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Hospital price transparency rule highlights [PODCAST]

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The Hospital Finance Podcast

In this episode, we are joined by Fred Stodolak and Mark Spehar from Panacea to discuss highlights of the CMS final rule on price transparency.       

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Highlights of this episode include:

  • Background on CMS’ final rule and what they hope to accomplish with the rule’s requirements.
  • Details behind the final rule’s requirements related to machine-readable files.
  • What shoppable items are services are included in the consumer-friendly display requirement?
  • Steps hospitals can take to ensure they are compliant.
  • What else can health systems expect with price transparency going forward?
  • And more…

Mike Passanante: Hi, this is Mike Passanante. And welcome back to the award-winning Hospital Finance Podcast®. On November 15th, 2019, CMS issued its final 2020 rules for hospitals regarding price transparency. And the good news is that unlike the original proposal, which would have provided less than two months to prepare, hospitals now have until January 1st, 2021, to implement the new requirements. Today I’m joined by Fred Stodolak and Mark Spehar of Panacea Healthcare Solutions, who will discuss the requirements of this new rule and strategies for making sure your hospital is ready when it comes into effect. Gentlemen welcome to the podcast.

Fred Stodolak: Thank you, Mike.

Mark Spehar: Thanks, Mike.

Mike: Mark, can you give us some background on why CMS issued this particular rule and what they’re trying to accomplish with it?

Mark: Absolutely, Mike. As many folks are well aware, on June 24th, 2019, the President signed an executive order on improving price and quality transparency in America to put patients first. Well, prior to this rule, CMS already required that hospitals make public their chargemasters. The intent of this new order in the resulting final real is really to increase the availability of more meaningful price and quality information. Now, none of this really should come as a surprise. The Secretary of the Department of Health and Human Services tipped his hand, way back in December of 2018, if anybody saw his joint report, along with the Department of Treasury and Labor, called Reforming America’s Health Care System Through Choice in Competition. And specifically, they recommended quoting them from the report, it should be a priority of this administration to ensure that patients are engaged with their health care decisions. And they have the information they need to be savvy consumers of health care. Federal agencies should eliminate any federal rules or policies that create unnecessary barriers to state, federal, or private sector initiatives that provide price transparency. HHS also stated in the final rule, that they believe that transparency in health care pricing is critical to enabling patients to become more active consumers, so they can lead the drive towards value.

Mike: That’s great. Mark. Why don’t you tell us what the requirements of the role are?

Mark: Well, broadly, it can be stated there’s two requirements for hospitals nationwide. The first is to provide a machine-readable file containing the negotiated rates and terms for each payer. This needs to be made accessible from the provider’s website without any barriers. CMS is also indicated that while consumers may access this file, it’s their intent that researchers, employers, even software developers and payers have access to this information on the basis that such transparency will hopefully drive competition and drive down rates and ultimately, premiums that get passed along to consumers. The second part of the requirement is really for each hospital to find a list of the top non-urgent 300 shoppable items and services that provide a consumer display of charges and negotiated rates and other information for those items. The list of 300 must also include 70 items defined by CMS already based on HCPCS and a few by DRG codes this second broad requirement is really designed to encourage consumers to become more active in choice and also to encourage competition.

Mike: And Fred, let me turn over to you to break down the aspects of both of those requirements. So first, can you explain the details around the machine-readable file rule?

Fred: Yeah. Sure, Mike. I’d be happy to do that. Let me start by saying that, reading the final rule, attending the public CMS calls that they’ve had on this topic, and recent exchanged emails with CMS, leads me to believe that much more guidance is required from CMS. In fact, we have a call with them coming up here at Panacea. The language in the requirements of the final rule cannot easily be applied to the many payers and payer contract terms that have either multiple provisions and calculations required to derive the allowed price, or where the price is variable for each patient based on resources that they consume. For like procedures, one payer might be paying a percent of changes, one might be a per diem, and one might be a case rate. And to try to line that up, as required by CMS, for a specific procedure would be difficult since the charges and the length of stay, for example, for those two different payers might actually be different among patients. So anyhow, we’re going to continue our dialogue with CMS, and we have this upcoming meeting with them. And we’re optimistic that we’ll be able to obtain more guidance, and of course, we’ll share that with our clients as well as your audience, Mike.

Nonetheless, the rule requires that the description for all items and services, not just the 300 shoppable items, along with the charge and the negotiated rate or price, be included in the file, along with the payer plan, the payer plan name, the name of the procedure, the place of service, whether it’s an inpatient or outpatient setting. And the rule further requires that this file contain, for each item and service, the minimum and the maximum de-identified negotiated rate. So what they want to put in that file is to show, for a hip replacement, for example, what the lowest negotiated rate is for a payer, without the payer’s name, and the highest, and they think that information will be useful to drive the competition that Mark was mentioning. This may be an onerous task where the definition of the classification of services and payment methodologies varies across payers, such as in the example I just gave you. And our opinion is that it would be more meaningful to display the average inlier allowed payment, by DRG for inpatients and by primary procedure code for outpatients. In other words, what Panacea does believe would be more meaningful to a consumer, for sure, and to others doing research, is that it would make more sense to display the actual result of those contract terms, especially where there’s multiple provisions. And this way, we’ll be able to see the result of the calculations, and one number across the various methodologies.

The machine-readable file must also contain the corresponding discounted cash price, if and where such a discount is offered. Where there’s no discount being offered, and where no negotiated rate applies, the gross charges must be included in that file. And then finally, I wanted to mention that the requirement is that this be updated annually or no less than annually. Of course, providers can update it more frequently if they desire. It also must be searchable digitally and must use a CMS-provided naming convention, and, in terms of the machine-readable will format. It could be a JSON, XML, or a CSV format.

Mike: Okay. So, Fred, let’s turn over to the second requirement which has to do with a consumer-friendly display. What can you tell us about that?

Fred: Yeah, sure. I’d be happy to explain that. The consumer-friendly display must include a minimum of 300 shoppable items and services, Mike. And deciding on which of those 300 shoppable items and services will be displayed, the provider must consider volume or the revenue level, and the services must be non-urgent or elective. The 300 items and services must include the 70 defined already by CMS, and when the hospital does not provide all 70, they have to make up the difference so that they still arrive at the 300-item list. By the way, they also need to disclose some of the items that they don’t provide services on that are among the 70 required for assist. They need to disclose that it’s just not available at that hospital. In selecting the top 300 items, we advise our clients to consider excluding those that may have inconsistent or complex payment terms across payers for the same inpatient or outpatient surgical items or services. So, really what I’m saying there is that, in selecting the 300 items, there’s specific requirements, okay, that need to be considered in selecting those 300, taking into account volume, and so forth. But we’re also suggesting that you take into account those procedures that have complex payer terms, and maybe excluding those from your list. For health systems, this exercise must be done for each hospital within the health system due to the likely volume in case mix differences. So in other words, the 10-hospital or 20-hospital health system is not going to be able to just develop one list across all entities. They’re required to develop a unique list taking into account the different volume or revenue levels of those procedures. And of course, some providers will provide services that the others don’t. We urge hospitals to consider related items also, and services in developing their list so that consumers have full disclosure. For example, we’re recommending that they include without CC and with and without NCC DRGs and the with CC and NCC rates. And for outpatients, they might want to include the with contrast, the with and without contrast, and the without contrast items. In other words, they may come up with one of those items on the list, and we’re suggesting that it might be good to have more than 300 items and include some of those related procedures. Again, this is just to have a more consumer-friendly display. The consumer display must include plain language description of the service, the related primary code used for accounting or billing purposes, the gross charges, the negotiated rates for all payers. Just like in the machine-readable file, the display must include the minimum and the maximum negotiated rate, the discounted cash-price, if applicable, and the inpatient and outpatient setting. So, those hospitals, already having an online patient estimator, made accessible on their website to consumers and without barriers and calculating their specific obligation, the integration with an eligibility system and providing these 300 shoppable items and services, the format and display is not required. Given the 10-month window between now and implementation, hospitals not having such a system today, might find it more economical and realistic and expeditious to actually focus on the consumer display that I just mentioned. Under either scenario, it’s still going to be important for providers to develop their shoppable services list and develop their machine-readable file.

Mike: Fred, what are some of the next steps you recommend for hospitals so they can ensure compliance by next January?

Fred: Well, Mike, one of the things we’re recommending is that providers utilize this year wisely. We still have 10 months before the implementation date, and what we’re advising they do with that time, initially, is to take 12 months of claims and payment data, and to develop for each hospital in their health system their shoppable list. Again, we’re recommending that as the first step. In developing this list, we really feel it’s not only important to consider volume, and revenue, and the non-urgent status as CMS requires, but also, as I mentioned earlier, to consider the related procedures, and most importantly, select those that might be the easiest to actually display negotiated rates across all payers. Once completed, we suggest that the hospitals incorporate this list into the strategic or chargemaster pricing process. So the special pricing consideration is given to these consumer-focused items services. So, in other words, once we go through the process for each of the hospitals in our health system, we’re developing that shoppable list. To the extent that many of those items will be in the chargemaster, it would make sense to take a close look at the competitiveness and their defense ability of those prices in the chargemaster. We’ve got more than enough time to do that between now and January 1 of 2021.

And then finally, Mike, we recommend that providers develop their consumer display and the machine-readable file. However, in this process, we urge them to go beyond meeting the CMS requirements, instead, focus on what other value could be incorporated. For example, low cost or low charge providers may choose to display market information. Quality information may be valuable and helping consumers make choices for those items and services. Research data is available, and it may be beneficial to show the typical low, average, and high payments for each payer, those items and the services with complex multi-provisional contract terms as I mentioned earlier. In addition to the rates, such as per diems, or that do not directly align with specific items or services.

Mike: Fred, your firm Panacea is offering some new services to help hospitals meet the price transparency requirements. Can you briefly describe what you’re doing there?

Fred: Yeah, I’d be happy to do that, Mike. So Panacea has worked over the last two months to develop a software program, which we now call Panacea’s shoppable disaggregation algorithm and report set, and what it does, it provides hospitals and health systems with a useful analysis and reports to help them choose and finalize their 300 or more shoppable items and services list. Health systems only need to provide us with their claims and payment data, Mike, for 12 months. And our algorithm and the tables that we’ve built in the algorithm will begin with 100% of the patient population, and will disaggregate the population to many useful buckets, making it easy to make the final selection.

While there are many buckets and useful filters in the report, Mike, it’s important to mention that at the top of the disaggregation hierarchy, we remove all non-urgent items and services. We take into account a myriad of criteria such as ICD-10 codes, place of service, revenue codes, and much more. And we also tag and flag those items having the highest utilization of private outpatient usage as a single-build item and a multiple-build item. As part of this process. We also offer the option of building charge and payment profiles for the defined shoppable items and services showing the low average and high charges, and payments by pair, but also the typical detailed services included for the inpatient and outpatient surgical cases. And as I mentioned earlier, we actually believe that this information is actually more useful to the consumer than that which is specifically required by CMS, where we have complex multi-provisional terms for certain payers and for certain services.

We’ve also enhanced our popular a hospital zero based pricing system to include new methodologies and concepts surrounding lowering the charges to define shoppable items and services. And finally, we are releasing in April a program that will allow us to actually produce the machine-readable file for our clients and assisting in the developing of their consumer display.

Mike: Thank you, Fred. Mark, let me turn back to you for some final thoughts. It sounds like you’ve got some great services teed up to help hospitals proactively prepare for the price transparency requirements. Is there anything else that you think healthcare system should be on the lookout for, during 2020, related to price transparency?

Mark: Wow. Well, I wish I had a crystal ball and be really specific about what to expect in 2020, 2021 and beyond. But some hospitals and health systems are really hopeful that the core challenges that are out there really push these requirements out beyond 2021, or perhaps even completely strike them down all together. I’m going to probably date myself with this reference, but it makes me think of an old toy I used to have as a child called the Magic 8 Ball where you’d ask a question, shake it up, and in a small window on the back of the ball an answer would fill it up, and you would say yes, no. It would even answer it is certain. There was one answer that was out there that was called Don’t Count on It. And I think that’s really appropriate here.

I think in the meantime, hospitals can do is just start planning for the expanding requirements now, particularly the shoppable services. And at the same time, just keep an eye out on some of those core challenges from the American Hospital Association, the Children’s Hospital Association just to name a few. But also keep an eye on some of the legislation that’s out there, too, surrounding surprise medical billing, that’s circulating both the Senate and the House, that potentially could see some action by May. As we all know, in the industry, momentum has been building on pricing transparency, probably since the mid-2000s. And it has really picked up tremendous steam over the last two years. It would be hard to fathom an abrupt stop ahead for this pricing transparency train.

Mike: Mark and Fred, thanks so much for joining us today on the podcast to help us all understand more about the price transparency requirements. For anyone in our audience who would like to learn more about what Panacea is doing for price transparency or take a look at any of the other services or offerings they have, you can visit That’s panacea I-N-C dot com. Thanks so much.

Fred, Mark: Thanks, Mike.


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