Column | Consumerism

Price transparency: the next chapter

Column | Consumerism

Price transparency: the next chapter

Ready or not, the new year will bring new federal price transparency requirements.

As healthcare finance leaders know, on Jan. 1, hospitals will be required to post online, in a consumer-friendly format, their payer-specific negotiated rates for 300 shoppable services. This is a primary requirement of the CMS final rule on hospital price transparency. As an alternative, hospitals may choose to maintain a web-based out-of-pocket (OOP) price estimation tool for shoppable services. Such tools are aligned with longstanding recommendations of HFMA’s Price Transparency Task Force and clearly useful to consumers. However, regardless of whether a hospital opts to post its payer-specific negotiated rates for shoppable services or provide an OOP estimator, it will still be required to publish a machine-readable file containing its payer-specific negotiated rates for its entire chargemaster.

Some hospitals put preparation for implementation of the final rule on the back burner, pending the outcome of legal challenges to the rule. We understand that many healthcare finance leaders have concerns about the disclosure of negotiated rates. For some, it feels like a bridge too far. Indeed, in a recent HFMA study, only 12% of the 151 provider organizations surveyed described themselves as “very prepared” for price transparency. And more than 90% perceived risks to transparency. These findings are consistent with the slow adoption rate of transparent business practices in healthcare, overall. 

But “wait and see” is not a viable strategy in today’s environment. It’s time for finance leaders to prioritize transparency and get OOP price information ready for one-click viewing by consumers. Going forward, hospitals and health systems should be able to explain and defend their prices to any care purchaser, consumer, regulator or journalist, particularly for services considered shoppable by CMS. That, in turn, may require providers to negotiate with health plans to bring about the price hydraulic necessary to make rates market competitive while limiting any negative impact to the hospital’s bottom line. This hydraulic likely involves reducing prices for certain shoppable services, such as diagnostic imaging, and increasing prices of other services, such as trauma care.

This is far from an optimal strategy. But as more-transparent prices increasingly drive volume for non-emergent services, hospitals will need to unwind the historical cross-subsidization of services that was necessary to make up for public payer shortfalls with private payer revenue. And unfortunately, this isn’t equitable. How can safety net hospitals compete on price with hospitals that have a much higher percentage of private health plans in their payer mix? The process also requires a considerable amount of analytics, preparation and negotiation to ensure this payment rebalancing is revenue neutral. But it is the kind of analysis that’s necessary for consumer-facing prices. 

And the issue will not just go away. The transparency bar will continue to be raised. It’s safe to say that disclosure of negotiated rates is just the latest development in a broader societal movement toward full price transparency in healthcare. Ultimately, consumers stand to benefit from greater price transparency. And I’m confident that all healthcare stakeholders agree that consumer benefit should be priority one.

About the Author

Joseph J. Fifer, FHFMA, CPA,

is president and CEO, HFMA, Westchester, Ill.

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