Clear as Mud? Federal Rule Will Mandate Hospitals to Post Prices on a Menu of Services
By Joey Berlin Texas Medicine May 2020

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From electronic health records to quality reporting, today’s physicians deal with plenty of distractions from patient care.

Starting in 2021, hospital-employed physicians may find themselves adding another one: explaining to patients the difference between their hospital’s multiple published prices for the same service.

Price transparency has been a popular item on lawmakers’ wish list as a means to lower health care costs – but, in practice, an exceedingly difficult task. That’s why the Texas Medical Association has helped defeat a number of state bills targeting physician services during recent sessions of the Texas Legislature.

But following a Trump administration executive order last year, price transparency is about to become a nationwide reality for hospitals and hospital-employed physicians. The Centers for Medicare & Medicaid Services (CMS) complied with the executive order by requiring hospitals to post rates for 300 different services in a consumer-friendly list beginning Jan. 1, 2021. Seventy of those services have been mandated by CMS; hospitals will choose the other 230.

“Traditional economic analysis suggests that if consumers were to have better pricing information for health care services, providers would face pressure to lower prices and provide better quality care,” CMS said in the rule summary and background. “Falling prices may, in turn, expand consumers’ access to health care.”

TMA will monitor the impact of the CMS rule, if it even reaches implementation: A court challenge by the American Hospital Association (AHA) and other hospital groups is in progress.

TMA Immediate Past PresidentPresident David C. Fleeger, MD, has the same concerns that hospitals and health plans have expressed about the drive for transparency: It could increase the price of services instead, because once contracted rates are out there for all to see, lower-earning competitors will want more out of their contracts. He also is concerned about future attempts to impose price transparency requirements on private practices.

“One has to wonder if transparency is going to have its intended effect,” Dr. Fleeger said, “or if it’s actually going to drive up prices so people feel like, ‘Oh, I’m not getting a good deal. I need to go back to the table and drive a harder bargain.’”

“Shoppable services”

The June 2019 executive order called for the U.S. Department of Health and Human Services “to require hospitals to publicly post standard charge information, including charges and information based on negotiated rates and for common or shoppable items and services, in an easy-to-understand, consumer-friendly … format that will meaningfully inform patients’ decision making and allow patients to compare prices across hospitals.”

The following November, CMS finalized a rule requiring hospitals to post four standard charges for at least 300 “shoppable services,” which the rule defines as one that a health care consumer can schedule in advance.

CMS divides the 70 services it’s requiring into four categories:

• Evaluation and management services: New patient or other outpatient visit, levels 2-4; patient office consultation, levels 3 and 4.
• Laboratory and pathology services: Basic metabolic panel; obstetric blood test panel; kidney function panel.
• Radiology services: CT scan, head or brain, without contrast; MRI scan of brain before and after contrast.
• Medicine and surgery services: Removal of one or more breast growths; routine obstetric care for both vaginal and cesarean deliveries, including pre- and post-delivery care.

The list of shoppable services must include payer-specific negotiated charges; discounted cash prices; and minimum and maximum negotiated charges among all payers. Also, in a separate file, hospitals will be required to list “all standard charges” – meaning those same four, plus gross charges, or chargemaster charges – for all of its items and services.

For more information on the CMS final rule and the full list of services that will require public price listings, visit tma.tips/cmshospitalrule.

A difficult future?

CMS told Texas Medicine the final rule lays out requirements only for hospitals, and “we therefore do not anticipate burden for practitioners that may be employed or otherwise contracted with the hospital.”

Of course, physicians are usually the ones providing or overseeing those hospital services. And TMA lobbyist Clayton Stewart says that doctors should not “have to be explaining the hospital’s prices for hospital services.”

He adds it’s always a possibility that a federal rule like this one could extend into an attempted price-transparency mandate on private practices.

“We do have a lot of price transparency measures that are already in place that have coincided with taking the patient out of the middle of surprise billing,” Mr. Stewart said, referring to Texas Senate Bill 1264. The 2019 state measure introduced independent dispute resolution as an option for many out-of-network medical bill disputes. (See “Swinging for Fairness,” August 2019 Texas Medicine, pages 30-31, www.texmed.org/
swingingforfairness.)

Dr. Fleeger, who is not hospital-employed, also warns that the new requirements for hospitals could eventually creep into new transparency requirements for private practices. He notes that requiring the posting of charges doesn’t give patients any information “regarding the quality of the service being delivered.” And the requirement to list several different types of charges illustrates the battle hospital-employed physicians will face in explaining pricing, he adds.

“For me in my office, or any  doctor whether they’re in private practice or large groups, there are multiple different prices that get paid by different individuals based on insurance company, whether they’re paying cash versus [in installments], versus whether they’re covered by the state or federal government,” Dr. Fleeger said.

The rule also requires hospitals and their physicians to update the data “at least annually.”

 “[There are] multiple different prices for any particular service provided or procedure done. It makes it hard for us to tell a patient what something costs. There’s no straightforward answer,” Dr. Fleeger added. “And the problem from a private-practice standpoint would be that those particular prices may change from time to time. And to have to keep up with that list and constantly be updating it regarding your different contract-negotiated prices … could be quite burdensome.”

Meanwhile, AHA and several other hospital systems and groups are determined to stop the CMS rule, with similar concerns. They filed suit in December, calling the rule “unlawful, several times over.” The suit says rates negotiated with insurers, in addition to being confidential, “do not reliably predict the patient’s out-of-pocket costs, and there is no easy way to reverse-engineer one from the other to determine what the patient’s copayment and deductible will be or even if the service is covered at all. The [CMS rule] will generate confusion about patients’ financial obligations, not quell it.”

CMS declined to comment to Texas Medicine on the pending litigation. 

Tex Med. 2020;116(5):37-39
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Last Updated On

April 30, 2020

Joey Berlin

Associate Editor

(512) 370-1393
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Joey Berlin is associate editor of Texas Medicine. His previous work includes stints as a reporter and editor for various newspapers and publishing companies, and he’s covered everything from hard news to sports to workers’ compensation. Joey grew up in the Kansas City area and attended the University of Kansas. He lives in Austin.

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