Insights

Making U.S. Hospital Pricing Transparency Laws Work for Your Business

On January 1, 2021, the United States Centers for Medicare and Medicaid Services introduced a new federal law compelling hospitals across the country to make their prices substantially more accessible to consumers. In this Insights article, we explain what that means for your healthcare business, and how you can benefit from it.
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Empowering Patients Through Transparency

On January 1, 2021, the United States Centers for Medicare and Medicaid Services (CMS) introduced a new federal law compelling hospitals across the country to make their prices substantially more accessible to consumers. The rule requires hospitals to publish their standard charges online in the following formats:

  1. A “comprehensive machine-readable file” that lists all standard charges for items and services provided, including negotiated rates agreed to by insurers.
  2. A “consumer-friendly display” of standard charges for no less than 300 “shoppable services,” explained in simple terms.1 According to a statement released by the CMS, the law aims to “ensure consumers have the information they need to make fully informed decisions regarding their health care.”2

Ten months later, the results of the new CMS pricing regime have been far from universally positive. A rift has appeared in the healthcare industry, separating the compliant few from the non-compliant many. For instance, in July 2021, one patient rights advocacy group revealed that 94% of randomly sampled hospitals were applying the rules either haphazardly or not at all.3 The organization, PatientRightsAdvocate.org (PRA), found that a “majority of sampled hospitals failed to publish ‘all payer-specific and plan-specific negotiated rates’”. This constituted, in the report’s words, the “most significant finding of noncompliance”.

The comprehensive report also tells us that:

  • 80% of hospitals did not publish payer-specific negotiated charges "clearly associated with the names of each third-party payer and plan" as required by the rule.
  • Half did not publish any negotiated rates at all.
  • 40% did not publish any discounted cash prices.
  • Incomplete data fields, often marked with N/As and asterisks, were a particularly widespread issue among hospitals sampled.

A July 9 article by California Healthline illustrates how a widespread lack of transparency translates to poor patient experiences. In the piece, healthcare reporter Bernard J. Wolfson details his futile attempts to compare prices in two major California hospital systems. “I have spent hours toggling among multiple spreadsheets, each containing thousands of numbers, in an effort to compare prices for 20 common outpatient procedures,” Wolfson writes. The information, he concludes, was about “as transparent... as hieroglyphics.”4

Inadequate enforcement of the pricing transparency law is partly responsible for the user interface issues that PRA outlines, and Wolfson colourfully elaborates on. The current maximum fine for non-compliance is capped at $300 per day for hospitals with over 30 beds. For top hospital systems, this is mere pocket change. Some systems seem to struggle with how to comply, others are wrestling with the competitive consequences of compliance, and then there are those contending with the cost-benefit questions of full compliance. However, the Biden administration, working alongside the CMS, is pushing to increase the fine to as much as $5,500 per day, or roughly $2 million annually for the largest hospitals. These proposed figures for January 1, 2022 will be much harder to shrug off than the current fines.

Looking Ahead: The Rise of Patient-Centred Solutions

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Source: Patient Rights Advocate

While simply ignoring the new rules has allowed some hospitals to stall for time, this is hardly an ideal long-term strategy. A better starting point would be to acknowledge the sheer extent of popular demand for straightforward, easily obtainable pricing information. Pricing transparency laws, it turns out, are enormously popular with U.S. citizens—one poll indicates that 91% of Americans support price transparency in healthcare, while 88% agreed with the statement that “hospitals should post real prices, not just estimates.”5

If the demand for better healthcare information is overwhelming, then so is the evidence that happier patients bring in more revenue for hospital systems. According to Accenture research, U.S. hospitals that delivered “superior” customer experience achieved 50% higher net margins on average compared to their “average” counterparts.6

Therefore, a truly patient-centric pricing strategy would involve learning to see pricing transparency laws as an opportunity rather than as a threat. It would mean truly embracing the connection between patient experience and higher earnings.

To turn this insight into action, healthcare providers should redesign their chargemaster according to the best practices of modern digital consumer services—more agility, analytics, and testing, fewer Excel sheets full of “hieroglyphics.” Such a strategy would involve:

  • Incorporating simple, intuitive design into every step of the consumer journey.

  • Considering the beginning of the consumer journey at a “shopping stage”, long before the customer is on-site.

  • Implementing smart “service bundles” based on available data. Patients often require multiple services each time they visit a hospital. A huge opportunity exists for providers who can leverage patient data into multi-service plans.

  • Providing context as well as content. Medical jargon can be as intimidating as medical fees. A June 2021 McKinsey report identifies lack of “transparent, understandable information” as a major pain point for prospective patients.7

  • Gathering feedback across processes and iterating based on insights gleaned.

By implementing a genuinely smart and accessible system, built out of data, feedback, and iteration, healthcare providers can begin implementing solutions that are both patient-centric and compliant with federal pricing transparency laws.

Providers must start by considering what consumers are really asking for. The data indicates they want the power to make the best purchasing decision they can, based on the most comprehensible and highest quality information available. These demands are perfectly in line with their expectations from participating in the broader economy.

At the same time, pricing is only one piece of the puzzle for healthcare consumers. Few people buy based on price alone. When making a purchase decision in healthcare, most consumers will also want to understand patient experience and quality of care, for instance. A sustainable digital strategy would address the full range of a modern consumer’s needs, not just their monetary ones.

In summary, the federal pricing transparency mandate should be understood as an opportunity for healthcare companies. The new legislation can offer providers a chance to learn more about changing expectations within their industry, and, to quote the great Wayne Gretzky, figure out “where the puck is headed”. It also creates the right circumstances for telling a larger story centred around pricing, patient experience, and quality, rather than mere compliance.

How can U+ help your company become a leader in innovation?

Healthcare organizations learning to navigate the new pricing transparency laws will need a comprehensive innovation strategy. U+ can help.

Always beginning with the user experience in mind, we work with businesses to build products that take consumers from their phones to the front door, instead of the other way around.

To date, we have brought 90+ successful businesses to market, creating over $1 billion in new value for Fortune 1000 companies, including many businesses in the Healthcare industry. Our success stories in this space include creating an online fertility wiki for an IVF clinic and a wellness app platform for Sodexo.

Footnotes

  1. CMS Report 10 Steps to Making Public Standard Charges for Shoppable Services

  2. CMS Press Release Press release CMS Proposes Rule to Increase Price Transparency, Access to Care, Safety & Health Equity

  3. Patient Rights Advocate Semi-Annual Hospital Price Transparency Compliance Report

  4. California Healthline Effort to Decipher Hospital Prices Yields Key Finding: Don’t Try It at Home

  5. Patient Rights AdvocateMarist Poll data shows that Americans overwhelmingly support their right to see real prices in healthcare — PatientRightsAdvocate.org

  6. Accenture US Hospitals that Provide Superior Patient Experience Generate 50 Percent Higher Financial Performance than Average Providers, Accenture Finds | Accenture

  7. McKinsey COVID-19 and how consumers think about healthcare

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