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Spring 2020 - Safety

CMS Price Transparency: The Basics

CMS released its final rule requiring hospitals to disclose payer-specific negotiated rates effective Jan. 1, 2021.

NOV. 27, 2019, was a momentous day for transparency in healthcare pricing when the Centers for Medicare and Medicaid Services (CMS) released its final rule requiring hospitals to disclose payer-specific negotiated rates effective Jan. 1, 2021. The rule’s goal is to create price pressure to lower healthcare costs by enabling consumers to more actively compare prices and proactively shop for care. Rather than perceiving transparency as an unwelcome burden, healthcare facilities should appreciate that this new rule presents opportunities for them to showcase services they provide and engage patients while meeting its requirements.

What does this transparency rule mean for healthcare facilities? The two major tenets are comprehensive machine-readable files and shoppable services. The rule requires hospitals, in comprehensive and machine-readable format, to post on their websites their gross charges, negotiated rates, minimum and maximum negotiated rates with payers, and discounted cash prices for all items and services. The data must be easily accessible and presented without barriers.

Posting similar information for 300 shoppable services in a consumer-friendly way is also required. CMS considers shoppable services to be those that can be scheduled in advance. Seventy of these shoppable services are divided into four categories (evaluation and management, laboratory and pathology, radiology, and medicine and surgery) and are published in the rule. The remaining 230 shoppable services are hospital-determined. The goal is to allow patients to be more informed about what they might pay for hospital items and services and, thus, to choose sites of care accordingly.

Simultaneously released by CMS, the Transparency in Coverage Proposed Rule requires most employer-based group health plans and health insurance issuers offering group and individual coverage to disclose price and cost-sharing information to participants, beneficiaries and enrollees up front.

Price Transparency Rule Definitions

Becoming familiar with the rule’s definitions will assist in making necessary changes to be compliant.

Hospital definition. A hospital is an institution in any state in which the state or applicable local law provides for the licensing or is licensed pursuant to such law, or is approved by the agency of such state or locality responsible for licensing hospitals, as meeting the standards established for such licensing. A state is defined as each of the states, the District of Columbia, Puerto Rico, the Virgin Islands, Guam, American Samoa and the Northern Mariana Islands.

Hospitals include all Medicareenrolled institutions licensed as hospitals (or approved as meeting licensing requirements), as well any nonMedicare-enrolled institutions licensed as a hospital (or approved as meeting licensing requirements). Federally owned/operated hospitals (e.g., Indian Health Program, Veterans Affairs or Department of Defense) are deemed compliant with making public standard charges requirements.

Hospital standard charges. These include:

  • Gross charge: a charge for an individual item or service reflected on a hospital’s charge description master (CDM), absent any discounts (the CDM price);
  • Discounted cash price: a charge that applies to an individual who pays cash, or cash equivalent, for a hospital item or service;
  • Payer-specific negotiated charge: a charge a hospital has negotiated with a thirdparty payer for an item or service (includes all negotiated rates with individual payers);
  • De-identified minimum negotiated charge: the lowest charge a hospital has negotiated with all third-party payers for an item or service; and
  • De-identified maximum negotiated charge: the highest charge a hospital has negotiated with all third-party payers for an item or service.

Hospital items and services. These include all items and services, including individual items and services and service packages, that could be provided by a hospital to a patient in connection with an inpatient admission or an outpatient department visit for which the hospital has established a standard charge. Examples include, but are not limited to, supplies and procedures, room and board, use of the facility and other items (generally described as facility fees), services of employed physicians and nonphysician practitioners (generally reflected as professional charges), and any other items or services for which a hospital has established a standard charge.

Required data elements. These include:

  • A description of each item or service;
  • All standard charges (gross charges, payer-specific negotiated charges, discounted cash prices, minimum and maximum negotiated charges) that apply to each item or service when provided in, as applicable, hospital inpatient and outpatient department settings; and
  • Any code used by the hospital for purposes of accounting or billing for the item or service (e.g., Healthcare Common Procedural Coding System (HCPCS) codes, diagnosis-related group (DRG) codes or other common payer identifiers).

Making standard charges public. These include:

  • Comprehensive machine-readable file: A single machine-readable file containing all five types of standard charges for all items and services provided by the hospital that is useful for employers, providers and tool developers to use in consumer-friendly price transparency tools they develop or that may integrate the data into electronic medical records and shared decision-making tools at the point of care.
  • Consumer-friendly shoppable services: A consumer-friendly list of some types of standard charges for a limited set of shoppable services (including 70 CMSspecified and 230 hospital-selected) provided by the hospital. This would be used by a healthcare consumer for a service that can be scheduled in advance.

Monitoring and enforcement. CMS has the authority to monitor hospital compliance by evaluating complaints made by individuals or entities to CMS, reviewing individuals’ or entities’ analyses of noncompliance, and auditing hospitals’ websites. Should CMS conclude a hospital is noncompliant with one or more of the requirements to make standard charges public, CMS may assess a monetary penalty after providing a warning notice to the hospital or after requesting a corrective action plan from the hospital if its noncompliance constitutes a material violation of one or more requirements. If the hospital fails to respond to CMS’ request to submit a corrective action plan or comply with the requirements of a corrective action plan, CMS may impose a civil monetary penalty on the hospital not in excess of $300 per day, and publicize the penalty on a CMS website. The rule establishes an appeals process for hospitals to request a hearing before an administrative law judge (ALJ) of the civil monetary penalty, and the administrator of CMS may review in whole or in part the ALJ’s decision.

Conduct a Financial Data Analysis

Healthcare facilities should conduct a financial data analysis to identify the true cost of care. From a pharmacy perspective, the CDM is front and center of transparency in drug and intravenous therapy pricing, and it will need to focus on simplicity of use and accuracy. As a major contributor of cost to some of the shoppable services likely to be chosen, pharmacy needs to be a part of pricing. Using infusion services as an example, templates can be created to address what contributes to the cost of a patient receiving a drug in the infusion center or a botulinum product in a clinic setting. It’s important to get accurate and complete data, and to keep it simple using plain language descriptions with corresponding billing codes (Current Procedural Terminology, HCPCS, DRG) and applicable revenue codes. Locations in the facility where services are performed are important as is a listing of any ancillary items and services that will contribute to costs. Patients want and need more transparency, and facilities will miss the mark if there’s a significant gap between patients’ expectations of transparency and accuracy of pricing information available to them.

Bonnie Kirschenbaum, MS, FASHP, FCSHP
Bonnie Kirschenbaum, MS, FASHP, FCSHP, is a freelance healthcare consultant with senior management experience in both the pharmaceutical industry and the pharmacy section of large corporate healthcare organizations and teaching hospitals. She has an interest in reimbursement issues and in using technology to solve them. Kirschenbaum is a recognized industry leader in forging effective alliances among hospitals, physicians, pharmaceutical companies and distributors and has written and spoken extensively in these areas.