New Executive Order Means Healthcare Price Transparency Gets Real

In May 2018, we kicked off our “Hospital Revenue Cycle Readiness Series,” with the topic of price transparency. I talked specifically about the Centers for Medicare and Medicaid Services (CMS)  rule that made it mandatory for hospitals to make public a list of their current standard charges through the internet by January 1 of this year. The majority of hospitals did comply, but not within the spirit that the regulation was intended. However, a new executive order puts more pressure on healthcare facilities to “publish prices that reflect what people actually pay for services in a way that’s clear, straightforward and accessible for all.”

Many hospitals minimally complied by putting cryptic files online that related to their chargemasters, or the lists of all the services and items for which a hospital can bill patients or their insurance providers. This list outlines the costs of tests, procedures, supplies, drugs, and services as well as any other fees related to their care (i.e. room charges). However, these prices don’t make sense to the average patient.

The executive order emphasizes the “actual” price paid by the patient―which is different than what the hospital charges. The executive order also opens the door for regulatory bodies to create true rules and oversight of price transparency. But, there will be more coming on that down the line. Unraveling the charge structure is often difficult for hospitals due to a number of factors, including:

  • Inconsistent pricing within the hospital’s department let alone across a system of facilities;
  • Strategic pricing being used to improve reimbursement;
  • Different approaches used to bundle services;
  • Complexity of physician decision making; and
  • Self-pay and charity-care policies.

Consumers still struggle to understand their health insurance benefits in general. Therefore, it’s difficult to expect them to understand these prices versus out-of-pocket expenses as well as make a determination on quality and value differences between facilities. For example, when comparing MRI services at face value, where one hospital lists a $2,100 cost and a free-standing imaging center shows a charge of $800, which do you think a patient will naturally pick? The real challenge for providers now will be taking into consideration what the true out-of-pocket costs will be for patients, and not just what their healthcare facility charges for a particular item or service. Additionally, providers will need to face the fact that some healthcare services are now viewed as a commodity.

Hospitals these days can’t afford to lose even one patient. Hospitals will need to take into account the average patient’s perspective in terms of how he or she examines and compares prices for healthcare services. Best practices call for information to be presented in a way that:

  • Provides easy to access, understand and use;
  • Creates common definitions and language describing hospital pricing;
  • Explains how and why the price of patient care varies;
  • Encourages patients to consider price as just one factor in their decision making; and
  • Directs patients to more information on financial counseling

Those hospitals that achieve price transparency AND help patients with the financial portion of their stays will earn their trust―and earn their business.
Contact Windham Brannon Healthcare Advisory Services Practice Leader Valerie Barckhoff at vbarckhoff@windhambrannon.com to get more information on how your hospital or healthcare facility can fully comply with the new executive order for healthcare price transparency.