Breaking Down Pricing Transparency Rules Within Health Care Systems

In a recent podcast for Integrated Healthcare Executive, David Shelton, CEO of PatientMatters, discussed the rules regarding pricing transparency across health care systems and offered insight into how they will affect hospitals and patients. The following is an edited version of that podcast.

My name is David Shelton, and I serve as the CEO for PatientMatters. I started my health care career in manufacturing and distribution of disposable medical equipment, spent some time in the insurance industry, and then moved to leading a team that was providing advocacy services for self-pay patients in hospitals.

During that time, we recognized that with higher deductibles and copays, more patients were behaving as if they were self-pay patients, even when they had insurance. We continue to provide patient advocacy services and now have moved into providing a full front-end service for hospitals that includes staff training, key performance indicator  improvements, and technology solutions to better interact with patients.

Fighting Surprise Billing

The new rules that came from the Centers for Medicare & Medicaid Services (CMS) are putting some different rules and requirements on hospitals for estimation and standardized pricing, which impacts both the hospital and the patient. To understand why the rules are in place, I think it’s important just to take a quick look leading up to the conversation about estimating pricing transparency, the things that go along with the new rules.

Probably the simplest definition of surprise billing—which is the driver for this—is when a patient receives services at an in-network facility that utilizes out-of-network medical providers. Anesthesiology, emergency treatment, and lab services are probably the most common causes.

Nearly half of all Americans have been impacted by surprise billing. 

There was a recent study that showed the ratio of emergency department visits resulting in an out-of-network bill rose from 32% in 2010, to almost 43% in 2016. That’s an 11% increase. The liability of patients from the emergency department experience went from $220 to $628. Similarly, the ratio of inpatient admissions with an out-of-network bill increased from 26% to 42%, a 16% increase, with patients’ liability increasing from $800 to more than $2000.

The proposed rules are aimed at giving consumers pricing transparency for what they pay for health care procedures. And these new rules come from President Trump’s executive order in June 2019, on improving price and quality transparency in health care.

Effect on Hospitals, Patients, and Industry

From an impact on the hospital perspective, CMS issued a final rule in November of 2019, updating the President’s executive order that requires hospitals to disclose the rates they negotiate with insurers, beginning in 2021. The administration also released a proposed rule that would require health plans to share price and cost sharing information with members upfront.

The result of that rule, from a hospital’s perspective, is the definition of the pricing model to be released online was more clearly laid out. I think some health care providers thought they could solve the pricing transparency challenge by simply posting their chargemaster files.

Of course, the problem with that strategy is the patient or the consumer does not understand how to interpret that data or how to derive a price for the services, and probably neither do many hospital employees. 

There’s now a more comprehensive standard charges file definition. The final rule requires hospitals to post their standard charges online in a machine-readable file. Those standard charges include gross charges, discounted cash prices, payer-specific negotiated charges, the identified minimum, and the identified maximum negotiated charges.

The hospitals will also be required to disclose the standard charges for all items and services including supplies, facility fees, and professional charges for employed physicians and other practitioners. 

The rule then states that hospitals are required to post payer-specific negotiated rates online, in a searchable and consumer-friendly manner for 300 services that patients are likely to shop around for. Seventy of those 300 services are stipulated in the rule, and the hospital can choose the other 230 services they post online. Finally, the hospital now puts themselves in a position to receive penalties, and those penalties can be up to $300 per day.

These rules aim to benefit the patient in a couple of specific ways. The proposal requires health insurance companies and group health plans that cover employees, to disclose on a public website their negotiated rates for in-network providers, and allowed amounts paid for out-of-network providers.

The thinking is this will promote competition in the health care industry, and also support consumer price decision-making. A lot of the conversation today is going to be using the words consumer and patient because they’re both looked at in the same perspective.

Health insurers are also now, or would be, required to provide members with personalized out-of-pocket cost information for all covered services in advance. It’s estimated that with these rule changes, the savings would be more than $128 million per year, due to lower medical costs for insurers and consumers.There are some consumer rebate opportunities that amount to more than $67 million annually, so the overall savings are pretty substantial. 

Potential Push-Back

The rules are being challenged right now by several groups in court. They’re challenging the release of privately negotiated rules to the public and to competitors.

I think it’s interesting to note that the price transparency rule is based entirely on the authority under the Affordable Care Act. At the same time, the current administration is arguing in court that the entire Affordable Care Act law is invalid. We see people going off of both sides of the aisle.

Again, the goal of the proposed rule is to enable informed health care decisions, by providing consumers with information on health care costs. The belief is that this information helps consumers make cost-conscious decisions, see fewer out-of-pocket surprises, and potentially lower overall health care costs.

I think most are in support of the rule. It’s the application of the rule that’s being challenged. There are some things that hospitals and health care providers can do, as they’re working through the challenge of providing bill estimates to patients like key points to take into account as you are building your estimation tool and determining how you are going to communicate with the patient.

I think that probably the two biggest things to consider are, first, when you are building your estimation tool, it’s important to remember that you’re not trying to give the patient an average price. You’re working to provide a specific price that fits for that individual, considering their insurance, deductibles, and copay.

You want the patient to leave with confidence around the provided estimate, to feel that that estimate was created uniquely for them to be able to address the particular situation they’re in now. When you are stretching your estimation tools, I think it’s important to make sure to take into account the physician providing these services.

I’ll give you an example. If you take two surgeons that may both complete a procedure, and the patient’s outcome and recovery are both positive, but they use perhaps different equipment in the process, maybe staff the operating room differently, the cost between those two physicians would vary dramatically. Anytime you’re building an estimation tool, I think it’s most important to focus all the way down to the physician providing the services, not just stopping at the [current procedural terminology] code and trying to build from that point. 

The second critical piece that presents a lot of challenges sometimes is managing your payer contracts. It’s sometimes forgotten. When you first build the estimation tool, you have staff specifically focused on the outcomes. You are measuring and comparing estimates to actual costs, and you are really refining the process, getting it really fine tuned for your specific organization. As the tool goes into use, you have to continue to measure its performance and monitor changes in the payers’ contracts.

It does not take many changes in the payer contracts to dilute the estimation accuracy. It’s important to either keep staff members or your vendor responsible for continuous accuracy measurements, with your estimation tool. I think it’s important to look for an estimation tool that’s maintaining a 95% or greater accuracy level for your communication back to your patients.

Navigating Challenges

As hospital acquisitions take place, you get a lot of challenges in the different technology solutions that might exist at one facility, and how those might be different from another. As you make the acquisition, that challenges really manifest in what system we will use, how will we communicate, and how we go forward.

Anytime an acquisition takes place, it presents many challenges and opportunities for the combined institution. Most hospitals provide some type of price information, but it can vary dramatically from one facility to another. One hospital may only be providing estimates based on a payment deposit model by service line, while another one may be using a sophisticated estimation technology.

As part of any acquisition or integration of a health system, an opportunity to improve study should always be conducted. There’s a good opportunity to partner with vendors or other groups that have been informed in the marketplace, and take advantage of their expertise, and their experience working in various health information systems.

That a lot of times presents some of the challenges as you are working with your different tools, and especially in the estimation tools. Hospitals should always move toward more information, to better serve their community. It should include technologies that offer ease of use for the users, and provide detailed dashboards and reporting from management, and most importantly, what’s the best solution to the patient interaction.

Typically, during these transactions or these transitions, rather, the hospitals evaluate the system needs and workflows required for all entities involved. They select a solution that best meets the needs of the expanded organization. The transition includes implementation of best available technology, workflow, customer service model, and training. Training is always critical to ensure a smooth transition. Training should include staff, providers, and most importantly the patient. 

Moving Ahead

The technology continues to change and it brings a lot of advances and opportunities for pricing opportunities, and to all the parties that are involved, from the patient to the hospital, across all spectrums. Technology makes care delivery more efficient and costs more effective. This can be in the form of automation that helps reduce labor costs and price transparency that gives patients useful information to make smarter decisions.

It is important to note that while technology can automate and inform, it is ultimately all of us doing our part to reduce waste in the system that leads to better outcomes. I believe that technology is only part of the solution.

The right patient-centric approach in workflows at hospitals coupled with technology leads to the greatest degree of success. When you look at this, at the times that we are in right now, these are challenging times for health care providers. The coronavirus is impacting our health care system in unprecedented ways.

It makes us pause and certainly thankful for those who work the front lines in health care every day. When you have this conversation about surprise billing and technology solutions, it’s sometimes tempting to point blame or accuse some of trying to take advantage of loopholes in the system.

While there may always be some of that happening,
 my experience in working with health care providers is these are people in institutions who are trying to do their very best every day, sometimes challenged with older technology, or office operational challenges that simply build or accumulate over time.

It’s important to note that health care is a hard business with lots of moving pieces, yet we depend on these individuals to do all they can for us when we are there in our time of need. I think working together will resolve the surprise billing challenges in our continuing effort to always put the patient first.