Updated on: November 21, 2019

BREAKING: Feds kick healthcare hornet’s nest with twin rules pledging price transparency

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Original story posted on: November 15, 2019

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The announcement covers OPPS, ASC regulations, and promises to ramp up competition among providers.

In a move that sparked instant and intense reactions across the healthcare industry, the federal government on Friday introduced twin final rules it says constitute “historic steps” to increase price transparency and increase competition among the nation’s various providers, health plans, and insurers.

Alluding to President Trump’s recent Executive Order on Improving Price and Quality Transparency in American Healthcare, the U.S. Department of Health and Human Services (HHS) made the announcement that the Centers for Medicare & Medicaid Services (CMS) is ordering that ambulatory surgical centers (ASCs) and entities engaged in the federal Outpatient Prospective Payment System (OPPS) make a number of specific changes – including making pricing information publicly available.

“President Trump has promised American patients ‘A+’ healthcare transparency, but right now our system probably deserves an ‘F’ on transparency. President Trump is going to change that, with what will be revolutionary changes for our healthcare system,” HHS Secretary Alex Azar said in a statement. “Today’s transparency announcement may be a more significant change to American healthcare markets than any other single thing we’ve done, by shining light on the costs of our shadowy system and finally putting the American patient in control.”

A press release making the announcement added that the move is intended to ensure that “insured and uninsured Americans alike have the information necessary to get an accurate estimate of the cost of the healthcare services they are seeking before they receive care.”

“Under the status quo, healthcare prices are about as clear as mud to patients,” CMS Administrator Seema Verma said in a statement of her own. “Thanks to President Trump’s vision and leadership, we are throwing open the shutters and bringing to light the price of care for American consumers. Kept secret, these prices are simply dollar amounts on a ledger; disclosed, they deliver fuel to the engines of competition among hospitals and insurers. This final rule and the proposed rule will bring forward the transparency we need to finally begin reducing the overall healthcare costs. Today’s rules usher in a new era that upends the status quo to empower patients and put them first.”

Officials also noted that HHS, the U.S. Department of Labor, and the U.S. Department of the Treasury are jointly issuing a proposed rule, “Transparency in Coverage,” that would require most employer-based group health plans and health insurance issuers offering group and individual coverage to disclose price and cost-sharing information to participants, beneficiaries, and enrollees upfront. With this information, the officials said, patients, will have accurate estimates of any out-of-pocket costs they must pay to meet their plan’s deductible, co-pay, or co-insurance requirements. 

“This will make previously unavailable price information accessible to patients and other stakeholders in a standardized way, allowing for easy comparisons,” the press release read.

If finalized, the proposed rule would also require health plans to:

  • Give consumers real-time, personalized access to cost-sharing information, including an estimate of their cost-sharing liability for all covered healthcare items and services, through an online tool that most group health plans and health insurance issuers would be required to make available to all of their members – and in paper form as well, at the consumer’s request. This requirement would “empower consumers to shop and compare costs between specific providers before receiving care.”
  • Disclose on a public website their negotiated rates for in-network providers and allowed amounts paid for out-of-network providers. “Making this information available to the public is intended to drive innovation, support informed, price-conscious decision-making, and promote competition in the healthcare industry,” the announcement read.

The proposed rule would also encourage health insurance issuers to offer new or different plan designs that incentivize consumers to shop for services from “lower-cost, higher-value providers” by allowing issuers to take credit for “shared savings” payments in their medical loss ratio (MLR) calculations.

But that wasn’t all.

The announcement included notice that officials are “finalizing a rule that will require hospitals to provide patients with clear, accessible information about their ‘standard charges’ for the items and services they provide, including through the use of standardized data elements, making it easier to shop and compare across hospitals, as well as mitigating surprises.”

Specifically, the move would require hospitals to make their standard charges public in two ways, beginning in 2021:

  • Via comprehensive, machine-readable file, including data encompassing all hospital standard charges (gross charges, payor-specific negotiated charges, the amount the hospital is willing to accept in cash from a patient, and the minimum and maximum negotiated charges) for all items and services. The file must be made available online, in a single data file that can be read by other computer systems, and must include additional information such as common billing or accounting codes used by the hospital (such as Healthcare Common Procedure Coding System (HCPCS) codes) and a description of each item or service.
  • Via “display of shoppable services in a consumer-friendly manner,” including information on payor-specific negotiated charges, the amount the hospital is willing to accept in cash from a patient for an item or service, and the minimum and maximum negotiated charges for 300 common shoppable services, to be updated annually, at a minimum.

The announcement defined “shoppable services” as those that can be scheduled by a healthcare consumer in advance, such as X-rays, outpatient visits, imaging and laboratory tests, or bundled services like a cesarean delivery, including pre- and post-delivery care.

In order to ensure that hospitals comply with the proposed requirements, CMS would be given new enforcement tools, including monitoring, auditing, corrective action plans, and the ability to impose civil monetary penalties – of $300 per day. In response to public comments, CMS said it plans to set the finalization date of the final rule at Jan. 1, 2021, in order “to ensure that hospitals have the time to be compliant with these policies.”

Reaction from prominent figures across the healthcare industry wasn’t just swift – it was varied.

“Healthcare pricing is complicated and is probably not the industry’s best attribute. Like airline pricing, fee structures tend to both confuse and frustrate people,” said David M. Glaser, Esq., a shareholder in Fredrikson & Byron’s Health Law Group and a popular panelist on Monitor Mondays, who also serves as a member of the RACmonitor editorial board. “I have not had the opportunity to digest the full impact of the regulations, but they are likely to force hospitals to make changes to how they communicate with patients, and also to consider how they establish fees.”

“Some time ago, it became common for hospitals to negotiate large discounts off of charges, with some insurers paying 60 percent, or 50 percent, or less, of billed charges. That trend has made it much more difficult for hospitals to deal with patients who are uninsured, or working with high-deductible plans,” Glaser added. “I expect that these new rules and changes in the marketplace are going to force hospitals to reconsider the basics of how they establish charges, and result in a shift back to when the amount paid and the amount charged are closer together.”

Stanley Nachimson, MS, principal of the health IT firm Nachimson Advisors and, earlier in his career, a 30-year veteran executive of HHS, struck an optimistic tone.

“This is an attempt by the administration to provide more transparency in healthcare prices by showing patients the actual costs that their insurance company pays for services,” Nachimson said. “While hospitals may consider this proprietary, this is information that can help patients make informed choices about treatments and legerdemain to get them.”

Dr. Ronald Hirsch (MD, FACP, CHCQM), vice president of the Regulations and Education Group at R1 Physician Advisory Services and a member of the Advisory Board of the American College of Physician Advisors and the American Case Management Association, wasn’t so sure about viability.

“Healthcare pricing is obviously an issue for everyone, but there is so much more to choosing a healthcare provider than just the cost of individual service,” Hirsch said. “I do not think this initiative if it survives the legal challenges, will make it any simpler for patients to choose a provider.”

Colorfully illustrating the potential endgame for the announcement was Michael A. Salvatore, a Physician Advisor with the Delaware-based Beebe Healthcare.  

“It is just a matter of time before we will be seeing Travelocity-like commercials for outfits with names like ‘Healtholocity,’ with patients exclaiming, ‘my total knee (replacement) only cost $50,000,’” he quipped. “This will be countered by another nonplussed patient blurting out, ‘What? Mine cost $65,000!’ Only to be further countered by the Healtholocity patient who smugly remarks, ‘I booked my total knee with Healtholocity for only $24,000.’”

“Then the self-satisfied Healtholocity patient looks into the camera and closes with the retort that ‘Healtholocity checks thousands of hospital websites for the best deals in healthcare,’” Salvatore added. “So in the future, you will be able to book your flight, your hotel room, and your laparoscopic cholecystectomy online.”

For a fact sheet on the Transparency in Coverage Proposed Rule (CMS-9915-P), please visit: https://www.cms.gov/newsroom/fact-sheets/transparency-coverage-proposed-rule-cms-9915-p

The final rule (CMS-1717-F2) can be viewed here: https://www.hhs.gov/sites/default/files/cms-1717-f2.pdf

The proposed rule (CMS‑9915‑P) can be viewed here: https://www.hhs.gov/sites/default/files/cms-9915-p.pdf

Mark Spivey

Mark Spivey is a national correspondent for RACmonitor.com, ICD10monitor.com, and Auditor Monitor who has been writing and editing material about the federal oversight of American healthcare for more than a decade. He can be reached at mcspivey@hotmail.com.

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