Turning price transparency regulations from a liability to your differentiator
On January 1, 2021, the Centers for Medicare and Medicaid Services (CMS) pulled back the curtain on hospital pricing with the introduction of the Price Transparency of Hospital Standard Charges regulation. The regulation aims to make it easier for consumers to shop and compare prices across hospitals and estimate the cost of care. This is a major disruptor that not only impacts your operations, but also your brand reputation and relationships with stakeholders. How can you seize this as an opportunity to differentiate your organization by effectively meeting reporting requirements while safeguarding your bottom line and protecting your reputation as a trusted healthcare provider? How can you leverage pricing information to positively impact negotiations with payers?
The answer: modernize your processes so that your pricing data works smarter in telling your story. Translate your big data into regulation-compliant formats that are easy for consumers to understand and use to make price comparisons. This will strengthen your standing as a trusted leader in consumers’ minds. Your pricing information can also reinforce the value you bring to consumers – superior quality delivered at competitive prices. And, importantly, an effective organizational story anchored in your pricing data will help mitigate any potential blowback from payers.
The regulation requires hospitals to provide clear, accessible pricing information online about the services in two forms:
1. Machine-readable file with all items and services
2. Consumer-friendly format of shoppable services
As you prepare to comply with the new regulation, bear in mind these four truths about transparency.
4 Pricing Transparency Truths
1. Regulatory requirements are here.
The price transparency train has left the station. You’re either on-board, or you aren’t.
Creating a machine-readable file appears to be fairly straightforward. Creating a list of services that can be scheduled by a healthcare consumer in advance – what CMS calls a “shoppable services list” – is more complex and challenging. The “shoppable services” list includes 70 designated services by CMS that are divided into four broad categories:
1. Evaluation and Management Services
2. Laboratory and Pathology Services
3. Radiology Services
4. Medicine and Surgery Services
The list must also include a total of 230 additional services selected by the individual hospital.
Remember, CMS’ goal is to provide consumers with pricing information they can use to compare different providers. Simply transferring your pricing data from your chargemaster into a machine-readable file won’t enable comparability. Your data must be subjected to appropriate calculations to produce comparable information that enables consumers to shop for services based on price. Producing comparable data files may be burdensome for many health systems, diverting time and resources away from what your staff must focus on: day-to-operations and patient care.
2. Financial threats are real.
CMS is already auditing hospitals’ compliance with the regulation. If your hospital is out of compliance, you face civil monetary penalties (CMP) of up to $300 per day with additional CMPs for ongoing violations. While $300 a day may not seem like much, the cumulative negative financial impact could be much more severe. CMS recently stated that hospitals that do not provide their median negotiated rates could be denied Medicare payment.
You can avoid these financial downsides by proactively assessing your capabilities to aggregate, segment, manipulate, and report your prices in an accurate and timely fashion. Your ability to respond depends on the overall current state of your processes and technologies.
3. Payers will pursue a level playing field.
Historically, the tension between hospitals and payers created by the price negotiation process, has simmered under the surface, out of public view. Now the enhanced visibility of your pricing information will heighten that tension and create more public posturing. Your competition will look for any advantages you’ve leveraged with payers for specific, highly profitable services. Payers will evaluate their overall strategic success in negotiating prices with your organization and will strive to level the playing field with all of the hospitals with whom they have contracts.
4. Reputation risks can’t be underestimated.
Your key stakeholders will be keenly interested in seeing your pricing information – consumers, hospital competitors, and payers. Will you be perceived as the high-cost provider in your market? Can you justify your prices when compared to others? Are your prices consistent with your quality of service? Does your hesitancy to publish or discuss your pricing data suggest you have something to hide?
Consider the implications to your brand if CMS posts on its website that your hospital is non-compliant and is under a monetary penalty. As you dig deeper into your pricing data, you’ll confront tough questions. You must be prepared to respond to them and reassure your stakeholders.
How to be successful in a transparent marketplace.
Too many hospitals and health systems are burdened with antiquated business processes and technologies. Those that are further along in their digital transformation initiatives will also come out ahead on the pricing transparency curve. Modernizing processes, operations, technologies and human resource capital will allow you to standardize the pricing data, enabling consumers to make apples-to-apples comparisons.
Here are two things you can do to accelerate your journey to modernization.
Use data to tell a compelling story.
A number of marketplace dynamics will shape a consumer’s ultimate choice. These include cost, quality and whether the preferred provider is in the consumer’s network. You should adopt a thoughtful, strategic approach to pricing transparency that gives rich, timely, and consumer-friendly information. Automated processes and digital technologies can help generate more insight from your data that will differentiate your organization. It can also establish the foundation for future discussions about pricing with payers and other stakeholders.
Partner with the experts.
Price transparency will require you to think big about big data. Your organization may decide to partner with outside data experts who can help assess and analyze your data, modernize your processes and technologies, and report pricing information that positions your hospital as a leader in price transparency. For example, when one of the largest Northeast health systems scrubbed its pricing data, it discovered a $20,000 price difference between its hospitals for a common procedure. By partnering with an expert, the organization was able to adequately answer questions that came from consumers, payers and others.
Let Sutherland help your hospital navigate the Price Transparency landscape. To learn how we use a combination of artificial intelligence, robotic process automation, and data expertise to meet compliance requirements, reinforce the value you bring to patients and negotiate payer contacts, get in touch with our experts today.
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