“How do you make a spreadsheet or database with 50,000 rows of highly technical, clinical billing information consumer-friendly?”
That is the question Niall Brennan posed in a recent interview following the first stinging fine that the Centers for Medicare and Medicaid Services levied on a health system in Atlanta. Having served as CMS’ chief data officer and as a senior analyst at the Medicare Payment Advisory Commission, he has been closely watching the enforcement of price transparency legislation play out over the past year and half. He and other price transparency experts believe CMS’ rule is fundamentally flawed in its design and poses an incredibly tough ask on hospitals, but health technology companies may be able to help. Given that compliance rates remain low and CMS starts to issue larger fines, hospitals’ efforts to find the answer to his question is getting more urgent.
CMS began enforcing its price transparency rule on the first day of 2021. The law requires hospitals to post their gross charges, payer-specific negotiated charges, de-identified minimum negotiated charges, de-identified maximum negotiated charges and cash prices on their websites in a machine-readable file. It also mandates that hospitals must publish pricing for the 300 most commonly-used services to their website in a consumer-friendly manner.
A recent study published in the Journal of the American Medical Association found that fewer than 6% of hospitals are fully compliant with CMS’ price transparency rule. Compliance has been minimal since the law came into effect more than two years ago, but the fines the agency had proposed for noncompliance were initially “so low that they had no influence whatsoever on whether a hospital complied or not,” Brennan said. He believed a far greater impetus for hospitals’ compliance is whether they “were fined in the court of public opinion,” referring to media coverage that positioned hospitals in an unflattering light for their noncompliance or failure to post information in an accessible manner.
On June 7, however, things took a turn. That’s when CMS slapped Northside Hospital in Atlanta with a $1 million fine, and it became the first health system in the country to face CMS’s ire over lack of compliance. Brennan said many other healthcare leaders were perplexed by the fine, as CMS had issued hundreds of warnings to hospitals in the couple months prior but only actually levied fines against one health system.
The reasons why Northside Hospital was fined but others weren’t remain unknown, though many speculate the health system’s leadership may have been especially defiant in their communications with CMS. The penalties could inspire more compliance from hospitals as a $1 million fine is an unexpected expense sure to cause pressure on nearly any hospital CFO.
Marcus Dorstel, vice president of operations at price transparency software startup Turquoise Health, agrees that hospitals will have to take compliance more seriously if CMS continues issuing fines like the ones that hit Northside Hospital.
“It could get to a point where hospital leadership is having a hard time justifying to the board or shareholders or community why they have this multimillion dollar expense line on their books for not complying with a federal law,” he said.
There are a few reasons why it is so difficult for hospitals to keep up with CMS’ requirements, according to Dr. Nick Patel, chief digital officer at South Carolina-based Prisma Health. First, there are so many permutations of what a procedure could actually cost that it is virtually impossible to create an accurate estimate of what a patient will end up paying. For example, the true cost of a gallbladder removal could come out to thousands of dollars more than the amount a patient saw on a price estimator tool due to surgical adhesions, excessive bleeding or other unforeseen complexities that could arise during the surgery.
“It’s a best guess ‘estimate for a repair,’ like your mechanic or air conditioning company would give you,” Dr. Patel said.
Another reason price transparency is tricky for hospitals is that patients mainly just care about what their out-of-pocket expense will be, not the “retail” or “non-adjusted” cost. Since this varies patient-to-patient based on their health plan and deductible, the technical lift for hospitals to calculate accurate estimates is more onerous.
Care variance within the healthcare industry also makes it tough for hospitals to provide effective price transparency tools. The documentation, coding and other ancillary charges involved in the medical billing process are quite complex, and surgeons may have different preferences for the amount of equipment they use for each case, Dr. Patel said. He said hospitals should continue working on ways to reduce care variance to better standardize costs.
All these complexities within the medical billing process makes it so patients can rarely understand the price transparency data they come across. Brennan said that he has talked with physicians who said they could not understand the pricing information their hospital posted, so it is highly optimistic to expect consumers to be able to digest the information that CMS is asking hospitals to post.
Dorstel said that his startup — as well as other healthcare software companies like Healthcare Bluebook and Cedar — could play a significant role in accelerating hospitals’ compliance because most hospitals are not equipped with the technical know-how and staff needed to create tools that present composite billing information in a consumer-friendly way. Cedar CEO Florian Otto agreed, saying that most of the hospitals he has spoken with about price transparency compliance tell him they do not have staff with any experience building the kind of digital tools that CMS requires.
“While I think the regulation’s intentions are very good, the execution is a bit unfair because you’re asking an entity to do something where no product really exists,” Otto said.
As health technology companies like his begin to produce software to help hospitals comply with CMS’ rule, Otto said they need to focus not only on software, but also on engagement. He said that most of the technology partners that are currently helping hospitals comply are enterprise software companies, which often have a hard time creating engaging tools because they build technology to meet the needs of an organization rather than individual users.
Engagement in this sense not only means creating tools that consumers can easily interact with, but also spreading the word that this pricing data could be available to them. Six months after CMS began enforcing its rule, a Kaiser Family Foundation survey found that just 9% of U.S. adults nationwide were aware that hospitals must disclose their pricing information online.
The fact that so few Americans seem to be using price transparency data to shop for care shows that CMS’ rule has not come close to achieving its purported main goal: to give patients more power. Otto said that the minimal awareness and use of hospitals’ pricing data might not be a problem for the time being because the tools that hospitals are posting are too complex to help patients actually shop for care.
“Hospitals are not complying because it’s just extremely tough to make really something that doesn’t confuse the heck out the patients,” he said. “That usually happens when you do it exactly as it’s mandated by CMS —it really confuses patients.”
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