “actionable transparency” needs to occur among all the key stakeholders, and barriers to rational pricing must be addressed. 

HFMA is convening a taskforce to identify and address these issues. In the meantime, providers should avail themselves of opportunities to improve the transparency of early financial communications with patients with the goal of enhancing patient-provider financial interactions.

The premise for providers’ need to act is simple: Financial discussions should not be delayed until after services have been delivered because doing so deprives patients of the ability to make informed choices about their treatment options. Moreover, patients’ need for early and transparent financial communications will only increase as patients assume greater responsibility for the direct cost of their care—through trends such as the move to high-deductible health plans, the formation of narrow network products, and the emergence of reference pricing.b

Congress and CMS Weigh In

Buried within the Affordable Care Act (ACA), in Section 1001 (Amendments to the Public Health Service Act), is a provision requiring hospitals to publish and annually update a list of standard charges for items and services provided.c Although CMS has yet to publish guidelines for carrying out this provision, a flurry of related activity has occurred, with CMS’s well-publicized release of charge data for high-volume inpatient conditions in May and for outpatient procedures in June, followed by a related hearing convened by the Senate Finance Committee on June 19. These actions not only represent clear steps toward accomplishing the spirit of the ACA provision—if not the letter of the law—but also firmly shine the spotlight back on hospital charges. 

There also is reason to question the value of these actions, particularly with respect to how valuable CMS’s released information actually is for patients and purchasers. Sadly, little of the discussion surrounding chargemaster prices has focused on steps necessary to achieve a rational pricing structure that better reflects costs, quality, and local market conditions or what actionable transparency looks like. In isolation, chargemaster data cannot yield the information patients and purchasers need to become value-driven consumers of health care.

For transparency efforts to be actionable, the key stakeholders need to work together to answer several key questions:

  • How will quality data be incorporated to offer a sense of the relative value offered by providers?
  • What price information (e.g., out-of-pocket costs, per-member-per-month coverage) is most valuable in informing healthcare decisions, and to whom is it valuable?
  • How should price and quality information be displayed so it is most useful?
  • Where should the initial efforts of pricing transparency focus—on patients, or on employers?
  • What barriers must providers, payers, employers, and patients overcome to achieve actionable transparency?

A chief focus for HFMA’s taskforce of key stakeholders will be to address these questions and the related issues that currently inhibit actionable transparency.d The taskforce’s work will be grounded in guidelines from HFMA’s 2007 PATIENT FRIENDLY BILLING® Project report Reconstructing Hospital Pricing Systems: A Call to Action for Hospital Financial Leaders.e

The taskforce will take time to reach consensus, but that should not stop providers from taking steps to improve patients’ financial interactions with the delivery system and, ultimately, begin addressing the problems raised in articles discussing the current state of hospital charges. 

Opportunities to Improve the Patient Experience

Two steps providers can take now to improve early transparency include simplifying and improving access to financial assistance and providing patients with up-front estimates of the cost of care (both total and the patient’s financial obligation) for common nonemergent services. 

Financial assistance policies. The ACA requires providers to adopt, implement, and widely publicize a financial assistance policy. As providers continue to review their financial assistance policies in light of ACA requirements, they should ensure that these policies take into account the growth of the underinsured and evolving needs of the community. Those organizations that currently do not offer financial assistance for balances after insurance should consider doing so. 

The ACA also requires that providers limit charges to all uninsured individuals to “amounts generally billed” to commercial payers and Medicare. While the industry awaits guidance from the final IRS 501(r) rule to determine how to calculate this amount, providers still must have a methodology for providing this discount as part of their financial assistance policies. 

Further, providers should simplify documentation requirements (using presumptive eligibility tools whenever possible) and reexamine when and how the policy is communicated to ensure broadest possible dissemination to patients who might be eligible. 

Up-front estimates. Price estimates should be meaningful to patients. Estimates should provide information necessary to assist patients in making treatment decisions, and that information includes the patient’s financial obligation. Ideally, patients should receive estimates of what they will be expected to pay prior to service. 

Although it is no simple matter to provide such up-front estimates to patients, healthcare organizations are exploring different ways to achieve this important goal.f Spectrum Health in western Michigan, for example, provides average prices for a wide range of procedures, as well as separate averages for the Medicare, Medicaid, and commercial reimbursement it receives, via its website. Omaha, Neb.-based Alegent Creighton Health has developed an online price transparency tool—known as the MyCost calculator—that uses the health system’s charges and the details of a patient's insurance coverage and deductible status to deliver an out-of-pocket estimate. 

Although in time, the barriers to pricing transparency in health care will likely be removed through the efforts of groups such as HFMA’s Pricing Transparency Task force, providers should not wait for this change to happen before they act. Providers should take whatever intermediate steps are possible until the problems that have prevented rational pricing and actionable transparency from occurring can be fully solved. By taking all possible steps to facilitate early, transparent financial communications, a provider can improve patient satisfaction while reducing both the risk of scrutiny related to account resolution practices and the resources the provider is compelled to deploy against collectible accounts. 

Chad Mulvany is a technical director in HFMA’s Washington, D.C., office, and a member of HFMA’s Virginia-Washington, D.C., Chapter.


a. See “Early, Transparent Financial Communications,” HFMA, published online May 15, 2009.

b.  See, for example, Andrews, M., “Large Companies Are Increasingly Offering Workers Only High Deductible Health Plans,” Kaiser Health News, March 26, 2013; Mathews, A., and Kamp, J., “Another Big Step in Reshaping Health Care,” The Wall Street Journal, March 1, 2013; and Mathews, A., “WellPoint Helps Cut Employers' Health Cost,” The Wall Street Journal, June 25, 2013.

c. The provision is in Section 2718 (Standard Hospital Charges), which the ACA established as an amendment to the Public Health Service Act, and which also includes the provision describing the medical loss ratio (MLR), which limits insurers’ administrative costs and profits.

d. See “Fifer: Increased Transparency Critical for Health Care,”.

e. Read the report.

f. See Butcher, L., “Lessons Learned from Transparency Pioneers,” HFMA.

Publication Date: Thursday, August 01, 2013

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