In a sweeping effort aimed at empowering consumers (patients), hospitals are now required by the federal government to post their standard service costs online. This new transparency rule seeks to provide the public with a more traditional consumer experience, unveiling more information for patients to consider when making critical healthcare decisions.  But, the question is, will this information be useful to consumers and will hospitals embrace this challenge?

Proposed in 2018 by the Centers for Medicare & Medicaid Services (CMS) — the federal agency that administers the Medicare and Medicaid programs — the new rule seeks to divulge service costs that healthcare providers have historically kept a closely guarded secret (and perhaps for good reason).

Hospitals have long argued that their standard pricing information is irrelevant to consumers, as standard pricing is not what is typically charged or collected. Additionally, determining what charges will be involved with a certain procedure is complicated and merely listing the standard charges may not be useful to the consumer. However, despite intense pushback and justified skepticism from hospitals, increased transparency could lead to some very appealing opportunities.

What’s Changed?

As of January 1, 2019, hospitals must publicly share a machine-readable version of their billable services (commonly referred to as a “chargemaster”) on their website. The list must cover the price of every procedure, test, supply, drug, room charge, and other services offered by the hospital and must be updated as needed, or at least annually.

While many hospitals have successfully implemented the rule, others are struggling to find accurate and appropriate means of curating the data.

Building on this effort, in June 2019, President Trump signed an Executive Order proposing that negotiated charges between hospitals and commercial insurers also become public in 2020. This proposed addition has been met with considerable resistance from critics claiming that too much transparency could subsequently harm competition in the industry and that these rates are essentially “trade secrets.”

Opportunities for Providers

To combat pricing variances (and perceived differences in value), forward-thinking hospital executives have found ways to go above and beyond the requirements mandated by CMS. For example, many hospitals have begun creating and implementing methods for patients to receive personalized cost estimates based on their unique circumstances, such as cost estimators via online portals, call centers, and mobile apps. These tools integrate existing cost statistics with real-time patient data to give the patient a more accurate prediction of their ultimate cost while generating a more positive overall experience.

Hospitals can also use this rule as an opportunity to engage their patient population and provide supplemental education and communication, a powerful tool for relationship-building and increasing brand loyalty. For example, hospitals should compare (benchmark) their online chargemasters with direct competitors and use this information to provide patients with more data and insight into the industry’s cost metrics and the differences between a hospital and its competitors. As a bonus, this process will also provide the hospital with supplemental documentation to better answer inquiries and defend costs with statistically-backed rationale.

The process of complying with transparency requirements and monitoring/benchmarking the competition will inherently require hospitals to analyze large swaths of data. As a result, hospitals have the unique opportunity to improve their own shop by scrutinizing everything from cost performance and budget, to strategic objectives and program costs. This data-driven approach opens the door for more insight into how to manage the budget and expenses while adjusting things like staffing and output costs to improve the overall financial performance of the hospital. Hospitals can use this more granular level of available information as a roadmap for improving processes and ultimately creating a more cost-effective operation.

The Bottom Line

Increased price transparency will undoubtedly spur more patient speculation (and confusion, at least initially), research, and potentially price competition across the industry. While this is only the beginning of the government’s transparency initiative (and certainly not the last burdensome requirement), it’s important that hospitals not only implement the rule thoughtfully but also seize the opportunity to create a more future-ready, successful enterprise.

If you want to learn more about cost transparency and how it may affect you, please contact CRI for more information.