How the CMS Final Rule Affects Health Care Price Transparency

If you’re frustrated by not knowing the cost of most health care services, you’re not alone. Approximately 90% of United States residents believe the government should require hospitals and insurers to disclose prices. About 75% of patients would rather pay $50 out of pocket than not know the cost of a primary care visit. Almost half say a clear estimate of financial responsibility affects whether they see a certain provider.

Approximately 45% of all spending by health insurers is for hospital care, which is why many health systems and hospitals are being urged to be more transparent in their pricing of services and procedures. As the Centers for Medicare and Medicaid Services (CMS) notes, hospital price transparency helps Americans know the cost of a hospital item or service before receiving it.

Most health care consumers are frustrated with high costs. The average outpatient visit costs $500, and most inpatient stays run more than $22,000. Compared to other developed countries, the U.S. consistently has the highest health care costs for both types of services. Even hospitals publishing list prices rarely result in patients paying those exact amounts.

Promoting broad patient benefits

As Brian Blasé, Special Assistant to the President at the White House's National Economic Council from 2017-2019, explained, health care price transparency has four key benefits. These should be better-informed consumers and patients; better-informed employers who help workers shop for value; improved ability for employers to monitor insurer effectiveness and eliminate counterproductive middlemen; and public pressure on high-cost providers.

There are other benefits for health care consumers and providers, one of the biggest of which is reducing the cost of care. Additional advantages of price transparency in health care include:

• More educated health care purchasing decisions
• Real-time online access to estimated out-of-pocket (OOP) costs
• Enhanced patient engagement
• Better knowledge of prices/fees pre-procedure
• Easier comparison of hospital products and services
• Reduced market prices for various procedures
• Increased patient knowledge of payment responsibility
• Reduced claims payments for lab tests, advanced imaging and clinician office visits
• Elimination of surprise medical bills
• More profitable revenue collection from lack of surprise medical bills

Reading the rule

Rules implemented under the Affordable Care Act (ACA) require hospitals to publish the standard prices for the services they provide, otherwise known as chargemaster rates. However, much of the data is still too complicated for many consumers to understand, and most of the prices don’t consider insurer-negotiated rates.

The U.S. government’s major initiative to promote health care price transparency, the CMS final rule on price transparency, is scheduled to go into effect on Jan. 1, 2021. Under the rule, hospitals must list standard costs for 300 “shoppable services” and the lowest prices they will accept from consumers paying out of pocket. Shoppable services are defined by CMS as ones that can be scheduled by a health care consumer in advance.

According to the U.S. Department of Health & Human Services, the CMS final rule requires hospitals to make their standard charges public in two ways:

1. Comprehensive machine-readable file: All hospital standard charges – including the gross charges, payer-specific negotiated charges, the amount the hospital is willing to accept in cash from a patient and the minimum and maximum negotiated charges – must be made public on the internet in a single data file that can be read by other computer systems. It must include information such as common billing or accounting codes used by the hospital and a description of the item or service to provide common elements for consumers to compare standard charges.
2. Display of shoppable services in a consumer-friendly manner: Payer-specific negotiated charges, the amount the hospital is willing to accept in cash from a patient for an item or service and the minimum and maximum negotiated charges for 300 common shoppable services must be made public in a manner that is consumer-friendly. The information has to be updated at least annually.

The CMS recommends that health care consumers review the data to be informed and shop around. Hospitals can prepare for the 2021 rule by presenting their “value story,” complying with the rule, reassessing their outlook on rule and business practices and shopping in advance for vendors. Hospitals and health systems not in compliance with one or more of the rule’s requirements face a monetary penalty of up to $300 per day.