In this episode, we are joined by Panacea Healthcare Solutions CEO Fred Stodolak and Executive Vice President Govi Goyal, to discuss the latest CMS requirements for hospital price transparency.
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Highlights of this episode include:
- How the July 9th executive order pertains to healthcare
- How surprise billing impacts providers
- New rule CMS proposed around price transparency
- What Panacea is doing to help hospitals comply with the price transparency requirements
Mike Passanante: Hi, this is Mike Passanante and welcome back to the award-winning Hospital Finance Podcast. The requirements for hospital price transparency are rapidly evolving, as are the penalties for not complying with these requirements. Joining me today are Fred Stodolak, CEO of Panacea Healthcare Solutions, and Govi Goyal, executive vice president, of Financial and Revenue Integrity Services, to discuss the latest around CMS rulemaking in this area, and what hospitals can do to remain compliant. Fred and Govi, welcome to the show.
Govi Goyal: Thank you.
Fred Stodolak: Hi, Mike. Thank you.
Mike: Great to have you back. So let’s start off. On July 9th of this year, President Biden issued an executive order that contained a directive towards price transparency. What was the substance of that order and how has it impacted providers?
Govi: Yeah. Absolutely. Thanks, Mike. So I think it’s important for folks to know that the executive order by President Biden that was released on July 9th contained 72 initiatives that really spanned multiple industries. Now there was a significant emphasis on healthcare, especially as it pertains to prescription drug and hearing aids, the standardization of health plans in the insurance marketplace that that will allow consumers to compare costs, and a lot on competition, antitrust law, as it pertains to hospital mergers. For example, the top 10 health systems in the US make up a quarter of the market share. This is really why the executive order is leaning on the DOJ and FTC to enforce antitrust laws, and even go as far as to challenge some of these prior mergers that may have been questionable.
So the common denominator here, in President’s executive order as it pertains to the healthcare industry, is really centered around consumerism, decreasing costs, and making healthcare more affordable for the patients. So when there’s a lack of competition, that typically means higher prices and reduced quality care. So President Biden has directives in the order that encourages agencies such as the FTC to, for example, ban pay for delay, that limits competition, and results in increased drug prices, and directs the HHS to consider allowing prescriptive hearing aids to be sold over the counter. Those are just some examples. All of this dovetails in two of the hottest topics happening in health care right now.
And the purpose of this podcast here, really, is price transparency and surprise billing. There’s language in this executive order that directs the HHS to support existing price transparency rules, and to finalize the legislation that addressed the surprise billing. And while the jury’s still out as to whether prices will go down as a result of price transparency, one thing is certain, that price transparency will put a spotlight. It’s going to put a spotlight on the variation in prices, and negotiate rates across and within geographic regions. In terms of the Surprise Billing Act, it is intended to provide protection to patients that would otherwise be stuck paying high out-of-pocket costs because they received their services from an out-of-network provider. We’ve come a long way since the Affordable Care Act that was signed back in 2010, but many hospitals out there are still struggling to adapt and fully comply with these requirements. So this executive order, in large part, is really about the enforcement of the rules, so it’s taken more seriously from providers.
Mike: And Govi, can you tell me more about the surprise billing and the impact to providers?
Govi: Yeah, absolutely. It’s a timely question, Mike. So surprise billing really happens when a patient goes to a hospital to receive care and the facility is in-network for that patient’s health insurance, but the physician or treating provider is out-of-network. So under this scenario, often the patient has no choice or knowledge at the time of care that the physician is out-of-network, and ultimately receives a high surprise bill. It’s often significantly higher than if the physician was in-network. Another common scenario is when a patient is simply taken to a facility that that is out-of-network, often in an emergency situation. The patient, again, has no choice of the facility or the ambulance service. And according to CMS studies, have shown the amount to be more than 10 times higher than would otherwise have been billed from in-network providers. It’s important to note that these new rules apply to hospital-based and freestanding emergency services. So the No Surprise Act really is a major shift in dictating how providers may bill for patients that are out-of-network also known as balance billing, and the limitations put on cost sharing for enrollees.
What we’re finding here is that the two biggest areas that providers seem to need the most guidance here, in kind of interpreting the No Surprise Act, is A: what is the scope? So are there exceptions where balance billing is allowed? And B: what’s the methodology for identifying or calculating the patient responsibility for these out-of-network plans? So for example, the No Surprise Act prohibits healthcare facilities and providers from balance billing covered services, even in non-emergent cases, unless certain conditions are met. One of those conditions pertains to what’s referred to as notice and consent, and having those requirements being satisfied. So in other words, if the non-participating provider gives written notice to the patient or authorized representative, and there are requirements regarding these written notices, such as the notice needs to be provided to the patient no later than 72 hours before the non-emergent service, or at the time the appointment was made, and a good faith estimate cost is presented to the patient, among many others. In regards to the consent document process, that also has requirements, such as including the date the notice was received, and the date and time the consent was signed, as well. It is important to note that HHS is is going to provide these standard documents for notice and consent.
But getting back to the No Surprise Act itself, so if the patient or an authorized representative grants consent to the notice, then that means the patient has waived– they’ve waived their protections, and therefore balance billing may not apply. I want to use the word “may.” I’m emphasizing the word “may” because there are circumstances where the notice and consent exception to balance billing does not apply, especially for ancillary services. So for example, items and services related to emergency medicine, anesthesiology, pathology, radiology, neonatology, whether that’s being provided by a physician or non-physician practitioner, other items and services provided by assistant surgeons, hospitals, intensivists, diagnostic services, including radiology and laboratory services. Granted there are certain diagnostic lab tests that are not considered ancillary, and because they are not considered ancillary, the notice and consent exception would apply, thus allowing for balance billing to the patient. In addition, the other circumstances where the notice exception would not apply is for services that are unforeseen, right, that unexpectedly arise during that standard course of treatment. So I know I listed a lot of circumstances here where the notice and consent requirement would not apply. And it’s, generally, any service where– the impetus around this is any service where the patient may have little control over the particular provider rendering the service. And so unfortunately, the opportunity to provide the notice and gain consent in order to balance bill the patient is very limited.
In terms of the process to calculate the cost sharing amounts, the No Surprise Act does state that cost sharing for patients visiting a non-participating provider can’t exceed those cost sharing amounts of a participating provider. But we all know that, when we think about cost sharing amounts from in-network payers, they’re not created equal. They vary by payer and plan type. So the million dollar question is, how do we determine what this cost sharing amount is? And so it all depends on what is referred to as the recognized amount. In other words, the cost sharing amount that is calculated under the No Surprise Act must equal the recognized amount. And the recognized amount is defined as an amount determined by an all-payer model, for example, Maryland. If that’s not applicable, then it refers to state law. And if it is still not applicable, is the lesser of the amount billed by the provider or facility, or what is known as the QPA, or qualified payment amounts. So the qualified payment amount is defined as the median contracted rate for that plan and service, and within that geographic region, as determined by the payer. So it’s really the payer, not the provider, that determines the amount that the provider may balance bill. And it’s calculated using that medium contracted rate for the covered service by that plan within that geographical area.
I mean, this is a major shift in the way patient responsibility has been calculated in the past, where it may just be the gross charge minus whatever the insurance paid or allowed amount. And so in terms of calculating the patient’s responsibility, non-participating providers are really at the mercy of the out-of-network payer to determine the patient responsibility. This can be really concerning, since it’s the providers that have skin in the game here.
Mike: Absolutely. Great information there, Govi, and thanks for your insights on surprise billing requirements. I’d like to move over to another price transparency topic. And this one’s for you, Fred. Can you tell me about the new rule that CMS has proposed around price transparency? And in particular, the penalties and the impetus for this new rule?
Fred: Sure, Mike, I’d be very happy to do that. So effective January 1, 2021, hospitals were required to produce and publish on their website both the machine-readable file, to include the negotiated rates for all payers and all items and services, and they were required to produce a consumer display or a patient estimation system, including the same information for consumers to easily search 300 top shoppable items. Unfortunately, Mike, many studies, including a study conducted by Panacea, have shown that, as of June of this year, only about half of the hospitals nationwide have complied. As a matter of fact, CMS recently suggested that even fewer hospitals have fully complied. So consequently, Mike, on July 19th, CMS proposed, in the OPPS rule, they included significant increases in this penalty to take effect January 1, 2022. The penalty for not complying in 2021 after a warning, an appeal period, capped out at 109,500. So in other words, under the current rules, the maximum penalty a hospital will incur for not complying for 2021 was 109,500 per hospital per full year of noncompliance. Now, under the new rule, this is the minimum. And the maximum is now over $2 million per hospital. However, I wanted to make a note that hospitals with less than 30 beds will continue to be capped at 109,500.
And it’s important to note that the new rule and penalty is actually based on a calculation now, that is as follows. It’s $10 per day, up to a daily maximum of 5,500. So just to give you an example, for a 200-bed hospital, they would be subject to a $2,000 per day penalty, which for a full year equates to 730,000, versus the $109,000 in 2021. So you can see that, clearly, these penalties for a 10-hospital system, for example, averaging 200 beds per facility, would be subject to $7 million in penalties for a full year of noncompliance. So clearly, providers need to take heed, and make every attempt to comply as soon as possible.
Mike: Yeah. CMS is definitely starting to turn up the heat here. Fred, what is Panacea doing to help hospitals comply with price transparency requirements?
Fred: Well, Mike, Panacea’s claims auditor system, which has been used for many years to identify coding, compliance, and charge capture risks and opportunities, it actually provides just the perfect platform for us to build three new price transparency modules. And what we do is we leverage the claims, and the payment, and the managed care contract data that the system had already been using for other purposes. And so we’re leveraging that to provide these three new price transparency modules. And specifically, our system and our process does the following: First, we process a full year of claims and payment data using our disaggregation algorithm and report set, to identify, as required, the top shoppable items for each hospital within a health system. And simultaneously, while we’re doing that processing, Mike, we actually create a very useful average charge or payment profile for each item of service. And we group all the claims through an MS-DRG grouper, or our outpatient groupers and pricers. They also load the managed care contract terms into our system, and the fee schedules into our system. And combined with the processing I just mentioned, we can produce a machine-readable file for all items and services.
And we’ve also built a special subset for the shoppable items and services, to actually feed our patient estimation system, or to meet the requirements of a consumer display. If you recall, the consumer display just requires that we show the negotiated rates. We don’t have to provide and out-of-pocket estimate versus the patient estimation system, which many of our clients have chosen, does provide and out-of-pocket estimate. To do all three components, namely the shoppable list being the first, the machine-readable file, and the consumer display, the process can take up to four months, factoring in data quality, validation, the time to make any corrections and updates, prior to publishing the data on the client website. So really, hospitals should get started now in order to be compliant, fully compliant by January 1. Also, since charges are utilized to calculate most self-pay discount amounts– in other words, most hospitals nationwide, about 90% of our clients actually will calculate the self-pay discount based on charges. And those self-pay discounts are now required to be published, along with the percentage of charge negotiated amounts. So what’s happening is we’re seeing an increase in hospitals wanting to develop and realign their chargemaster to be more defensible. And finally, Mike, we’re currently offering a free consultation to either review the status of a hospital’s compliance, or to provide advice recommendations as they begin the process of meeting the compliance requirements. And during this process, we’re also providing a no-cost diagnostic review of the hospital’s prices. And we’ve actually added some special analytics on the shoppable items.
Mike: Excellent. Fred, if someone wanted to get in touch with you about that consultation, how can they do that?
Fred: Go to our website, and they’ll see the toll-free number (1-866-926-5933). Or they can register on our website. There’s an area on the website, PanaceaInc.com.
Mike: Excellent. Fred Stodolak and Govi Goyal, thanks so much for joining us today on the Hospital Finance Podcast.
Govi: Thank you, Mike.
Fred: Thank you.