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Navigating the American healthcare and insurance system is a complex and convoluted process, even for patients with a working knowledge of the industry. As costs continue to rise and confusion escalates, it is prudent to carefully examine any potential solution from eliminating barriers to understanding healthcare-related expenses. Arguably, there is no other industry in America where consumers must work so hard to determine the price of the services prior to purchasing. Why does an MRI cost a few hundred dollars at one clinic and a few thousand dollars at another? Why are charges on a hospital claim significantly higher than the amountof a third-party payor reimbursement to the hospital? Will federal legislation help answer these essential questions?
When the Calendar Year 2020 Final Rule addressing Price Transparency (CMS-1717-F2) was released on November 15, 2019, initial reactions showed the polarizing nature of the new requirements. On one end of the spectrum, the American Hospital Association rapidly brought a lawsuit against CMS/HHS, arguing the Final Rule should be thrown out on multiple grounds, includinga lack of statutory authority to define “standard charges” to include negotiated payer rates anda violation of First Amendment rights. On the other end, Patient Advocacy Groups celebrated the Rule as a move toward lifting the veil on hospital pricing and argued that once rates are publicly available, basic economic principalswould continue to drive down costs incurred by patients. The previous Price Transparency Final Rule that went into effect on January 1, 2019 contained a requirement that hospitals publish gross charge data.We are in the midst ofmultiple years’ worth of Final Rule regulationsconsistentlyfocused on helping patients make informed decisions related to the cost and quality of care. The Final Rule frequently hearkens back to the goal ofincreasing patients’ ability to review pricing data before making decisions.
One key element of the 2020 Final Rule is the requirement that each hospital must publish a “machine-readable CDM file” that contains charge item descriptions, service packages, gross charge amounts, self-pay cash price, and contracted payor negotiated rates, among other information.
That CDM file may not necessarily lead to clear pricing information regarding a patient’s cost for care though. For example, consider Patient A, who requires a knee replacement. Patient A has commercial insurance coverage and begins to research what the final cost will be after the surgery. Patient A visits 3 hospital websites and using the published CDM files available, learns the following information:
Hospital A: Knee Surgerygross charges - $65,000 Payor negotiated rate for patient’s insurance policy - $45,000 case rate
Hospital B: Knee Surgery gross charges - $80,000 Payor negotiated rate for patient’s insurance policy - $6,600 orthopedic per diem
Hospital C: Knee Surgery gross charges - $50,000 Payor negotiated rate for patient’s insurance policy – 60% of gross charges
Based on those data points, which of those 3 hospitals would be the most cost-effective to the patient? This is a critical question in the context of the Final Rule, since the Rule was written on the foundation that the requirements wouldallow patients better access knowing their own cost related to care.However, given only the information above, all of which is required to be published by the Final Rule, there is no immediate answerfor Patient A. The patient will need to consult their insurance plan information to confirm how co-pay, co-insurance, and deductible will factor into their cost of care. Patient A willalso need to confirm the hospital and surgeon are in their respective insurance payor’s network. So, while the published CDM file displayed the required information, did it necessarily inform the patienton their true cost? Only time will tell if the data is as useful as the Rule maintains it will be.
So, what is the best advice to offer clients? Compliance with federal regulation is of upmost importance to our hospitals and in this increasingly transparent world, so is competitive pricing along with a marketable strategy to provide accurate patient estimates. The Final Rule does allow for hospitals to use a patient-facing estimation tool to display the actual out-of-pocket cost for a minimum of 300 specific shoppable services or procedures that could be scheduled in advance (such as CT scans, routine blood work, orchild delivery including 70 services defined by CMS and 230 services defined by each hospital); however, in the absence of that tool, hospitals must instead release a static file of the required information. It is important to note that this technology will only exempt hospitals from having to create a static file of the 300 shoppable services but it will not exempt the hospital from having to develop a full machine-readable file with the standard charge data requiredas previously discussed. The future of patient education in determining cost of care remains to be seen but simply posting the negotiated payor rates and gross charges may not consistently offer patients the answers they are looking for.