Joshua Brooker, REBC, ABHP, ESP, ASFC
Hospital Price Transparency Rule
Originally posted April, 2021, by the Lancaster Medical Society, in the Lancaster Physician Magazine here on page 22 where our principal, Joshua Brooker, was the Author.
A patient comes to the ER complaining of a headache. They are told an MRI costs $5,000. They proceed to roll the dice, walk out, and collapse because their headache was actually a brain bleed.
This is the very reason front-ended price transparency hasn't been advocated for before now. Your financial situation shouldn't create pause co seek medical care. However, the reality is ... it does. In 2016 the Kaiser Family Foundation, a nonprofit, released "The Burden of Medical Debt: Results from the Kaiser Family Foundation/New York Times Medical Bills Survey." In their study, they cited consumers with existing medical debt are two to three times as likely to skip medical care. Regardless, across the market, cost does play a part in seeking care. Because of this, let's dive into how we got here and where we are headed next.
HOSPITAL PRICE TRANSPARENCY: WHY IT CAME ABOUT
Hospital price transparency is one facet of several current initiatives to curb the overall cost of health care by increasing consumer literacy and leveling markets.
FOUNDATIONAL CRACKS ...
On July 30th, 1965 Lyndon B. Johnson and the American Medical Association came to a consensus that provided financial support in health care for the elderly and needy while allowing provider flexibility. On this day, President LBJ signed the amendment to the Social Security Act of 1935 to include benefits for Medicare/Medicaid.
"The agreement? The federal government would subsidize the cost of care as long as healthcare providers charged 'usual and customary' rates for their region." - Avik Roy of the Foundation for Research on Equal Opportunity and former health policy advisor to Mitt Romney, Rick Perry, and Marco Rubio.
By 1973, Medicare beneficiaries exceeded 23 million, and Congress shifted medical billing oversight to insurers through the HMO Act. When the government was the sole source of payment for billed medical expenses, doctor billing departments had to agree to declared payment rates -- much like you still do with the Centers for Medicare and Medicaid Services (CMS). For the broader market, being governed by insurers, it became more economical for providers to merge and negotiate. Health systems became a way for health providers to negotiate fair and equitable compensation for work. Outsourcing credentialing, billing, and coding services to the health system began the process of desensitizing physicians from the cost of care. Higher pay for health systems led to higher health insurance premiums. This domino effect finally led to discussing the Affordable Care Act in 2008.
Forty-three years after the introduction of Medicare and Medicaid, old solutions (subsidies) were proving to die hard. With the introduction of premium tax credits, Congress decided to throw more money at the problem instead of looking at the root issue. The solution was to have the Treasury, the Department of Labor, and CMS agree to a new way to handle health care. The system would tether eligibility for tax credits to consumers' income.
Fast forward, and we see for 2019 the Kaiser Family Foundation estimated $52,330,619,948 in premium¹ tax subsidies were paid out to help consumers curb premiums for health insurance. The 2019 CMS Report² cites operating costs for Medicare, Medicaid, and CHIP to be another $1,087,271,000,000!
The hospital price transparency rule is intended to support a more patient-driven health care system by making prices for services provided by all U.S. hospitals more transparent for patients. As a result, patients will have the opportunity to become more informed about what they may pay for hospital items and services.
WHAT DOES HOSPITAL PRICE TRANSPARENCY ENTAIL?
Under the Federal Register, CMS states, "This final rule establishes requirements for hospitals operating in the United States to establish, update, and make public a list of their standard charges for the items and services they provide. These actions are necessary to promote price transparency in health care and public access to hospital standard charges.
"By disclosing hospital standard charges, we believe the public (including patients, employers, clinicians, and other third parties) will have the information necessary to make more informed decisions about their care. We believe the impact of these final policies will help to increase market competition, and ultimately drive down the cost of health care services, making them more affordable for all patients."
WHAT ARE THE REQUIREMENTS FOR HOSPITALS?
On November 27th, 2019 the final rule required as of January 1st, 2021, the following needed to be in place:
Hospitals needed to make a machine-readable file available publicly on their website for anyone to download. This file must be public, meaning no request for it is necessary, and it's on the public domain. Additionally, it can't be held behind a login, which would impede access.
Hospitals must provide a dashboard to price out up to 300 services for consumers to hypothetically "shop" common procedures by hospital.
The intended benefit to hospitals will be improved initial data collection, lower bad debt, lower cost to collect payments, and improved patient satisfaction and retention.
WHAT CAN CONSUMERS EXPECT?
Our four local hospitals in alphabetical order can be found online at the links below:
IT'S IMPORTANT TO NOTE SEVERAL THINGS:
1. The estimates do not take into consideration surgical complications or other miscellaneous expenses. Regardless, this is a great start for anticipating costs.
2. If you have chest pain, that is not the time to window shop.
3. Consider both cost and quality when it comes to your health. Use the sites above and also Medicare.gov's Hospital Compare system (medicare.gov/care-compare/?providerType=Hospital&redirect=true) for information. This system is a move in the right direction for patient-driven health care.
CMS Rx Public Use Files -As of January 1st, 2021, CMS has made public files for companies to access Medicare Rx costs by drug, insurer, and pharmacy for real-world pricing. The hope is that the same will happen for patients under 65.
CMS Interoperability and Patient Access Ruling (March 9th, 2020)- This rule gives consumers remote access to aggregate all their health care data (health and claims history) IF they want it regardless of insurance plan or provider system.
(Our platform at www.snaphealth.me is in development to soon leverage these two updates to help consumers. Check it out)
Surprise Bill Act (December 27th, 2020)
For Consumers: Beginning January 1, 2022, it will be illegal for providers to bill patients for more than the in-network cost-sharing for (nearly all) scenarios in which surprise bills arise. Ever go into the hospital and find out a radiologist or anesthesiologist is actually billed separately or out of another state? The insurer will have to cover them and offer the in-network rate.
For Physicians: Health plans will be required to pay within 30 days. If you don't agree with the in-network rate of usual and customary charges, disputes go to an arbitrator who will agree with whichever side is closer to the median in-network rate in the region as of 2019: inflation-adjusted with the CPI-U inflation index.
American Rescue Plan Act
(March 11th, 2021)
This piece of legislation is still hot off the press, but with the depth of details surrounding it, we are aware there are changes on the horizon to CHIP, Medicaid, Individual health programs across the United States.
(April 26th UPDATE: Since the original release of this article we unpacked ARP and the benefits to Consumers and Businesses. Feel free to read them.)
THE FUTURE OF PRICE TRANSPARENCY?
Transparency will provide two different forces in health care. Obviously, having access to expenses makes for a more educated consumer when it comes to costs. With that said, a less obvious impact is if pricing is available to the public, different negotiated physician costs will level out. Before, a hospital, vendor, insurer, or physician may have negotiated the best deal. Now, those same partners will be able to see whether or not they actually have paid or been paid fairly and request the median price.
In the finance industry, fee transparency on investment accounts created a bottom-of-the-barrel-like outcome where many brokerage accounts now have zero or nearly zero trading costs. This has not put investment advisors out of business, rather their underlying value has been more pronounced to individuals looking to offload responsibility. We don't see a race to the bottom, we see an opportunity to educate consumers on actual costs of care and level out price differences from one plan to the next. Regardless, the health care industry isn't going anywhere. People will always need access to quality health care.
1. KFF's Estimated Total premium Tax Credits Received by Marketplace Enrollees. Data Source: Early 2020 Effectuated Enrollment Snapshot, Centers for Medicaid and Medicare Services(CMS), July 23, 2020.
2. "CMS Financial Report 2019," Pg 27. Centers for Medicaid and Medicare Services(CMS), March 11th, 2021, https://www.cms.gov/files/document/cms-financial-report-fiscal-year-2019.pdf.