Skip to content

Hospital Price Transparency

Oct 13, 2020

In late 2019, after months of discussion, CMS released its final rule on hospital transparency, mandating the disclosure of standard charges as well as negotiated rates. This update followed closely on the heels of the 2019 CMS requirement that hospitals publicly post their chargemasters and the subsequent executive order from President Trump calling for more stringent transparency requirements.

As of January 1, 2021 (a year later than was initially proposed), hospitals must:

  • Publish easily accessible information about standard prices for medical services in a comprehensive, machine-readable file. The list must include information that promotes comparability, such as common billing or accounting codes and a description of each item or service.
  • Disclose — in a consumer-friendly, easy-to-read format — payer-specific negotiated charges for 300 “shoppable” services. (These are services that can be scheduled by a healthcare consumer in advance, such as x-rays, outpatient visits, imaging, and laboratory tests.)
  • Pay civil monetary penalties of $300 per day if they are found in violation of the rule.

Impact on Healthcare Providers

Price transparency is intended to empower consumers by enabling informed purchases. But transparency isn’t as simple as it sounds, especially for a sector that has been defined by complex government reimbursement formulas and secret negotiations with private payers. Complying with the new requirements certainly won’t be cheap. “This is an extremely heavy lift for hospitals that are already buried with administrative burden,” said one healthcare IT vendor.

The same day the hospital transparency rule was issued (November 15, 2019), the American Hospital Association and three other healthcare trade groups announced they would sue the administration, claiming the administration had overstepped its authority. They called the requirement to publicly disclose negotiated rates “a setback in efforts to provide patients with the most relevant information they need to make informed decisions about their care.” Instead of promoting transparency, they say, “this rule will introduce widespread confusion, accelerate anticompetitive behavior among health insurers, and stymie innovations in value-based care delivery.” It is unclear how or if resistance from the hospital community will impact this requirement and its timing. However, for now, transparency requirements exist. Healthcare providers must take adequate steps to prepare, or face significant fines.

How to Get Started

Act now. Don’t assume the rule will be overturned. Despite legal challenges, the trend toward increased transparency will only continue.

Benchmark. Turn transparency requirements to your advantage by using competitive intelligence (such as quality scores, pricing data, IRS Form 990s, cost reports, and other publicly available information on other healthcare providers) to inform your strategic planning.

Educate. Any major change requires clear and up-front internal communication. Start by educating clinical and administrative staff on what is changing, how the hospital is complying, and how to answer consumer questions about pricing.

Go above and beyond. Many hospitals are approaching transparency requirements as an opportunity to invest in cost estimators and other tools to more accurately predict an individual’s out-of-pocket costs while creating a positive patient experience.

Relevant insights

Join Our Conversation

Subscribe to our e-communications to receive the latest accounting and advisory news and updates impacting you and your business.

This field is for validation purposes and should be left unchanged.