Continued Uncertainty Regarding Hospital Pricing Transparency

November 25, 2019

CMS has put forth pricing transparency provisions for both hospitals and insurers – but what will they really mean for healthcare?

Earlier this month, CMS released the much anticipated final calendar year (CY) 2020 rule for the Medicare Outpatient Prospective Payment System (OPPS). While many were expecting specific guidance regarding CMS’s controversial proposal for greater hospital pricing transparency regarding privately negotiated rates within the rule-in fact, per the American Hospital Association (AHA), hospitals have already committed resources to complying with the new proposal requirements-the new conditions were noticeably absent. Instead, CMS briefly acknowledged pricing transparency in a few sentences, noting that the agency was still considering the many messages it received regarding the proposed final rule during an open comment period.

Lovisa Gustafson, MBA, assistant vice president at the Commonwealth Fund, says there was a lot of speculation on why the provisions were missing from the CY 2020 OPPS final rule.

“In terms of the transparency requirements being pulled out as a stand-alone rule, the truth is we didn’t know the exact reason,” she says. “Many speculated that it was to partition the broader CY 2020 rule from the complexity, and potential legal challenges of the transparency provisions.”

Yet, just two weeks later, on November 15, 2019, CMS unexpectedly dropped the final ruling regarding hospital transparency as well as new proposed transparency provisions regarding coverage for insurers. In a public announcement of the two rules, HHS Secretary Alex Azar called the provisions “revolutionary changes for our healthcare system.”

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"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,” he said.

The requirements still include a publication of price lists as well as privately negotiated rates between hospitals and insurers on 300 shoppable healthcare services. While CMS said it was carefully reviewing the more than 1,400 comments it received on the proposed rule-notes cautioning that the provisions would not decrease healthcare costs and would likely hurt the very consumers the government claimed they are supposed to help-the final rule was nearly indistinguishable from the proposed version.

“The rule is pretty consistent with the original,” says Gustafson. “They are giving hospitals a bit of time for the provisions to take effect, waiting until 2021, because they understand there is a lot that hospitals will need to do to conform to the new rules. But they certainly were not watered down, which can sometimes happen with lobbying or review of comments during the comment period.”

While many were surprised by Friday’s announcement, Gustafson says that there were hints CMS was thinking about expanding the requirements to apply to payers. As Seema Verma, the Administrator of CMS, recently noted in an interview with the Wall Street Journal, the agency would prefer “a less disjointed approach,” indicating the agency was working on a combined plan that would include provisions to both provider and payer organizations. The proposed coverage requirements include giving consumers “real-time, personalized access to cost-sharing information, including an estimate of their cost-sharing liability,” as well as providing a public website to share negotiated rates for in-network and out-of-network providers. The proposed rule, like the previous hospital transparency rule, is now open for public comment.

While Gustafson says there was already uncertainty across the industry about the potential fall-out for the hospital transparency rules even before they were finalized, there remains quite a bit of ambiguity about how it, as well as its insurance counterpart, will affect the healthcare market now that they’ve been given the green light.

“There are people who have very different views on what will happen when these prices become transparent,” she says. “Economic theory would say that price competition should lead to lower prices over time, which is good for consumers. And there are a number of different ways this information could be used, say by employers, to improve plans and lower the cost of care. But the truth is, we just don’t know. We have never had this kind of price transparency before. And we don’t know what the effects may be because we haven’t had a controlled experiment to see how it might affect the healthcare market. We will just have to wait and see.”

Kayt Sukel is a science and health writer based outside Houston.