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Health Insurers and Hospital Groups Argue Price Transparency Rules on Hospitals, Clinical Laboratories, and Other Providers Will Add Costs and ‘Confuse’ Consumers

Insurance industry claims new federal price transparency regulations cost each payer as much as $13.6 million in set up and maintenance costs

Price transparency in hospital, clinical laboratory, and other service provider costs marches ever closer to reality for America’s healthcare consumers. Meanwhile, some insurers and hospital groups are working to block implementation of federal rules they argue will confuse consumers and potentially lead to higher costs.

The pushback from hospital and payer lobbies centers on a pair of new federal rules that build on directives in President Trump’s 2017 Executive Order Promoting Healthcare Choice and Competition (13813) and that direct federal agencies to modify their implementation of the Patient Protection and Affordable Care Act.

The first is a Proposed Rule, titled, “Transparency in Coverage Proposed Rule” (CMS-9915-P) that would require payers to make public on their websites negotiated rates for in-network providers and allowed amounts paid for out-of-network providers. Insurers also would be required to make an online “tool” available to members that would provide consumers with out-of-pocket cost estimates for “all covered healthcare items and services.” The 60-day public comment period for this rule went into effect November 15, 2019.

The second is a Final Rule which goes into effect on Jan.1, 2021, titled, “Medicare and Medicaid Programs: CY 2020 Hospital Outpatient PPS Policy Changes and Payment Rates and Ambulatory Surgical Center Payment System Policy Changes and Payment Rates. Price Transparency Requirements for Hospitals to Make Standard Charges Public” (CMS-1717-F2). The rule requires hospitals to disclose online not only their chargemaster prices but also prices negotiated with payers for 300 “shoppable” healthcare services.

These shoppable services include:

Medical Laboratory and Pathology Services

  • Basic metabolic panel
  • Blood test, comprehensive group of blood chemicals
  • Obstetric blood test panel
  • Blood test, lipids (cholesterol and triglycerides)
  • Kidney function panel test
  • Liver function blood test panel
  • Manual urinalysis test with examination using microscope
  • Automated urinalysis test
  • PSA (prostate-specific antigen)
  • Blood test, thyroid-stimulating hormone (TSH)
  • Complete blood cell count, with differential white blood cells, automated
  • Complete blood count, automated
  • Blood test, clotting time
  • Coagulation assessment blood test

Medical laboratories and anatomic pathology groups may want to closely monitor ongoing efforts by payers and hospital groups to block these rules, since any changes will extend to their services, as well as extend price transparency to most employer-based group health plans and health insurance issuers offering group and individual coverage.

Will Transparency Lead to Higher Healthcare Costs?

In its story on insurer claims, FierceHealthcare reported that the rule would require payers to disclose a “staggering” amount of data, leading to implementation costs 26 times more than the Trump administration’s $510,000 estimate. To comply with the federal rule, an insurer will spend as much as $13.63 million on setup and maintenance. That prediction is based on an economic analysis from economic consulting firm Bates White, which conducted the survey on behalf of The Blue Cross Blue Shield Association (BCBSA).

“Some plans have indicated they would be forced to run two sets of tools—one designed to meet member shopping needs and another implemented only to meet the requirements of the proposed rule,” the BCBSA told FierceHealthcare.

Meanwhile, the Association for Community Affiliated Plans (ACAP) argued in a letter to Centers for Medicare and Medicaid Services (CMS) Administrator Seema Verma that cost-sharing liability estimates—which are not a price quote for care—could “lead to consumer confusion and frustration.” The ACAP also asserts the transparency plan could inadvertently lead to higher healthcare cost increases.

“In the absence of quality data, consumers may determine that high cost equates to higher value, select the higher-cost providers, and ultimately drive up medical expenses, especially in circumstances where the consumer’s out-of-pocket costs have been met,” wrote ACAP Chief Executive Officer Margaret A. Murray.

The Alliance of Community Health Plans (ACHP) echoed those views in its own statement, claiming the Trump plan will burden consumers and drive up costs.

“We have long supported efforts to make quality and pricing information more accessible, understandable, and actionable for consumers,” the ACHP wrote. “But they need real-time, patient-specific information tied to individual coverage benefits, not a massive published list of prices that may only frustrate consumers and likely increase costs over time.”

Hospital Associations and Healthcare Systems Bring Lawsuit Against HHS

In December 2019, several hospital associations and healthcare groups filed a lawsuit to block next year’s implementation of the hospital price transparency rule. The plaintiffs included the:

These healthcare organizations and providers joined together to argue that HHS lacks the statutory authority to require and enforce public disclosure of individually negotiated rates between commercial health insurers and hospitals. They also say consumers are likely to be confused by the information they receive.

“America’s hospitals and health systems stand with patients and are dedicated to ensuring they have the information needed to make informed healthcare decisions, including what their expected out-of-pocket costs will be,” said Rick Pollack (above), President and CEO, American Hospital Association, in a news release. “Instead of giving patients relevant information about costs, this rule will lead to widespread confusion and even more consolidation in the commercial health insurance industry.” (Photo copyright: American Hospital Association.)

In its legal response, HHS contends that hospitals are adding to consumers’ confusion by failing to provide transparency.

“They do not dispute that consumers are casting about for accurate information about prices in a complex healthcare system, yet they rely on that same complexity as an affirmative reason to deprive patients of pricing information they need to figure out their out-of-pocket expenses,” HHS said in its brief.

DePaul University Professor Anthony LoSasso, PhD, who specializes in healthcare economics, admits to being “on the fence” regarding the pros and cons of transparency plans.

“I want to think that people can benefit from price transparency. But for a variety of reasons, people don’t look at pricing info even when it’s available,” LoSasso told WTTW News in Chicago.

Nevertheless, HHS vows to continue its push for price transparency.

“Hospitals should be ashamed that they aren’t willing to provide American patients the cost of a service before they purchase it,” HHS Deputy Assistant Secretary and National Spokesperson Caitlin Oakley told Reuters in a response to the hospital groups’ lawsuit.

In light of the government’s push to make healthcare pricing more transparent, clinical laboratory and anatomic pathology leaders in hospitals and health systems would be wise to prepare for a future that includes price shopping by consumers.

—Andrea Downing Peck

Related Information:

Executive Order Improving Price Quality and Transparency in American Healthcare to Put Patients First

Transparency in Coverage Proposed Rule (CMS-9915-P)

Medicare and Medicaid Programs: CY 2020 Hospital Outpatient PPS Policy Changes and Payment Rates and Ambulatory Surgical Center Payment System Policy Changes and Payment Rates. Price Transparency Requirements for Hospitals to Make Standard Charges Public

Insurers: Price Transparency Rule Puts ‘Staggering,’ Expensive Burden on US

Lawsuit vs Alex M. Azar II, in his official capacity as Secretary of Health and Human Services

Hospital Groups File Lawsuit Over Illegal Rule Mandating Public Disclosure of Individually Negotiated Rates

The Pros and Cons of New Health Care Price Transparency Rule

Azar Price Transparency

Hospital Groups File Lawsuit to Block Trump’s Price Transparency Rule

New Price Transparency Shopping Tools Help Healthcare Consumers Make Educated Choices and Save Money Using Smartphones and Other Devices

Price shopping for clinical laboratories and other healthcare services and surgical procedures creates a ‘healthy competitive environment,’ an Optum executive noted

With the threat of infection from SARS-CoV-2 (the coronavirus that causes COVID-19) on the minds of most Americans, price transparency for medical care is more critical than ever, and new smartphone applications (apps) are helping patients shop for the best prices and quality when selecting healthcare, including clinical laboratory services. 

One example, SmartShopper by Vitals (now known as Sapphire Digital) of Lyndhurst, N.J., is a pre-paid employer- or health plan-based program that lets people use mobile phone apps and go online using their computers to check prices and quality ratings for healthcare service providers in their area. The program may also incentivize members to prices shop by offering up to $500 per service for choosing lower-cost providers. 

“Today, there is no reason consumers shouldn’t know the price of routine, non-emergency care,” said Heyward Donigan, former President and CEO of Vitals who is now CEO of Rite Aid (NYSE:RAD), in a news release. “Putting consumers in the driver’s seat for making informed healthcare decisions will create a competitive healthcare marketplace that ultimately lowers costs for everyone.”

Does Price Shopping Create a ‘Healthy Competitive Environment’?

Individuals whose health plans or employers have signed up for SmartShopper can use it to seek out the best prices for routine exams, preventative exams, imaging scans, and to schedule surgeries. The program’s provider data is compared by cost and quality based on nationally recognized metrics and patient reviews.

Some of the largest health insurers in the country, such as Anthem and Highmark, provide price shopping tools to their clients. 

“Up to 7% of overall healthcare spent could be reduced through price transparency tools like SmartShopper,” Becca Lococo, PhD, Vice President, Customer Experience at Optum, told Modern Healthcare. This can create a really healthy competitive environment in an industry where costs are already rising.”

Employers Save Big with Price Shopping

Large companies can reap substantial savings when they provide their employees with price shopping tools. Employer savings can range from $1,810 for a round of physical therapy to $80 for a mammogram. Patients, on average, save $606 for each procedure with SmartShopper, reported Modern Healthcare.  

“Even just one person shopping can make a difference for that employer in terms of the claims they’d be paying out at the end,” Steve Crist, Vice President, Commercial Health Plan, Blue Cross Blue Shield of North Carolina, told Modern Healthcare. “Even though the employer is paying the incentive, the cost savings more than make up for it. The ROI on this program is very strong.”

The Vitals SmartShopper Book of Business Report 2017 notes that, between 2014 and 2017, the tool saved employers $40 million and paid out $4.6 million in cash rewards to individual consumers. In 2016 alone, SmartShopper saved employers $15 million and paid out $1.8 million in cash incentives with the average incentive check totaling $85.

The Vitals report also listed the top 10 procedures and the three-year total cost savings for employers that used SmartShopper. The list includes clinical laboratory testing as the fifth largest source of savings for employers that used price-transparency tools as part of their health benefits programs:

  • Colonoscopy ($6,592,719)
  • MRI ($5,382,440)
  • Physical therapy ($4,545,758)
  • Remicade therapy ($4,364,887)
  • Lab and blood work ($3,600,105);
  • CT scan ($2,001,602)
  • Upper GI endoscopy ($1,301,916)
  • Knee Surgery ($913,436)
  • Mammogram ($868,322)
  • Shoulder Surgery ($636,615)

SmartShopper has a configurable list of more than 200 medical procedures and services included in the tool. Sapphire Digital (formerly Vitals) uses claims data and collaborates with clients to develop the ideal combination of services to maximize savings for their customers. 

“We don’t have to boil the ocean to produce a sizeable reduction in healthcare costs for our employer clients,” said Heyward Donigan, former President and CEO of Vitals and now CEO of Rite-Aid, in the Vitals report. “Focusing on routine, shoppable procedures that are relevant to the demographics of a client’s workforce generates significant savings.” (Photo copyright: Wall Street Journal.)

Price Shopping for Surgery

In 2018, before changing its name to Sapphire Digital, Vitals sold its consumer services division to WebMD. The sale enabled Vitals to focus on enhancing and developing its price transparency tools. The company then launched Medical Expertise Guide (MEG), which uses advanced analytics to create “proprietary Composite Quality Scores for surgeons and facilities to help consumers find the best surgeon and facility combination for their surgery, at a predictable cost,” according to Sapphire Digital’s website.  

“MEG brings consumers information, powered by data and analytics and supported by personalized service, to help them make quality healthcare decisions with confidence,” said Donigan, in a news release. “MEG guides employees to the best care, while helping employers manage the overall cost-effectiveness of their healthcare program.”

Examples presented in the news release of the “savings per case” for people using MEG include:

In October 2016, Dark Daily reported on another example of using healthcare transparency tools from Castlight Health. That tool enables Safeway employees to check clinical laboratory prices on their smartphones or computers before selecting where to have tests performed. At that time, Safeway and its employees were able to reduce spending on clinical laboratory tests by 32% in only 24 months by selecting the labs with the lowest prices.

The examples presented above are evidence that price transparency is gaining a foothold in healthcare. These are early demonstrations that price shopping tools do help consumers make more informed decisions when choosing hospitals, physicians, or clinical laboratories. The trend is for ever-growing numbers of consumers to rely on pricing transparency tools when selecting their medical care.

Pathologists and clinical laboratories should not ignore this trend, as it could affect business workflow and revenue streams. 

—JP Schlingman

Related Information:

Encouraging Patients to Shop Around Amid High Healthcare Prices

Show ‘Em the Money: Paying Patients to Shop for Affordable Medical Care

Vitals SmartShopper Expands to Millions of Consumers in 2018

Vitals SmartShopper Book of Business Report 2017

Vitals Launches MEG, A Medical Expertise Guide for Health Care Shopping

Vitals Announces Company Name Change to Sapphire Digital

From Casting Light to Total Eclipse? Can a New CEO Turn Around Castlight Health?

Vitals Study Shows Consumers Using Cost Transparency Tools Select Clinical Laboratories with Low Test Prices

Using the Reference Pricing Strategy, Safeway and its Employees Reduce Spending on Clinical Laboratory Tests by 32% in Only 24 Months by Selecting Lab with Lowest Prices

Ohio Healthcare Network Serving Amish and Anabaptist Communities Could Provide Blueprint for Hospital Price Transparency

This rural health system has nearly a decade of experience offering cash-only package pricing for medical services including, most recently, inpatient stays

While healthcare networks and hospital organizations nationwide argued over pricing transparency, Pomerene Hospital in Millersburg, Ohio, embraced the concept. The not-for-profit hospital developed packages of care that include “one all-inclusive price for tests, procedures, and episodes of care, rather than a lengthy list of itemized charges that didn’t even include professional fees” for its self-paying customers, Modern Healthcare reported.

Clinical laboratories and pathology groups that read Dark Daily know that on Jan. 1, 2021, a new Centers for Medicare and Medicaid Services (CMS) final rule (CMS-1717-F2) on price transparency goes into effect. It requires hospitals to publish their standard chargemaster prices, as well as payer-negotiated prices, online for customers to review.

A companion proposed rule (CMS‑9915‑P) will, if passed, require health plans and healthcare insurers to disclose covered healthcare costs to customers upon request, including “an estimate of such individual’s cost-sharing liability for covered items or services furnished by a particular provider.”

These rules have created a fire storm of controversy. Hospital systems and healthcare organizations like the American Hospital Association (AHA) argue that revealing payer-negotiated rates will undermine health networks’ negotiating power with insurers and increases hospital prices.

They may be right. But that hasn’t stopped one health network in rural Ohio from providing a blueprint on price transparency that could be a model for the rest of the nation—at least for one segment of its customer base.

Bundled Care Packages Increase Revenues at Pomerene

Pomerene is a not-for-profit healthcare provider established in 1919. Originally, the tiny hospital had “a six bed women’s ward, a three bed men’s ward, six private rooms, a three bed OB ward, and a nursery with five cribs. There were ten physicians on staff,” notes the hospital’s website.

Today, Pomerene has more than 325 employees, 80 physicians, and 55 licensed beds. The hospital has 30 departments on three floors and is one of the largest employers in Holmes County.

Pomerene has developed bundled care packages for more than 300 services—including inpatient care—for Amish and Anabaptist patients, as well as any other self-pay patients who pay their bills in full at the time of service, Modern Healthcare reported.

The initiative came in response to concerns raised by the area’s Amish and Anabaptist communities, which make up roughly 40% of the county’s population. They do not use commercial health insurance. Instead, they pay their medical bills out of pocket, and when they are unable to pay for medical services, benefit actions and church support fill the financial gaps.

Church members asked Pomerene for guaranteed bundled pricing. They did not want the uncertainty of hospital bills that might include lists of itemized charges, but not professional fees and other potential costs.

“We have our own healthcare,” a retired Amish carpenter (who asked that his name not be used) told Reuters. “They (hospitals) give you a bill. If you can’t pay it, your church will.”

Both religious groups also value thriftiness and are known to be fierce negotiators. In recent years, they lobbied Pomerene Hospital to include inpatient care in its all-inclusive pricing structure.

“We assume a certain level of risk with this financial arrangement,” Pomerene Hospital CEO Jason Justus, who at the time was Pomerene’s Chief Financial Officer, told Modern Healthcare. “But it’s about saying what we’ll do and doing what we say. That builds a great deal of trust in the community.” Justus took over as CEO in July, 2019, reported The Daily Record.

Jason Justus, CEO, is shown above to the right of Tony Snyder, former CEO of Pomerene Hospital until July of 2019. Initially, Snyder was concerned that posting the hospital’s prices would discourage the Amish from seeking care at his hospital. “They are shrewd business folks, they are price sensitive, and they will shop,” he told Modern Healthcare. “They don’t expect you to lose money, but they don’t want to be paying exorbitant margins.” Fortunately, price transparency had the opposite effect. “We were holding our breath,” Justus said. “We were optimistic it would work, and we were pleasantly surprised when it did.” (Photo copyright: The Daily Record.)

In total, nearly one-quarter of the hospital’s patient revenue comes from bundled-service packages, with 3,387 packages provided last year, Modern Healthcare reported. In 2018, Pomerene brought in $36,971,931 in operating revenue, according to Modern Healthcare Metrics.

Bundled Payments Drive Innovation

Bundled payments also have forced hospital administrators and staff at Pomerene to find innovative ways to cut costs by shortening patient stays. For example, Modern Healthcare reported that the length of hospital stay for childbirth, which at the time averaged two-to-four days, dropped to 24 hours after the hospital created a 24-hour package for obstetrical deliveries. Within 18 months, 80% of childbirth cases fit the 24-hour model.

“Here is free market economics at work,” said Robert Michel, Dark Daily’s Editor-in-Chief. “This hospital understands that it must meet the needs of this unique group of patients with good service and quality at a fair price. That understanding comes with an incentive for the hospital’s staff to identify and implement innovations to cut costs while improving quality.”

However, Pomerene Hospital’s policy of disclosing prices to patients in advance of services remains uncommon in the healthcare industry. “Outside of Medicare, bundled pricing is rare-to-nonexistent among full-service US hospitals, most of which say they don’t know their actual costs for providing care and, therefore, can’t offer such prices,” Modern Healthcare stated.

For competitive reasons, Pomerene does not publicly post its package prices and only prospective cash-paying patients are provided the cost breakdowns. That will most likely change following enactment of the CMS final rule.

Other Health Systems That Bundled Prices

Though Pomerene does not shares its price-packaging methods with other hospitals, its track record for attracting cash-paying patients made it an example to other hospitals serving similar religious communities.

The Medical Center at Scottsville in Kentucky followed Pomerene’s lead and discounted cash prices—paid upfront or before discharge—by 25% for 300 medical services, including childbirth and common surgical procedures. This was to attract the area’s Mennonite population, noted Quartz magazine.

“I will tell you they are very conscientious about cost. They are very business-savvy and will shop around,” Eric Hagan, Regional Vice President of Operations at Med Center Health and Administrator of the Medical Center at Scottsville, told Quartz.

Will Americans as a whole be just as eager to shop for medical services? The answer to that question may determine whether increased price transparency throughout healthcare, including clinical laboratory testing and anatomic pathology services, results in lowering their healthcare costs.

—Andrea Downing Peck

Related Information:

Hospital Develops Package Prices to Lure Cash-Paying Patients

The Amish Understand a Crucial Element of Modern Medicine that Most Americans Don’t

How Do Amish Choose a Hospital?

CY2020 Hospital Outpatient Prospective Payment System (OPPS) Policy Changes: Hospital Price Transparency Requirements (CMS-1717-F2)

As U.S. Struggles with Health Reform, the Amish Go their Own Way

Trump Administration Announces Historic Price Transparency Requirements to Increase Competition and Lower Healthcare Costs for All Americans

Excessive $48,329 Charge for California Patient’s Outpatient Clinical Laboratory Testing Calls Attention to Chargemaster Rates and New CMS Price Transparency Rule

Studies show medical laboratories may be particularly hit by adjustments to hospital chargemasters as hospitals prepare to comply with Medicare’s New Transparency Rule

Recently, Kaiser Health News (KHN) published a story about a $48,329 bill for allergy testing that cast a spotlight on hospital chargemaster rates just as healthcare providers are preparing to publish their prices online to comply with a new Centers for Medicare and Medicaid Services (CMS) rule aimed at increasing pricing transparency in healthcare. The rule goes into effect January 1, 2019.

The patient—a Eureka, Calif., resident with a persistent rash—had received an invoice for more than $3000 from her in-network provider.

Though this type of allergy skin-patch testing is usually performed in an outpatient setting by a trained professional, such as an allergist or dermatologist, the patient elected to have the testing performed at Stanford Health Care (Stanford), a respected academic medical system with multiple hospitals, outpatient services, and physician practices.

The patient’s insurance plan, Anthem Blue Cross (Anthem), paid $11,376 of the $48,329 amount billed by Stanford Health Care, which was the rate negotiated between the insurer and Stanford, Becker’s Healthcare reported. The patient ultimately paid $1,561 out-of-pocket.

So, where did that $48,329 in total charges come from? Experts pointed to the provider’s chargemaster. A chargemaster (AKA, charge description master or CDM) lists a hospital’s prices for services, suppliers and procedures, and is used by providers to create a patient’s bill, according to California’s Office of Statewide Health Planning and Development (OSHPD).

Chargemasters note high prices beyond hospitals’ costs and may be considered jumping off points for hospitals to use in invoicing payers and patients, RevCycleIntelligence explained.

Hospital representatives will negotiate with insurance companies, asking them to pay a discounted rate off the chargemaster list. A patient with health insurance accesses care at that negotiated rate and perhaps has responsibility for a share of that amount as well.

However, an out-of-network patient, uninsured person, or cash customer who receives care will likely be billed the full chargemaster rate.

In a statement to KHN, Stanford explained that the California woman’s care was customized and, therefore, costly: “We conducted a comprehensive evaluation of the patient and her environmental exposures and meticulously selected appropriate allergens, which required obtaining and preparing putative allergens on an individual basis.”

Johns Hopkins researchers Ge Bai, PhD, CPA (left), and Gerard Anderson, PhD (right), authored a study published in Health Affairs that shows “Hospitals on average charged more than 20 times their own costs in 2013 in their CT scan and anesthesiology departments.” Hospitals with clinical laboratory outreach programs will want to consider how their patients may respond as new federal price transparency requirements make it easier for patients to see medical laboratory test prices in advance of service. (Photo copyright: Johns Hopkins University.)

Now is a Good Time for Clinical Laboratories to Make Chargemaster Changes

Some organizations, such as the Healthcare Financial Management Association (HFMA), are calling for chargemaster adjustments as part of a comprehensive plan to improve transparency and lower healthcare costs. This falls in line with the new CMS rule requiring hospitals to post prices online starting Jan.1, 2019.

In fact, hospital medical laboratories, which cannot distinguish their services from competitors, may be impacted by the new CMS rule perhaps more than other services, the HFMA analysis warned.

“The initial impact for healthcare organizations, if they have not already experienced it, will be on commoditized services such as [clinical] lab and imaging. Consumers do not differentiate between high and low quality on a commoditized service the same way a physician might, which means cost plays a larger role in consumers’ decision making.” That’s according to Nicholas Malenka, Senior Consultant, GE Healthcare Partners, and author of the HFMA report. He advises providers to do chargemaster adjustments that relate charges to costs of services, competitors’ charges, and national data.

Medical laboratory leaders also may want to take another look at the opportunities and risks for labs suggested in an earlier Dark Daily e-briefing on the Medicare requirement. (See, “Latest Push by CMS for Increased Price Transparency Highlights Opportunities and Risks for Clinical Laboratories, Pathology Groups,” August 8, 2018.)

Are Chargemaster Charges Truly Excessive? Johns Hopkins Researchers Say ‘Yes!’

Most hospitals with 50 beds or more have a charge-to-cost ratio of 4.32. In other words, $432 is charged when the actual cost of a service is $100, according a study conducted by Johns Hopkins University and published in Health Affairs.

The researchers also noted in a news release about their findings titled, “Hospitals Charge More than 20 Times Cost on Some Procedures to Maximize Revenue,” that:

  • Charge-to-cost ratios range from 1.8 for routine inpatient care to 28.5 for a CT scan; and,
  • Hospitals with $100 in CT costs may charge an uninsured patient or out-of-network patient $2,850 for the service.

“Hospitals apparently markup higher in the departments with more complex services because it is more difficult for patients to compare prices in these departments,” lead author Ge Bai, PhD, CPA, Associate Professor at Johns Hopkins Carey Business School, noted in the news release.

“(The bills for high charges) affect uninsured and out-of-network patients, auto insurers, and casualty and workers’ compensation insurers. The high charges have led to personal bankruptcy, avoidance of needed medical services, and much higher insurance premiums,” co-author Gerard Anderson, PhD, Professor of Health Policy and Management at Johns Hopkins Bloomberg School of Public Health, stated in the news release.

Legal Issues Possible for Hospitals, Medical Laboratories, Other Providers

Still another study published in the American Journal of Managed Care (AJMC) explored the legality of “surprising” uninsured and out-of-network patients with bills at the chargemaster rates. It found that contract law supports market-negotiated rates—not chargemaster rates that do not reflect actual costs or the market.

“Patients and payers should know that they are under no obligation to pay surprise bills containing chargemaster rates, and state attorneys generally can use the law to prevent providers from pursing chargemaster-related collection efforts against patients,” the researchers wrote.

Labs Need to Get Involved

Clinical laboratory leaders in hospitals and health systems are advised to reach out to hospital chargemaster coordinators to ensure the chargemaster, as it relates to the lab, is inclusive, accurate, and in sync with competitive market data. Independent medical laboratories may want to similarly check their chargemasters to see how their lab test prices compare to the prices charged by other labs serving the same community.

—Donna Marie Pocius

Related Information:

That’s a Lot of Scratch: The $48,329 Allergy Test

Allergy Tests

Six Things to Know About a Woman’s $48K Allergy Test

The Role of the Hospital Chargemaster in Revenue Cycle Management

Why Your Access Strategy Demands Pricing Transparency

CMS Proposes Changes to Empower Patients and Reduce Administrative Burden

US Hospitals Are Still Using Chargemaster Markups to Maximize Revenue

Hospitals Charge More than 20 Times Costs on Some Procedures to Maximize Revenue

Battling the Chargemaster: A Simple Remedy to Balance Billing for Unavoidable Out-of-Network Care

Latest Push by CMS for Increased Price Transparency Highlights Opportunities and Risks for Clinical Laboratories and Pathology Groups

 

Latest Push by CMS for Increased Price Transparency Highlights Opportunities and Risks for Clinical Laboratories, Pathology Groups

As federal regulatory agencies continue to push transparency, hospitals, medical labs, anatomic pathology groups, and other healthcare providers must develop strategies for remaining competitive and maintaining patient volume

More price transparency continues to be a goal of Medicare officials. Some clinical laboratory managers and pathologists may be unaware of a proposed rule issued by the federal Centers for Medicare and Medicaid Services (CMS) in April that would require hospitals to post prices online as early as this January 1, 2019.

This action is a definitive demonstration of how the federal healthcare program continues to scrutinize how healthcare organizations communicate with patients and post their prices. This pressure on healthcare systems and individual providers extends to the clinical laboratories and anatomic pathology groups that support them. Without a plan to address these changes, medical laboratory test volume and practice revenues can be severely impacted.

Recent coverage from RevCycleIntelligence indicates that this trend is only just getting started.

“When you go to receive a healthcare service, there are always going to be situations where you can’t know what the costs will be, especially around emergency situations and some acute situations,” Centers for Medicare and Medicaid (CMS) Administrator Seema Verma told RevCycleIntelligence. “But for a lot of us, we’re going in for planned procedures. You should be able to know what it’s going to cost you.”

In April 2018, CMS posted a proposed rule that requires hospitals to post standard service rates online and update their pricing lists at least annually starting January 1, 2019. While many healthcare organizations currently report pricing to state boards and other online directories, this rule, if enacted, could make it easier for consumers to source reliable pricing information before obtaining care.

“We are concerned that challenges continue to exist for patients due to insufficient price transparency. Such challenges include patients being surprised by out-of-network bills for physicians—such as anesthesiologists and radiologists who provide services at in-network hospitals—and patients being surprised by facility fees and physician fees for emergency room visits. We also are concerned that chargemaster data are not helpful to patients for determining what they are likely to pay for a particular service or hospital stay,” the CMS proposed rule states.

In the proposed rule that references out-of-network bills, pathologists should have been included as a hospital-based physician service—such as anesthesiologists and radiologists—that submits bills to patients for care provided in the hospital. Pathology practice administrators may want to review the specific language of the proposed rule to understand how hospitals served by the pathology group will be required to post prices.

Seema Verma

“If you’re buying a car or pretty much anything else, you’re able to do some research,” Seema Verma (above), Administrator, Centers for Medicare and Medicaid Services told RevCycleIntelligence. “You’re able to know what the quality is. You’re able to make comparisons. Why shouldn’t we be able to do that in healthcare? Every healthcare consumer wants that.” (Photo copyright: Centers for Medicare and Medicaid Services.)

Transparency Concerns Lead to Additional Questions from CMS

Alongside the proposed rule, CMS also is issuing a request for information (RFI) to give healthcare experts an opportunity to:

  1. Demonstrate the impact of current proposals; and,
  2. Make recommendations to further align the proposal with both the needs of healthcare organizations and service providers as well as the cost-reduction goals of CMS.

Key questions, according to RevCycleIntelligence, include:

  • How should “standard charges” be defined (e.g., average or median rates for chargemaster items; average or median rates for groups of services commonly billed together as determined by the hospital; or average discount off the chargemaster amount across all payers)?
  • What types of information would help patients understand hospital prices and patient financial responsibility? How should hospitals use this information to inform patients and decision-making?
  • Should healthcare providers be required to tell patients about their out-of-pocket costs for a service prior to care delivery? Should providers even play a role in informing patients of out-of-pocket costs?
  • Should CMS require providers to give patients information on what Medicare pays for a service?
  • How should CMS enforce healthcare price transparency requirements? Should hospitals have to attest to meeting requirements?

Implications for Healthcare Services and Diagnostics Providers

RevCycleIntelligence reports that between CMS rules and bills introduced by Senators, an increase in healthcare transparency pricing is likely. These requirements will continue to apply pressure to clinical laboratories, anatomic pathology groups, and other diagnostics providers.

Much like the importance of communicating value to the new wave of payer and physician partnerships emerging around the country, transparency will offer an opportunity to communicate value to consumers.

However—particularly for high-margin services and assays—laboratories must create strategies to address pricing transparency and communicate the value of their services if they hope to maintain volumes and financial integrity at existing levels.

A study conducted by Johns Hopkins University researchers and published in The American Surgeon also highlights benefits that transparency might hold outside of simple regulatory compliance.

Analyzing data from six ambulatory care centers from 2016, they found that five out of six reported increases in both patient volume and revenue after adopting price transparency. Half of the centers also reported a reduction in administrative burden—a concern that medical laboratories must also address as streamlining operations and optimizing efficiency becomes a core part of successful lab operation in the face of healthcare reform.

Clinical laboratories and anatomic pathology groups should develop a strategy for addressing new transparency requirements. That strategy should include ways to effectively communicate their value to both healthcare providers and consumers. Should the CMS proposed rule progress to a final rule, failure to address pricing transparency may result in enforcement and compliance concerns—a critical issue for laboratories already facing tighter markets and increased regulatory and payer scrutiny.

—Jon Stone

 

Related Information:

“Just the Beginning” of Healthcare Price Transparency, Verma Says

CMS Aims to Catalyze Advancements in Consumer Price Transparency

Verma: CMS Will “Use Every Lever” for Promoting Interoperability, Data Access

CMS to Require Healthcare Price Transparency Online for Hospitals

Publish Your Prices, Boost Your Bottom Line

Healthcare Price Transparency in U.S. Not Improved in Recent Years

The Impact of Price Transparency for Surgical Services

Patients’ Views on Price Shopping and Price Transparency

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