In March of 2020, during the first wave of the pandemic, it seemed unlikely that the Center for Medicare and Medicaid Services (CMS) would implement the new hospital price transparency rules as scheduled on January 1st, 2021. Considering the focus on COVID and legal attempts by the American Hospital Association to block the new rules, it was quite plausible that implementation would be delayed.
But here we are, over halfway through 2021 and the rules are in effect. While CMS has sent out warning letters to non-compliant hospitals, no penalties have been enforced. Regardless, this is a good start and a major healthcare policy shift many would not have predicted just a few years ago.
CMS Price Transparency Rules
To review, the new rules require a hospital website have the following:
- A machine-readable file with all pricing – chargemaster rates, insurance specific negotiated rates, cash prices and the average maximum and minimum negotiated charges for each procedure and
- 300 shoppable services of the same rates as above, except for the chargemaster rates. And of those 300 shoppable services, CMS specifies 70 of those procedures, while the hospital can choose the other 230.
For the few hospitals that are compliant, the machine-readable files (e.g., Excel spreadsheets) can be daunting. A spreadsheet typically includes thousands of lines of tests and procedures, including the 70 CMS-specific and 230 hospital-chosen shoppable services. And of course, each procedure includes the negotiated rate for all payors contracted with the hospital, as well as the cash rate.
But that’s not it. Compliant, and even some partially compliant hospitals, include costs at each location (inpatient and outpatient) as well as every medication and supply cost. In some cases, this exhaustive amount of pricing data is probably meant to overwhelm rather than educate. Luckily, some hospitals are using price estimators that can help the consumer sift through and find the most relevant information – their out-of-pocket expense.
While some hospitals may use price estimators to obfuscate the consumer’s attempt to determine the price they could pay, when designed properly, price estimators can be a force for good. Still, at the end of the day, there is one thing conspicuously missing from the machine-readable files and the price estimators.
What’s missing
According to the CMS rules, hospitals are required to show expected ancillary fees associated with a procedure. For example, if the consumer is getting a CT scan with contrast, and the contrast is billed separately, the hospital is supposed to show that fee. But those aren’t the missing costs I’m referring to.
The missing costs, relevant to the patient to be sure, are the physician, aka the ‘professional fee.’ Keep in mind that the CMS rules mostly pertain to transparency of ‘facility fees’ which are the fees charged by the hospital. They don’t include the fee the doctor charges to perform a procedure like a colonoscopy or the charge to read a diagnostic exam like a CT scan at the hospital.
Hospitals don’t offer the professional fee because if they don’t employee the physician, there is no reason they would even know the fee the physician negotiated with the insurance company. Knowing the total cost of care – the professional and facility fee – associated with a particular CPT code is the next step in the transparency journey.
The total cost of care
A robust price estimator should incorporate AI into its pricing calculations by recognizing that any estimate should automatically “link” and merge the hospital facility fee, physician professional fee and other billable fees into a final patient estimate.
Those physician fees will be easier to come by in 2022 when new CMS rules require insurance companies to release their negotiated rates with hospitals, ASCs and physicians. However, the implementation of the transparency rules affecting insurers was recently delayed 6 months by the Biden Administration.
In the case of a colonoscopy, price estimators will need to link the professional, facility, biopsy processing and evaluation fee for CPT 45378. Rummaging through a spreadsheet to determine the cost specific to the patient’s insurance plan is untenable for the typical consumer. The consumer will come to rely on an intuitive price estimator that has search functionality, insurance verification and calculate the total estimated out-of-pocket expense in real time. Armed with 21st century technical innovations and government enforcement, the consumer will no longer have to settle for part of the story.
A maximally useful price estimator will all associated costs within an episode of care will give the patient more actionable information to make better financial decisions for themselves and their family.
Dr. Jonathan Kaplan is a board-certified plastic surgeon based in San Francisco, CA and founder/CEO of BuildMyHealth, a price transparency-lead generation platform. He is also the author of a forthcoming book on price transparency and its benefits to the healthcare establishment and all Americans.
