Innovation Medical Specialties News

Hospital price transparency: Great news for patients, healthcare system | Opinion

Starting on Jan. 1, patients will know, for the first time, the real prices charged by hospitals for medical care. Thanks to the Price Transparency of Hospital Standard Charges Rule from the federal Centers for Medicare and Medicaid Services (CMS), hospitals will be required to disclose the actual “discounted” prices they have agreed to accept in full payment from various payers. These real prices are far lower (50% or less) than the exorbitant and largely fictitious chargemaster prices that hospitals have been required to publish since 2019.

In addition, the new rule requires hospitals to provide this information in a user-friendly digital format and, for at least 300 shoppable services, with plain English descriptions. These prices must be procedure-based. That is, the disclosure must include pricing for all ancillary services involved. For example, an MRI with contrast would have to include charges for the MRI, the contrast and the radiologist, if employed by the hospital.

The new rule requires hospitals to disclose five types of “standard charges.” Standard charge means the regular price established by a hospital for an item or service provided to a specific group of paying patients, like patients with health insurance from a particular insurance company or self-pay patients.

The rule requires disclosure of the following:

  • Gross charge (list price) — the charge for an individual item or service that is reflected on a hospital’s chargemaster, absent any discounts.
  • Discounted cash price — the charge that applies to an individual who pays cash (or cash equivalent) for a hospital item or service.
  • Payer-specific (the payer, e.g., the insurer is identified by name) negotiated charge — the charge a hospital has negotiated with a third-party payer for an item or service.
  • De-identified (the payer, e.g., the insurer is not identified by name) minimum negotiated charge — the lowest charge that a hospital has negotiated with all third-party payers for an item or service.
  • De-identified maximum negotiated charge —the highest charge a hospital has negotiated with all third-party payers for an item or service.

Group of doctors in a hurry down the hospital hallway

This means that a patient scheduling an MRI of the knee with contrast, for example, can compare hospital prices before the patient decides which hospital to use. Uninsured or out-of-network patients can compare both the gross charge, as well as the self-pay price, and the cash discount price, if available. Insured patients can see the price the hospital has negotiated with its specific insurance carrier, which will allow the patient to determine the co-insurance amount the patient will be required to pay.

For example, a patient needing a knee MRI and having CapitalMark (fictional) health insurance might find the following information (the numbers are fact-based estimates). The gross price charge by Hospital A is $2,600, and Hospital B, $3,200. Hospital B offers a discounted cash price of $1,000; Hospital A doesn’t offer a discount for cash payment, and it must say so. The CapitalMark negotiated price is $1,075 for Hospital A and $1,250 for Hospital B; the maximum de-identified negotiated prices are $1,300 and $1,700, and the minimum de-identified negotiated prices are $650 and $800, respectively.

Part of CMS’s plan is for third-parties to use the data disclosed by hospitals to create even more user-friendly websites for use by patients. With this information an uninsured patient who could afford to pay in cash might choose to go to hospital B. A patient with CapitalMark insurance would have a lower co-insurance payment at Hospital A. A patient with CapitalMark insurance will be able to see that at least one other insurer has negotiated a lower price, and thus the patient may want to consider a different insurance provider.

A patient with a high deductible health plan may choose Hospital B and pay cash rather than using health insurance, if, for example, it was near the end of the year and the patient was more than $1,075 away from meeting the deductible.

Self-insured employers will now be able to see, for the first time, how good a job their third-party administrator is doing negotiating prices on their behalf. This will pressure those administrators to negotiate better pricing or risk losing customers.

The new rule is great news for patients and the U.S. healthcare system because it will lead to lower prices and better quality in healthcare in markets with multiple competing hospitals. Of course, price transparency alone will have little impact on monopolized markets. Requiring a monopolist to fully disclose pricing does nothing to lower prices because there is no competition. In too many markets, healthcare systems have gotten so large that there is no meaningful competition. In these markets, along with the new rule, anti-trust enforcement is needed to break up anti-competitive dominant healthcare systems.

Prashant Tambe
Prashant Tambe
An expert in SEO, Prashant carries an experience of over five years in the industry. He has the ability to analyze global industry trends that helps the leaders to make smarter decisions. An electrical, electronics and communication engineer, Prashant is able to predict future trends as they are changing fast with technological development.