Revenue Cycle Management

Pricing Transparency

By Emily Goertz, VP Revenue Cycle, UTMB

We all know that managing the Revenue Cycle is complex. We face new obstacles daily, even without the complexities due to COVID 19. Not only has COVID placed astronomical pressure on Providers to increase cash flow and decrease costs, but the ever-changing requirements and regulations keep us consistently pivoting and jumping through hoops to get paid or even just to be compliant with new regulations. 

The pricing transparency rule is one example of a new requirement placed on Providers that was effective since January 1, 2021. Generally, transparency in healthcare pricing has long been sought after but has remained difficult to achieve. Simply put, pricing transparency is a mechanism to assist patients shopping around for healthcare services prior to seeking those services. Although price is not the only consideration when choosing a healthcare provider, it is an important aspect to most patients. It is also one of the most difficult pieces of information to get from most hospital systems. 

In the 2015 IPPS Final Rule, CMS provided guidelines for implementing the previously approved ACA provision after the pricing transparency requirement was largely ignored. In this rule, CMS required hospitals “to make public a list of their standard charges, or their policies for allowing the public to view a list of those charges in response to an inquiry”. 

In 2019, CMS finalized the Pricing Transparency Rule in which the “standard charge” was defined and enhanced to include the rates negotiated between hospitals and commercial payers, effective January 1, 2021. Although the requirement of publishing rates seems well-intended, as it could theoretically help some very well-informed consumers shop around, it would still require consumers to understand the complexities around calculating patient liabilities for different services. It also puts the onus on the consumer to calculate the patient’s liability. Also, and importantly, many hospitals and providers are reluctant to publish their rates due to strategic and competitive reasons, besides the fact that the detailed payer-specific negotiated rates can be very complex to compile and would only confuse patients.

Hospitals today are under enormous pressure to contain costs, but at the same time, they are struggling with decreasing reimbursement rates, strong market competition, and wavering consumer loyalty.

Price transparency aims to provide consumers with pricing information to assist with comparison shopping for healthcare services. Unfortunately, these requirements placed on hospitals did not accomplish that goal. 

If you work in healthcare finance or revenue cycle, you know that any hospital or provider’s “standard charges” mean nothing to the patient, and publishing those charges simply checks a box for compliance. In healthcare, gross charges are not the price for any patient. We know that the patient’s liability (if insured) is based on the allowable amount, and even for the uninsured, the standard charge does not reflect the amount a patient will pay at most hospitals.   

The allowed amount is the rate that the payer and provider have agreed upon during the negotiation of the contract. The payer cost shares these rates with their members, meaning that a patient pays a portion of the contracted rate to the hospital. If a hospital wants to decrease the “price” to a consumer, they will have to re-negotiate their contracts for lower rates. That doesn’t make a lot of sense when hospitals are struggling even to make a margin at all. Hospitals are focusing on cost containment and on improving the quality of care for their patients. To continue doing that, they must get paid for their services, including both the payer and patient liabilities (not to mention that payment is post-service). Most hospitals are paid a “fee” for their services, and if their costs are too high, they already lose money when providing care to their patients. Reducing the already low rates paid to hospitals is not the answer to the transparency problem.

Providers can still achieve what I believe was the intent behind this rule. Providers should pro-actively create the ability for patients to determine their potential financial obligation at any organization, for most services. At a minimum, providers should be expected to comply with the requirement to post estimates (not “prices”) for the consumer-friendly list of 300 (and more) “shoppable” services as defined by CMS and individual hospitals. Patients should be able to go to a Provider’s website and access that information with the simple input of the service they are seeking, their insurance information, and year-to-date out-of-pocket information. 

Hospitals today are under enormous pressure to contain costs, but at the same time, they are struggling with decreasing reimbursement rates, strong market competition, and wavering consumer loyalty. As cost pressures continue along with efforts to continuously improve quality and care, hospitals will continue to struggle with sustainability. At a minimum, we should all be working to provide meaningful estimates for our patients, decrease the overall cost of healthcare, and provide value to consumers, not just check the box to comply with burdensome government requirements. 

At The University of Texas Medical Branch, we have implemented a robust estimator tool that patients or the public can utilize to determine their estimated costs for 300+ shoppable services. Guest estimates are available for the insured and the uninsured for both hospital and professional services.  We define key terms, which include pricing, charges, patient responsibility, how insurance coverage affects what patients will have to pay, and procedure types by service line such as cardiology, obstetrics, etc., to help patients and the public navigate through the process. UTMB is proud of the work accomplished in this area thus far and is committed to helping our patients navigate this complex process. 

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