CMS has finalized a rule that will force hospitals to publish a public list of their standard charges for items and services they provide. The rule was originally proposed to take effect in 2020, but the finalized version won’t require the changes until 2021.
The rule is a major breakthrough to providing patients with more transparency for the costs of hospital services, with CMS hopeful that the additional information will help patients make better choices about their care with the ability to shop around for lower priced-services. Importantly, the rule includes definitions for five types of standard charges that includes payer-specific negotiated charges. These prices are important because most individuals with insurance coverage don’t pay list prices for care.
CMS also stated that the high cost of healthcare in the U.S. can be directly attributed, at least in part, to a lack of transparency.
“We believe there is a direct connection between transparency in hospital standard charge information and having more affordable healthcare and lower healthcare coverage costs,” the final rule reads.
The final rule includes all hospitals, including those not paid under the Medicare Outpatient Prospective Payment System (OPPS), though the final rule falls under the OPPS policy changes.
“President Trump has promised American patients ‘A+’ healthcare transparency, but right now our system probably deserves an F on transparency,” HHS Secretary Alex Azar said in statement. “Today’s transparency announcement may be a more significant change to American healthcare markets than any other single thing we’ve done, by shining light on the costs of our shadowy system and finally putting the American patient in control.”
Implementing the new rule is expected to cost an individual hospital 150 hours and nearly $12,000 in the first year. The total cost for more than 6,000 hospitals will come to $71.4 million and have a total time burden of 900,300 hours, CMS estimated. In the following years, CMS expects hospitals will have to spend $3,610.88 per year and 46 hours to review and post their standard charges. Hospitals are expected to update their lists at least annually to reflect current charges and are encouraged to communicate with patients in a consumer-friendly way so they can compare costs across different hospitals and fully understand their liability.
Several comments on the proposed rule came from individuals who expressed support for the rule, citing their own personal experiences with opaque hospital services. On the industry side, comments expressed concern that price transparency would actually help bring down overall healthcare costs, the final rule explains. While CMS noted the disclosures will help consumers understand their out-of-pocket costs better prior to receiving care, the agency also acknowledged the rule would not provide comprehensive estimates. The final rule includes civil monetary penalties for hospitals not in compliance.
CMS also issued a proposed rule called Transparency in Coverage that would require health plans to also make available their prices.
The rule has two approaches to offer the healthcare information to consumers, including requiring all non-grandfathered group health plan or health insurance issuer to make available a list of “personalized out-of-pocket cost information for all covered health care items and services through an internet-based self-service tool and in paper form upon request,” as well as “the in-network negotiated rates with their network providers and historical payments of allowed amounts to out-of-network providers through standardized, regularly updated machine-readable files.”