The Impact of Price Transparency on Healthcare

Hero blog price transparency
Cejka Search
March 06, 2020 08:44 AM (GMT-04:00)
Thought Leadership

The healthcare industry has been a central focus in our current political climate, specifically in the debate over how our population will receive care going forward. The role of insurers, patient responsibilities and price transparency are all front-and-center in the conversation. This has created a fork in the road for healthcare executives, who now must stay ahead of the curve in order to prepare their organizations for the future.

Adding to the complexity, both the Trump administration and the Centers for Medicare & Medicaid Services announced newly proposed rules regarding price transparency in healthcare that could take effect in 2021. While the new rules have met both praise and criticism, executives across the country are watching these changes closely, and are looking for ways to remain compliant, remain profitable and meet the needs of patients.

Understanding the Debate

To fully understand the potential impact of the proposed new rules, we must first understand the debate over price transparency. During the summer of 2019, President Trump instructed federal agencies to use the authority granted to them under the Affordable Care Act to develop federal rules that require the disclosure of hospital prices. Under the President’s instruction, the price lists would not only include charges to patients, but also the discounted prices hospitals negotiate with insurers. In June of 2019, the U.S. Congress also stepped into the fray when the Senate health committee approved the Lower Health Care Costs Act of 2019. This legislation would establish a new, non-profit entity to collect de-identified claims data with actual prices paid for health services across the country. The data would then be available to state databases and the public.

Advocates of price transparency argue that competition in the health industry cannot control costs unless patients understand the prices they are currently paying. However, there is strong opposition to the actions taken by the President and the Senate on the part of insurers and health providers. One main concern of the opposition is that making hospital prices public may actually drive costs up in some markets. Because the majority of hospital markets are so consolidated that they lack true competition, creating price transparency could encourage low-priced institutions to increase their fees in order to keep up. There is also a concern that this effort will add more administrative red tape, but yield little results. The argument suggests that, while patients with high deductibles may prefer lower priced services, most consumers will stay with the health providers they trust and continue to allow insurance to shoulder the brunt of the cost.

The New Rules

In November of 2019, CMS issued a final rule requiring hospitals to disclose the rates they negotiate with insurers that will take effect in 2021. This aligns with the Trump administration proposal requiring health plans to share price information with members up-front. The CMS final rule includes the following provisions:

Create an all-inclusive “standard charges” file.

Under the final rule, hospitals will be required to post their standard changes online in a machine-readable file. CMS considers standard charges to include discounted cash prices, gross charges, de-identified minimum negotiated charges, de-identified maximum negotiated charges and payer-specific negotiated charges. Hospitals will be required to disclose the standard changes in these categories for all items and services.

Publicize 300 shoppable services.

The final rule also requires hospitals to post payer-specific, negotiated rates online in a patient-friendly and searchable way for their 300 most popular services. The rule outlines what should be included for seventy of the 300, while the hospitals can identify the other 230 on an individual basis.


Hospitals that fail to publish the negotiated rates online could be fined up to $300 per day.

What the Future Looks Like

While President Trump has called the CMS final rule a “great victory”, both provider and payer stakeholders are taking legal action. The American Hospital Association, Association of American Medical Colleges, Children's Hospital Association and Federation of American Hospitals issued a joint statement following the announcement of the final rule calling the proposal "a setback in efforts to provide patients with the most relevant information they need to make informed decisions about their care." The group contends that the final rule and the steps taken by the President will not help patients to understand their out-of-pocket costs, but will confuse patients and encourage anticompetitive behavior among insurers.

As of January 2020, The American Hospital Association and Association of American Medical Colleges filed suit against CMS, claiming CMS’ adjustments were unlawful. They noted a judge’s previous ruling against the cuts when the two groups previously sued over site-neutral payments in 2019. In September 2019, a U.S. district court judge ruled that CMS had overstepped its statutory authority, noting that changes to payments must be budget-neutral and could not target specific services. Following that ruling, CMS must repay hospitals the difference for 2019, which adds up to nearly $380 million. Currently, the Department of Health and Human Services is appealing the 2019 ruling to the U.S. Court of Appeals for the District of Columbia Circuit.

Staying in front of the Debate

Healthcare leaders understand the enormous impact decisions on price transparency could have on their organizations and their communities at large. In fact, forward-looking executives are putting strategies in place to innovate ahead of any government mandate. Both provider and payer institutions are leveraging their capabilities in data and analytics to find ways to meet the needs of patients, while continuing to operate under their current business model. From offering patients discounted prices for common procedures that are paid for in advance, to creating out-of-pocket cost estimation tools, these pioneering leaders are putting their organizations on a path to success, no matter which side of the debate comes out on top.

With the fast pace of change and the continuously changing regulations facing the healthcare industry, having the right leaders in place is more important than ever. To connect with Cejka Search executives to learn more about finding the right leaders for your organization, contact us.

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