What Does the Price Transparency Final Rule Require?

By Paul Shorrosh, Founder and CEO | Thursday, December 12, 2019

After an uproar from hospitals and health plans about President Trump’s executive order on price transparency, requiring disclosure of privately negotiated discounted prices, the administration initially seemed to be going back to the drawing board and asking for industry feedback to help shape the revised version. At the time, it seemed unlikely they would be back with a new version of the rule before the end of the year, but here we are.

Frankly, even after thousands of public comments about the proposed rule, the changes in the final rule seem minor. The requirement to disclose privately negotiated prices remains, and that’s why hospitals are up in arms.

In short, the final rule requires hospitals to disclose negotiated prices in two ways:

  • Via a machine-readable file: Hospitals will be required to post online a single data file, which can be read by other computer systems, that contains all hospital standard charges (including the gross charges, payer-specific negotiated charges, the amount the hospital is willing to accept in cash from a patient, and the minimum and maximum negotiated charges) for all items and services they provide.
  • Via a display of shoppable services in a consumer-friendly manner: Hospitals will be required to make public their payer-specific negotiated charges, the amount the hospital is willing to accept in cash from a patient for an item or service, and the minimum and maximum negotiated charges for 300 common shoppable services—70set by CMS and the remaining 230 by each hospital’s choosing. The hospital must present the information in a consumer-friendly manner and update it at least annually. “Shoppable” services include services that can be scheduled by a patient in advance, such as imaging procedures, outpatient visits, lab tests or bundled services like a caesarean delivery.

The final rule provides CMS with new enforcement tools, including monitoring, auditing, corrective action plans, and the ability to impose civil monetary penalties of $300 per day.

Proposed Rule for Health Plans

A proposed rule unveiled the same day would affect health plans by requiring them to provide members with an estimate of likely costs in advance of a doctor or hospital visit. Called the Transparency in Coverage Rule, it would require health plans to:

  • Give their members real-time, personalized access to cost-sharing information, including an estimate of their cost-sharing liability for all covered healthcare items and services. They would need to do so through an online tool made available to all their members, as well as in paper form, if requested by the consumer. This requirement is intended to help consumers shop and compare costs between specific providers before receiving care.
  • Disclose on a public website their negotiated rates for in-network providers and allowed amounts paid for out-of-network providers. Making this information available to the public is intended to drive innovation, support informed, price-conscious decision-making, and promote competition in the healthcare industry. Making this information public directly helps the consumer while creating new opportunities for researchers, employers and other developers to build new tools to help consumers.
    This proposed rule presents challenges for payers, but my focus for now is on the final rule that will affect hospitals, which would take effect January 2021.

Next Steps on Hospital Rule

As expected, hospital groups promptly sued the administration in federal court to block the final rule.

Plaintiffs in the lawsuit, which include the American Hospital Association, say, “the rule … does not provide the information patients need. Mandating the public disclosure of negotiated charges would create confusion about patients’ out-of-pocket costs, not prevent it.”

I couldn’t agree more. Patients don’t care what hospitals and health plans negotiate with one another. But they care a lot about what their care will cost them—and they don’t want to wait for their bill, after they’re committed, to find out.

But even if the lawsuit to block the rule is successful, hospitals should realize they have work to do, because while they have legitimate arguments about its legality and its unintended consequences, providing transparency through accurate estimates of out-of-pocket responsibilities is not only the right thing to do for patients, it’s also the right thing to do for hospitals. Doing so will improve patient satisfaction and provide myriad benefits for hospitals.

Hospitals win because providing patients with this information will help them realize better patient engagement and satisfaction. Also, providing out-of-pocket estimates benefits hospitals financially by enabling them to collect more up front, lower the potential for bad debt and lower costs to collect.

The best part: It’s possible to provide this information for most of the nonemergency, “shoppable” services considered in the rule today. The AccuReg Estimate My Cost® product, for example, which is powered by the same technology that powers our patient estimation tools used by hospital staff across the country, is available right now, is easy to implement for our customers and provides patients transparency at an out-of-pocket level.

Increasing cost transparency doesn’t require an intrusive rule and the disclosure of trade secrets. It just requires the will to do it. Learn more about providing price transparency to patients by listening to our recent webinar, Price Transparency Beyond the New Regulation.

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