HIT Perspectives – April 2022
Five Things to Know About Medical Cost Transparency and its Impact on Payers, Providers and Patients
By Vanessa Candelora, Senior Consultant
We’ve all heard horror stories and maybe lived them. A patient goes in for a medical procedure assuming it is covered by insurance — only to find out afterward that just a portion is covered and a whopping and unaffordable balance is owed. There are also inherent “surprises” with high-deductible plans. They are attractive to consumers by offering lower premiums and cheaper up-front costs. That sounds good, but consumers may not understand they could receive large, unaffordable (but legitimate) medical bills because the deductible has not been met.
The struggle is real and the impacts are stunning. Two-thirds of Americans fear being unable to afford surprise medical bills, and 36% have delayed going to the emergency room — or skipped care altogether — because of that uncertainty. If that’s not bad enough, two-thirds of all bankruptcies filed in the United States are tied to medical expenses, the government reports.
That’s why Congress and policymakers said enough is enough, promulgating legislation and regulations that will promote medical price and cost transparency by payers and providers. Armed with actual cost information in advance, consumers are empowered to make informed choices with their care teams to identify affordable options and be better stewards of their health care dollars. Terminology is important when understanding this issue. Price is what providers charge, while costs are what the consumer would pay based on their insurance coverage.
Pulling the curtain back on medical pricing has not been easy. Price transparency is still a work in progress, but here to stay. Here are five things you should know.
1. Medical price transparency is a matter of law — and regulation
So far, there are three sets of federal requirements governing price and cost transparency. There are two regulations from the Centers for Medicare and Medicaid Services (CMS):
- Hospital Price Transparency Rule. Beginning January 1, 2021, hospitals must post two sets of information: a machine-readable file containing five types of standard charges and a consumer-friendly list of shoppable services for 300 items and services. The pricing data include expected out-of-pocket costs for “shoppable services” (or those that can be scheduled in advance) and must be provided in a consumer-friendly manner that facilitates hospital comparisons.
- Transparency in Coverage Rule. Beginning January 1, 2022, carriers and group health plans were required to produce and make available to the public negotiated rates for all covered items and services; out-of-network historical allowed amounts and billed charges; and in-network negotiated rates and costs for prescriptions. Enforcement has been delayed to July 1, 2022. In 2023, payers will also need to offer an online, shoppable health care pricing tool, which will allow consumers to see the negotiated rate between their provider and health plan for 500 services. The information also can be provided on paper, if requested. On January 1, 2024, carriers and group health plans must provide a personalized estimate of their out-of-pocket cost for items and services
- Prohibiting balance billing in certain circumstances. These provisions bake into federal law what many states have in place, such as including out-of-network providers (such as anesthesiologists) that work for in-network facilities
- Requiring disclosure about balance billing protections
- Requiring transparency of health care costs by providing patients an advance explanation of medical benefits (see CMS’ recently released FAQ for health care providers on the No Surprises Act’s requirements and prohibitions)
- Providing consumer protections related to continuity of care and establishing requirements for provider directories
- Requiring providers to give good faith estimates (GFEs) to self-pay and uninsured patients. These are in addition to providing GFEs to insured individuals seeking treatment from non-participating providers
Although the Act took effect January 1, 2022, the government will not enforce certain provisions until applicable rules are in place. (For details, see CMS’ FAQs on the topic.)
2. Compliance is lower than expected
According to a recent study, only 5.6% of hospitals nationwide are fully on board with the government’s medical price transparency requirements. Other research reports similarly disappointing compliance rates. So, what’s behind the compliance lag?
There is a lack of clarity about timelines and shopping tool synergies from regulators. Compliance may be difficult when the parameters are not yet known. Providing the clarity the industry is waiting for can take years, even though the final requirements are unlikely to vary much from what originally was proposed in a draft regulation.
Other reasons for noncompliance are related to industry-perceived misalignment of the regulation with the way hospital charges are created, making it challenging to provide required information. Hospitals may struggle to implement the new directive to assign prices to individual services because procedures typically are associated with multiple interrelated charges (i.e., bundled charges). These include pre-admission testing and physical exams; management or treatment of co-morbidities; and post-discharge medications, supplies, equipment and services. An even bigger challenge is for providers to gather expected charges and billing codes from co-providers in order to submit a holistic view of services for the period of care. On the other hand, there is evidence to suggest that some providers significantly mark up prices and deliberately create opaque pricing. They may want to keep these policies in effect as long as possible.
Whatever the reason for the lag in compliance, the law passed Congress and is now in effect. Federal implementation, enforcement and consumer demands will kick in. Even the most recalcitrant will be forced — either by enforcement fines or market forces — to fall into line.
3. Standards are in development
Standards are among the key pieces of infrastructure needed to interoperably implement the government’s cost transparency requirements. The Da Vinci Project is fleshing out a patient cost transparency use case that will help pave the way for real-time, interoperable data exchange in support of patient cost transparency for devices, services and collection of services. It leverages the use of application programming interfaces (APIs) using HL7’s FHIR (Fast Healthcare Interoperability Resources) standard.
The resulting implementation guide is expected to be published by the end of 2022. It will:
- Facilitate the ability to communicate GFEs for single services, collection of services and items from provider to payer
- Enable payers to communicate an advanced explanation of benefits prior to scheduled service or upon request to the patient and, optionally, the provider
4. Adoption of price transparency tools by consumers is unknown
The government has yet to nail down the transparency tool requirements that will be put into regulation, but there are reasons to believe consumers will embrace these price transparency tools.
- Consumerism is on the rise. Health care consumers want the ability to make choices based on quality, value, accessibility, safety and convenience depending on their priorities and health needs. Patients increasingly are expecting to have the ability to make real-time comparison of costs and services for health care. They want a comprehensive, hassle-free comparison experience, just as they have for online travel and shopping for everyday items
- Consumers will get used to using price comparison tools in other aspects of their care. They increasingly will see out-of-pocket costs of their prescriptions using a real-time benefit check at the point of prescribing. Some companies are buying considerable ad time on television to get patients to enroll in their proprietary (and unfortunately noninteroperable) medication price comparison tool
- There is synergy with other requirements. For example, many payers and providers have already created interoperable, standards-based APIs to make patient data just a click away on their smartphone. This is part of a larger effort to put data in the hands of patients
6. Other implications beyond price transparency
- Payers and providers should do more than the bare minimum to meet the requirements. Going beyond checking the box can build brand loyalty and create trust. Savvy payers and providers will be quick to create user-friendly cost comparisons that extend beyond the price comparison tools of the past and enable a good consumer experience. These all have implications for patient retention, member recruitment, market share and competitive advantage
- Providers should incorporate cost transparency into their overall patient engagement efforts. Financial empowerment similarly will enhance the patient experience, help patients understand their options and increase adherence to the care consumers need and can afford. Providers must be informed about patients’ care costs so they do not unknowingly incur medical bill debt
- Health care costs and coverage are a black box for most consumers. They will need to be educated about the new balanced billing requirements and what they mean. Patients also will need to be educated about what specific services and procedures entail, as well as the meaning of certain medical terminology. This information is supposed to be provided in an easily understandable way, but the health care industry is not known for plain speak. Different methods will be needed to address the needs of non-English speakers
- There are still many unresolved issues regarding unaffordable care. There are concerns that this could lead to care avoidance and higher medical costs at the back end for both the patient and the health care system. Payers, providers, and policymakers will need to find ways to ensure patients can access the care they need