New CMS Rule Requires Hospitals to Post “Costs” Online

January 31, 2019

Based on a new rule from the Centers for Medicare and Medicaid Services (“CMS”), as of January 1, 2019, all US hospitals are required to post “online” prices for every procedure, service and medication they may offer. Per CMS, the new rule is intended to improve price transparency and help patients better understand how much they will pay for care. The rule is a step in a positive direction to help create more transparency around healthcare costs for consumers. However, it is just a start since the rule may not create the most user-friendly platform. Take note of the following:

• Hospitals are required to list their “charge-master” prices. Charge-master prices are generally higher than what most patients pay. Charge-master rates are the starting point for private insurers to negotiate lower rates for their members. For someone with a group health plan, their carrier or TPA negotiates a “discounted price” off the charge-master but that is not what the hospital will post online. Consequently, seeing the “charge-master” is equivalent to seeing the “sticker price” on a car that no one ever really pays anyway.
•  Many hospitals have a disclaimer on their websites that lets consumers know that the listed prices are not realistic and, for example, that the list only includes charges from the hospital and does not reflect the charges for physicians, such as the surgeon, anesthesiologist, radiologist, pathologist, or other physician specialists or providers who may be involved in providing particular services to a patient.
• Hospitals are required to keep their prices in “machine-readable” lists that will be updated at least once a year. As such, the transparency tools themselves will vary from hospital to hospital which may make it hard for consumers to price compare. There are also no parameters around how the data is shown. The rule actually allows the data to just be listed line by line in excel file layouts. By contrast, the FDA’s requirements around “food labels” make it easy for one to compare calories from one brand of canned soup to another. That’s not the case with the CMS rule for hospitals.

Each hospital has likely developed their own format and process for the display of the data. And since the data is based on charge-master costs and not the price a consumer will actually pay or be charged, it remains to be seen how helpful the new rule will be for hospitals or patients. For now, this is the first step in what is expected to be a continued effort on the part of CMS to push and promote greater transparency in healthcare costs.

Employers and plan sponsors interested in true, user-friendly transparency tools may want to consider using a commercially available cost transparency vendor that can customize cost data based on their carrier and plan design. Such tools are a powerful way to help direct patients to lower cost providers on a more personalized basis and often include quality results in addition to cost. If you are interested in more information about transparency tools, please contact your Conner Strong & Buckelew account representative.