As U.S. hospitals entered the new year amid the pandemic, hospital administrators who had their hands full with community COVID infection rates and plunging revenues also had a new federal price disclosure rule they were required to implement.  

Effective Jan. 1, hospitals are required to post the prices they charge for their 300 most common medical procedures — ones that are most “shoppable” by people before they go into the hospital — displayed in a “consumer-friendly format.” The Centers for Medicare and Medicaid’s “Price Transparency Rule for Hospitals” is aimed at empowering the average consumer to shop for the best price on medical procedures ranging from colonoscopies to cardiac catheterizations. 

The new rule enacts requirements outlined in an executive order signed by President Donald Trump in 2019, requiring hospitals to publish on their websites “a machine-readable file containing a list of all standard charges for all items and services.” The regulation assumes that more transparency will stimulate market forces of competition and comparison shopping to leverage health costs downward.   

The new requirement for hospitals — which will be broadened in 2022 and 2023 to include health insurers — is a significant shift from CMS’ previous price transparency regulation. That regulation only required hospitals to post their “chargemaster” prices — list prices for every imaginable procedure, test and medication, which have been compared to the “manufacturer’s suggested retail price” for hospitals. 

After a yearlong delay by CMS to accommodate concerns by the medical community about the administrative and financial burden imposed by the proposed rule — and a legal fight with the American Hospital Association — the new rule was released on Oct. 29, 2020.  

The significant opposition by the medical industry to the rule prefaced what has been a lackadaisical rollout by hospitals. As of early March, a majority of the 100 largest U.S. hospitals — 65 — were “unambiguously noncompliant” with the new rule, according to an analysis of those hospitals’ websites by HealthAffairs, an industry journal. 

The three major health systems serving Central Iowa — MercyOne, UnityPoint Health and Broadlawns Medical Center — each are in compliance with the new rules with their price data posted on their websites. More importantly, perhaps, we found each of their websites has interactive price estimator tools. We took a quick test spin on each estimator and were able to quickly receive an estimate from each for a chosen procedure. 

The Iowa Hospital Association also has a price comparison tool in which prospective patients can compare prices for any of its member hospitals across the state. 

Hospitals face penalties of up to $300 per day for noncompliance. However, health systems also face significant costs to implement the systems, which some systems say can reach into millions of dollars, plus large and ongoing maintenance costs.

To gauge the impact of the rule in Iowa and to assess the intended and unintended consequences it’s having, the Business Record interviewed three health care industry professionals: 

 

Nataliya Boychenko Stone

employee benefits consultant at Holmes Murphy. 

Dr. Tom Evans

president and CEO of the Iowa Healthcare Collaborative.

Ben Vallier

CEO of the Iowa Clinic. 

 

‘We’re excited about it’ 

Ben Vallier, who began as CEO of the Iowa Clinic in August 2020, is an enthusiastic advocate of price transparency. The Iowa Clinic, which is not subject to the federal rule because it’s not a hospital, nevertheless has long been transparent in detailing prices of its procedures. The West Des Moines multispecialty group averages 420,000 patient visits a year. 

“We’re excited about it,” he said. “We think this is a great direction for health care. Transparency promotes competition, and competition promotes choice, and choice makes everything better — quality and cost. So we’re in favor of more transparency; we think it’s a step in the right direction.” 

The Iowa Clinic has offered a price transparency tool on its website and its patient app for smartphones for a number of years, Vallier said. 

“So they can go on there and put in the procedure they want to have done through their insurance, and we help them through the process and try to get them a fairly accurate estimate,” he said. “So we’ve been out in front of that for a while and I feel that’s an important part of what we want to do within the community.” 

 What are the biggest challenges in making price transparency more effective for consumers and for employers? 

“Businesses that sponsor health plans are a big piece of this,” Vallier said. “Providing data in a manner that is accessible to them, to help them create health plans that take care of their employees and hopefully maximize quality and cost has been a huge challenge.”

 

The way in which data is presented, and making it accessible and understandable to nonmedical folks, is by far the biggest challenge, he noted. “There’s a lot of jargon when you look at these lists of prices that doesn’t always make a lot of sense. And so trying to find ways to kind of help navigate that has been a challenge for a lot of the employers I’ve spoken to.” 

A swinging pendulum 

For Dr. Tom Evans, federal interventions in health care policy are nothing new — although the direction the pendulum is swinging in often depends on who’s leading the current administration. As head of the Iowa Healthcare Collaborative, a nonprofit focused on sustainable transformation of the health care system, Evans has helped providers develop and examine quality measures for nearly the past two decades. 

“The pendulum swings from one philosophy to the other one,” he said. “One of [the philosophies] is to manage price more effectively within the fee-for-service system. And then the other side of the pendulum is, ‘We’re going to manage things in a subscribership value-based reimbursement system.’” 

Evans said he’s an advocate for a value-based health care system, because “it teaches the providers they have to own their product, and it teaches them how to change.” By comparison, a fee-for-service system that emphasizes price encourages health systems to perform more procedures, charging as much as they can per unit, he said.  

“Philosophically, I think the price transparency piece undermines our efforts,” he said. “We’re trying to get consumers to be focused on the quality and the safety of the product and make clinical decisions based on that. When we throw the price stuff in there, I think it will become confusing.”  

That same argument was voiced by four major hospital organizations almost immediately after the final rule was announced last fall. In a joint statement, the American Hospital Association, the Association of American Medical Colleges, the Children’s Hospital Association and the Federation of American Hospitals said they would challenge the rule in court, saying the rule will “introduce widespread confusion, accelerate anti-competitive behavior among health insurers and stymie innovations.” 

In many instances, people are going to be more concerned about the quality of care — not price — when it comes to high-risk, high-cost procedures. Even relatively large employer groups may find themselves turning to larger metropolitan markets for surgeries, Evans noted. “For certain high-cost interventions, like hip replacements, I’ve seen self-funded employers sending people to the Cleveland Clinic or maybe the Mayo Clinic, rather than staying in Iowa, because the infection rates were better” at the out-of-state specialty clinics. 

Another speed bump has been the ongoing stress of the COVID-19 pandemic on health systems, and the added burden of enacting a rule that was formulated months before the pandemic began. “So now we’ve had this mind-boggling shock to the system. It doesn’t mean that we shouldn’t do it, but we’ve been trying to do this in unprecedented times and people are just stretched — their eyeballs are popping out.” 

Evans said greater price transparency probably won’t provide much benefit for the general population, but “having this information will certainly create new opportunities for innovators to do cool stuff. And also for groups that have enough critical mass, it could be helpful.” 

Hopeful ‘veil will be lifted’ on both price and quality

Nataliya Boychenko Stone, an experienced employee benefits consultant with Holmes Murphy, also has found that more transparency is not a panacea. 

“Just finding a price-efficient provider isn’t necessarily the win of the day — you’re looking for quality and price,” she said. “If you’re just looking at the cost, you don’t really know why that cost is low. Are they just trying to attract people to their facility, and [the price is lower because] it’s not a good-outcome facility?”

Even if every hospital abides by the rule and clearly posts their prices, interpreting the information to make a good consumer decision is difficult, Boychenko Stone said. “If the consistency is lacking, you can’t really compare the prices. So although the effort is helpful – and in theory it sounds like a good idea to be able to know the cost before you get a procedure – in reality it’s not quite as easy as it seems to be able to truly compare.”  

The role of insurance companies also comes into play, she noted, because the CMS rule requires that in addition to providing a cash price, hospitals must also list a negotiated price that would be paid through insurance. The rub is that negotiated pricing varies by insurance company. “The rule asks for a minimum and maximum so that you get a range,” Boychenko Stone said. “And although that might be helpful, you don’t really know the range you fall in until you have a conversation with your insurance company.” 

Overall, Boychenko Stone said that she’s hopeful that “the veil will be lifted on both quality and cost” to better enable people to make meaningful health care decisions. 

“We have more and more employers that are looking at incentivizing their employees when they do use a high-quality, low-cost provider,” she said. “So I think we will see that more and more in the future. 

“We do have third-party providers that have built their business model on providing information based on claims data they have purchased to give some estimates for employees. So the end consumer can call and say, ‘I’m going to have knee surgery — give me five top providers in my area,’ and they’d be able to estimate the cost and provide that information to you.” 

While those types of third-party services “aren’t an exact science,” there is an increasing appetite by employers to be able to provide that ability to their people, particularly as health care costs continue to increase overall. For that reason, “I think we will see more iterations of this,” she said. “Additionally, providers who are both high-quality and price-competitive are more likely to use that data to their advantage in their marketing to drive more patients to their facilities.”  

 

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What will the rule cost hospitals?

 

The Centers for Medicare and Medicaid Services estimates that, in the first year, compliance with price transparency regulations will cost $11,898.60 per hospital, and the cost will decrease to $3,610.88 per hospital in subsequent years. Providers vehemently disagree. Hospitals have estimated that compliance would cost hundreds of thousands of dollars. For example, CommonSpirit, which has more than 140 hospitals in 21 states (including MercyOne’s hospitals in Iowa) reported having more than 3,000 agreements with payers, each with 10 to 15 unique benefit designs. 

 

Source: Health Affairs 

 

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Iowa Hospital Association site allows comparison of hospitals’ basic charges

 

Iowa Hospital Charges Compare developed by the Iowa Hospital Association, allows health care consumers to access basic information about services and charges at Iowa hospitals. Information provided on the website is based on hospital “charges.”

 

A hospital “charge” is not the same as “expected payment.” “Charge” is the amount billed for a service. In the vast majority of cases, hospitals are paid considerably less than the billed amount. Because each person’s case is different based on that patient’s medical condition, a given patient’s charge will not necessarily be the same as the average or median charge. Furthermore, the actual amount paid by a patient will depend on that patient’s insurance coverage.

 

Iowa Hospital Charges Compare should be considered a starting point for comparing costs of care between Iowa hospitals, according to the site. Patients should contact individual hospitals to get further details about the possible cost of their care. Patients should also talk with their insurance provider to understand which costs will be covered, and which will be the patient’s responsibility.

 

www.IowaHospitalCharges.com