Hospital Price Transparency: Five Changes You Should Know

Newly proposed changes to hospital pricing transparency regulations announced by the Centers for Medicare & Medicaid Services (CMS) will impact approximately 7,000 hospitals operating in the U.S. Price transparency remains a high priority for the federal government, which views this ongoing initiative as a mechanism to increase competition for healthcare services and drive down industry costs.

The proposed rule from CMS seeks to streamline regulations and make it easier for hospitals to comply while enhancing measures to enforce and publicize hospital violations, with three notable objectives underscoring the push for recently announced changes:

• Improve automated access to standard charge information.
• Strengthen CMS’s enforcement capabilities.
• Improve public understanding of hospital charges to use pricing information for items and services.

Meanwhile, healthcare provider organizations are facing operational challenges with far-reaching quality, cost, and revenue cycle management implications. Indeed, labor shortages for clinical and technical roles continue to disrupt operations. Budgetary constraints and declining revenues also complicate matters.

These issues could not only hamper a hospital’s ability to deliver essential medical care across patient populations but also meet the mandatory compliance specifications, putting them at risk of incurring hefty fines. To that end, CMS has issued civil monetary penalty (CMP) notices to seven hospitals since 2021, totaling more than $2 million for price transparency violations.

Five Tenets of Hospital Price Transparency Enforcement

CMS announced its proposed changes to enforce hospital price transparency on July 13, 2023. The proposed rule would update and refine requirements for hospitals to publish their standard charge information, along with various enforcement provisions to address non-compliance.

The CY 2024 Hospital Outpatient Prospective Payment System (OPPS) Policy Changes: Hospital Price Transparency Proposals (CMS-1786-P), outlines five key changes that hospitals need to know:

1. CMS proposes to improve standardization of the charge data by requiring hospitals to use a CMS template to submit their charge information.
2. CMS proposes that hospitals encode standard charge information that corresponds to required data elements, including but not limited to standard hospital charges, descriptions, and accounting or billing codes.
3. CMS seeks to improve automated access and real-time centralization of the machine-readable file (MRF) by proposing requirements for technical modifications to the hospital’s public website footer, proper linkage, and .txt file format.
4. CMS proposes that each hospital would be required to affirm in its MRF that, to the best of its knowledge, the hospital has included all applicable standard charge information in accordance with the requirements of 45 CFR part 180 and that the information displayed is true, accurate, and complete as of the date indicated in the file.
5. CMS outlines new enforcement provisions, including a 90-day period for hospitals to come into full compliance, imposing penalties earlier and automatically, publicizing other enforcement activities, and streamlining the compliance process after a deficiency is identified.

Although these requirements would take effect on January 1, 2024, CMS would provide an enforcement grace period until March 1, 2024, to give hospitals time to adopt the CMS template.

How Consumerism Drives Price Transparency in Healthcare

Consumerism has infiltrated almost every aspect of modern life, and healthcare is no exception. Price plays a significant role in driving purchasing decisions in highly competitive markets. Take grocery or food retail as an example. Supermarkets can maximize their influence by offering discounts, coupons, and rewards for items they know are sold at competing stores. This strategy is widely used in hopes of securing loyal and frequent customers who can choose what to buy and where to shop. Consumerism behaviors are often based on cost, convenience, and affordability.

In recent years, the rise of consumer-driven healthcare has given patients more power to make financially informed decisions or purchases, enabling greater control over their medical choices. Price transparency in healthcare has become a hot topic as patients are increasingly demanding to know the cost of medical procedures and services. There are conflicting views on whether price transparency is an effective solution or if it simply perpetuates the commodification of healthcare.

Under price transparency legislation, hospital-specific standard charge information must be accessible in a machine-readable file (MRF) so patients can easily compare prices for non-emergency, yet planned, procedures, also known as shoppable services. However, presenting comprehensive and accurate charge estimates to patients in advance has been a significant challenge for several reasons.

Shoppable Services in a Consumer-Friendly Format

Theoretically, the hospital price transparency initiative would make it easier for patients to decide where to receive certain care for conditions like surgery or chronic disease management such as heart disease by allowing them to compare costs between facilities and providers.

However, while price is an essential factor, it is only one aspect of the bigger picture when it comes to making informed choices for medical treatments. Other considerations such as care accessibility, patient experiences, physician or office communication, and quality are deemed as important–if not greater– than the cost of shoppable services. A hospital’s quality of care metrics should, therefore, offer insights into its overall performance by including patient outcomes, safety measures, patient experiences, and more.

Being open about these factors ensures that patients receive the best care while also helping them manage costs effectively. Hospitals that track cost and quality outcomes can proactively share this information and engage consumers throughout their buying cycle.

Hospitals Tackling Complex Industry Challenges

Meanwhile, hospitals face pressing priorities that may delay much-needed technology or organizational improvements to enable more robust healthcare data collection and analytics. The costly and ongoing COVID-19 public health crisis has led to extensive physician burnout, increased healthcare costs, diminishing revenue, and strained operational budgets.

These complex issues require innovative solutions and partners to reverse the historic impact. Without the means to offset these industry dynamics, many hospitals face uncertainty in meeting the evolving technical specifications of the price transparency regulations by the proposed deadlines.

Hospitals must also navigate the potential impact of new transparency regulations on their revenue cycle management models and address concerns regarding competitive pricing with insurers, payers, and provider networks.

Hospital Items and Services Variables: Estimating Costs

Estimating the cost of services is a labor-intensive process that involves collaboration between hospital administration, various clinical departments, and partner organizations. The intricacies of medical procedures, labor, and administrative factors—including the payer agreements themselves—collectively present obstacles for hospitals as it relates to fulfilling the requirements for estimating service costs.

Regarding insurer contracts, there is often a lack of uniformity in determining reimbursement rates due to price variables. This makes it challenging to compare similar costs for a specific service. In addition, if out-of-network providers handle procedures such as radiology, anesthesia, or pathology, unexpected costs or charge increases may arise.

Even though CMS aims to establish uniform pricing components through its mandatory template, gathering diverse data from numerous contracts, documents, and billing systems is a significant undertaking. Despite hospitals’ ability to fulfill this task in a compliant manner, they often face time constraints, personnel shortages, and outdated technology.

Solutions to Meet CMS Price Transparency Compliance

As stated earlier, healthcare delivery’s complexity and fluidity make price determination, and the factors dictating costs, a multi-faceted environment for consumers to navigate. Provider organizations that struggle with inefficiency in teams, technology, or processes may find it challenging to generate the required pricing and MRF elements. This could be attributed to potential data errors and the resulting frustrations caused by uncertain output accuracy.

Fortunately, hospitals can comply with the rigorous healthcare price transparency requirements and lighten staff workload by adopting advanced price transparency software to effectively organize and display an organization’s chargemaster data and a comprehensive list of shoppable services. In addition to utilizing price transparency technology, such as Vitalware Hospital Price Index^TM, health systems must establish a defensible pricing strategy (DPS) to justify the cost of medical treatment.

To operate transparently, price services strategically, and present an accurate bill or claim, hospitals must organize and efficiently manage charge description master (CDM) data and all related files. Many hospitals consolidate these files into a single system, enabling administrators and teams to view the data within one connected solution.

By utilizing advanced technology and professional services, hospitals can reduce the manual effort involved in consolidating pricing files and standardizing charge data. This not only improves their pricing strategy and payer relations but also ensures the accuracy of their completed CMS templates or files. As a result, hospitals lessen their burdens and can confidently comply and adhere to impending regulations.

CMS Price Transparency Checklist: Preparing for 2024 Enforcement

Despite the challenges involved in accurately compiling pricing information upfront, some hospitals are dedicated to embracing the groundbreaking movement toward price transparency. By prioritizing compliance, these health systems make healthcare costs available to consumers at an early stage rather than after a procedure, which may prevent patients from postponing or seeking medical care elsewhere.

CMS conducts ongoing hospital website assessments as part of its efforts to enforce new regulations and hold organizations accountable. Assessments conducted in 2021 and 2022 indicate significant improvements in hospitals’ implementation efforts since the initial price transparency regulation went into effect on January 1, 2021.

However, approximately 30 percent of hospitals, as of this reporting, still need to make further progress to achieve full compliance. CMS expects that the introduction of proposed guidelines will prompt hospitals to act and expedite their compliance.

To avoid penalties and adhere to the recently proposed rules, hospitals should consider these five recommendations:

1. Align Payer Pricing and Contracts: Compile accurate pricing and costs for standard services from all payer agreements and provider contracts.
2. Implement Price Transparency Technology: Leverage or upgrade technology tools to centralize all shoppable services pricing data and meet the MRF technical specifications and user-friendly format standards.
3. Assess Compliance Resource Needs: Identify any gaps in critical resources needed to adopt the new template. Ensure the template is published in plain language for patient access and CMS compliance by the enforcement dates.
4. Leverage Strategic Partners: Align strategically with a technology and service partner for immediate resource support, technical guidance, continuous transparency compliance, and centralized pricing scalability across new hospitals, contracts, and partnerships.
5. Engage Patients: Communicate with patients proactively regarding their estimated costs for planned procedures and customer or billing services.

Additional Reading

Would you like to learn more about this topic? Here are three articles we suggest:

Hospital Chargemaster Basics: What It Is, How It Works, and Why It’s So Important

Healthcare Price Transparency: Three Opportunities for Transformation

Healthcare Price Transparency: Understanding the Cost-Pricing Relationship