Price Transparency Efforts Yielding Disappointing Results

As part of the federal government’s efforts to promote price transparency, facilitate informed decision-making and increase market competition in healthcare, the Centers for Medicare & Medicaid Services (CMS) introduced the Price Transparency of Hospital Standard Charges regulation, effective January 1, 2021.¹

Effectively, through this rule, CMS has mandated that hospitals and health systems publish not only standard charges (prices), but also various other pricing information, including gross charges, payer-specific negotiated charges (including minimum and maximum rates) and the discounted cash price. Prices must be specific to an insurance health plan.

The importance of price transparency cannot be overstated, as a wide disparity in procedural prices exists among hospitals located within a metropolitan statistical area (MSAs), as well as within the same hospital among different payers and within a specific payer, by plan.

Price transparency will require price leaders to justify their premium prices, where as those with moderate prices can potentially use their pricing strategy for competitive advantage, assuming equal quality.

These regulations are but a preliminary step in a longer journey towards healthcare consumerism, with personalized price estimators very likely to become a reality, enabling anyone to calculate their out-of-pocket expenses for health care services.

Footnotes:

1: 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. A rule by the HHS; 11/27/2019 https://www.federalregister.gov/documents/2019/11/27/2019-24931/medicare-and-medicaid-programs-cy-2020-hospital-outpatient-pps-policy-changes-and-payment-rates-and