In November 2019, the Centers for Medicare & Medicaid Services (CMS) finalized one rule and proposed another designed to create greater transparency in healthcare pricing. The final rule requires providers to publish their charges for 300 services by Jan. 1, 2021. The complementary proposed rule, now out for comment, requires health insurers to disclose their negotiated physician network rates and to publish rates they pay to out-of-network physicians. For the 21 states that have previously required publication of health prices this may not be a huge challenge, but there are still new federal rules to abide by. (See Quick Takes below for details.)
The industry has resisted implementing these rules since they were first proposed (via executive order in June 2019). Many providers did not think the rules would go into effect; others said the deadline was unrealistic. Hospitals argued that disclosing negotiated prices will increase healthcare costs by allowing insurers to collude to fix prices. They have also voiced valid concerns that the rules will create more administrative and compliance overhead that will ultimately increase healthcare delivery costs.
However, the transparency rules are not going away: CMS leaders have said empowered patients are the future of healthcare. Further, as we have predicted, some new entrants in the industry offer transparent pricing already. Walmart clinics’ flat-rate pricing is just one example. Price transparency will be key as the industry, including providers, steadily shifts to a consumer-driven care-on-demand platform-based business model.
Healthcare consumers are no longer a captive audience. They increasingly have choices about where to get care. Transparency rules will arm consumers with the quality and cost information they need to be better-educated healthcare consumers. Transparency will also equip payers and employers to drive down prices, an outcome more than 25% of providers already expect. Payers will also likely begin offering innovative health plans built on outcomes as well as cost, pushing consumers toward providers that balance quality and cost to offer the best value. That’s added pressure for providers to justify pricing as consumers learn to evaluate whether higher cost always delivers better quality.
Providers will find the new paradigm challenging, yet compliance as a business strategy would net them tangible benefits. Price transparency creates opportunities for providers to get a clear picture of their true costs of service; to align their service offerings more closely with the communities they serve; and to serve patients more effectively with comprehensive information about quality measures, total costs of a procedure and custom payment plans.
Accomplishing those goals will strengthen providers’ ability to compete as the healthcare industry evolves. Here are some key strategies providers can adopt to get there.
Transparency creates many options for providers to reshape how they deliver care and build healthcare consumer loyalty. The next generation of healthcare consumers will demand new buying options and clear prices, which we discuss in part two of this series. Hospitals that are quick to comply with the new rules can position themselves for success in this more competitive, value-oriented price-conscious market.
White House issues Executive Order 13877 and the Proposed Rules:
“Executive Order Improving Price and Quality Transparency in American Healthcare to Put Patients First.”
“Calendar Year 2020 Outpatient Prospective Payment System & Ambulatory Surgical Center Price Transparency Requirements for Hospitals to Make Standard Charges” becomes final.
One Comprehensive Machine-Readable File.
Required Data Elements:
Consumer-Friendly List of Shoppable Services:
“Transparency in Coverage” proposed rule would require most payers to:
Provider opportunities from payer transparency:
Provider associations sue federal government to stop rule.
Scenario 1 – Court strikes down the Rule
Scenario 2 – Rule Implemented As-Is
Scenario 3 – Rule with Limited Provisions
Next, read part two of this series, “Understanding the Healthcare Comparison Shopper.”
For more information, visit the Healthcare section of our website.
This article was authored by Kinshuk Kaushik, Ruchi Mishra, Randall Nash, Basel Basha and Srivaths Srinivasan of Cognizant’s Healthcare Consulting.