Price Transparency in Healthcare

By Sherry Baker @SherryNewsViews
February 14, 2020

Price transparency — clear information about what medical costs are and why — is becoming a reality. Here’s a look at new federal rules set for 2021.

If you are interested in your own health and medical care — and the financial cost of staying healthy or getting well when you have a health problem — you need to know about price transparency in healthcare.

“Price transparency” means having information about the cost of healthcare services, including exactly what you are being charged for and why. The goal is to help patients and other care purchasers identify, compare, and choose healthcare providers who offer the desired level of value they need, according to the Healthcare Financial Management Association.

it’s a complicated subject. Hospitals and other medical centers and providers typically negotiate prices with insurance companies, for example, and they have administrative costs that must be considered when a patient is charged for a service. These are not factors typically broken down on a bill or shared publicly.

But that is set to change. Hospitals will have to comply with a new price transparency federal rule, finalized by the Trump administration and issued by the Centers for Medicare & Medicaid Services (CMS), which goes into effect in January 2021, but many healthcare providers are expected to roll out price transparency information sooner in advance of the deadline.


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What the new rule means for hospitals and patients

The new rule is saddled with an extremely long official name: The Calendar Year (CY) 2020 Outpatient Prospective Payment System (OPPS) & Ambulatory Surgical Center (ASC) Price Transparency Requirements for Hospitals to Make Standard Charges Public Final Rule.

But don’t let that intimidate you from finding out what it means — because the odds are, price transparency in healthcare is an issue that will impact almost everyone in the U.S., sooner or later.

Under the new rule, hospitals will be required to share price information that most have kept somewhat under wraps, including the rates they negotiate for procedures with insurance companies and the discounted fees they offer patients who pay cash (SEE: What Is a Cash Rate for Healthcare?).

The finalized rule aimed at making healthcare prices transparent sets these requirements hospitals must follow for both standard charges, costs incurred by treatment in hospitals, and “shoppable services,” which are often scheduled on an out-patient basis:

Hospitals will be required to make all hospital standard charges public

This includes overall charges as well as charges negotiated with insurers and the amount a hospital is willing to accept in payment if you pay cash. Information for all items and services must be displayed publicly online. This online information must also explain common billing or account codes used by the hospital so patients can compare charges, hospital to hospital, for the procedures and other medical services they need.

Information about hospital charges for all shoppable services must be displayed publicly, too

Shoppable services are tests and procedures that a patient can schedule in advance, often on an out-patient basis. For example, laboratory tests, x-rays, MRIs, and other imaging tests are shoppable services, unless conducted due to an emergency. In addition, shoppable services also include what is known as “bundled services,” procedures that can be scheduled ahead of time but need follow-up care or multiple tests (for example, a cesarean birth with doctor visits and tests scheduled before and after delivery). Hospitals will also be required to make public the charges they negotiate with insurance companies, and the amount the hospital is willing to accept from a cash-paying patient who needs a shoppable service. The information must be easy to understand, easy to find, and easy to search on a prominent location online.

In addition, the minimum and maximum negotiated charges for 300 common shoppable services must be updated at least once a year and available online. In ddition, the shoppable service charges must be grouped with other related fees for services the hospital usually provides when a patient needs a shoppable service.

The rule has produced controversy from some healthcare providers, insurers, and other interested parties. For example the Association of American Medical Colleges (AAMC ) has expressed concern that, “instead of helping patients know their out-of-pocket costs, this rule will introduce widespread confusion, accelerate anticompetitive behavior among health insurers, and stymie innovations in value-based care delivery.”

However, supporters of the rule see it as an important way to increase price transparency in healthcare, which will, in turn, potentially lower healthcare costs on everything from hospital services to prescription drugs.

More price transparency is likely ahead

As hospitals begin to provide easily accessible online information about their prices, patients may expect, and perhaps insist upon, seeing more transparent pricing information from health insurance providers about charges that may not be covered by their insurance plans.

To that end, a second rule, called the Transparency in Coverage Rule has been proposed and issued by the CMS (but is not yet finalized).

Like the already approved rule affecting hospitals, the proposed companion rule will emphasize the need for making healthcare costs clear to patients and easily accessible online, including providing information about negotiated rates with the insurers’ network providers, as well as the typical amounts the insurers pay to out-of-network providers.

The rule mandates health insurers to provide easy-to-find and understand information about how much patients may owe in out-of-pocket charges for medical services. If finalized, the proposed Transparency in Coverage rule will also require health plans to provide an online tool available to all of their members to deliver immediate, personalized access to their share of costs for all healthcare services and items covered by their insurers.

With easily accessible and accurate estimates of any out-of-pocket costs an insured person must pay to meet their insurance provider’s deductible, co-pay, or co-insurance requirements, the hope is patients can avoid sometimes shocking “surprise” medical bills (balance billing) that can be financially devastating.

What’s more, the proposed rule requires most employer-based group health plans and health insurance issuers — whether they offer individual or group coverage — to disclose price and cost-sharing information up-front to those they insure. Having this information easily available can help patients compare insurance coverage when they are deciding on the policy that’s right for them.

Bottom line? Price transparency is one part of healthcare

Of course, having access to medical care you and loved ones need is extremely important. So is understanding what you are paying for and how much your insurance covers — and why.

It’s also crucial to remember, however, the least expensive insurance policy or procedure may not be the best for everyone. Healthcare needs are individual. But the move toward transparency in healthcare pricing, when put in place and widely available, will hopefully provide an opportunity for more understanding of the best available options for you and your family.


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February 14, 2020

Reviewed By:  

Janet O'Dell