Price Transparency and Your Chargemaster: Planning Ahead New Price Transparency Proposals Place Emphasis on Chargemaster Completeness, and Capabilities
New Rules, Creating New Demands
Following up on the hospital price transparency rule that went into effect on January 1, 2019, [section 2718(e) of the Public Health Services Act] the Centers for Medicare & Medicaid Services (CMS) issued a series of proposed new rules on July 29, 2019. These proposed rules include several new requirements that up the ante on transparency required in the original rule.
CMS requested feedback on these proposed new rules, so it’s probably premature to expect that all of them will become law. But it’s also worthwhile to think of these proposals as a framework for the kinds of requirements that are likely to become standard in the not-too-distant future. After all, these proposals are a normal part of regulatory processes in complex environments, like medical care, where broader requests are given further definition and specificity over time. That specificity makes these laws more easily enforceable, and the introduction of revenue-producing penalties for non-compliance creates an incentive for enforcement. This well-established pattern suggests that in some form or another, these new measures are likely to be enacted…eventually.
Which means your actions, in anticipation and response, will be critical. Our hope is to outline some key steps you might consider in proactive response — not only to the specific changes proposed, but to the business environment, and perhaps more importantly, the consumer response they’re likely to bring about.
Big Picture Takeaways
We’ll discuss the specifics of the proposed new rules in a moment, but first, we wanted to share a few general impressions that may help you parse the rules and their intent as you read through them.
- The rules define a deeper level of granularity for pricing information faithful to the broader goal of pricing transparency. Gross charges and payer-specific negotiated charges are explicitly included, as well as individual items and services, and “service packages.” Basically, any service “for which a standard charge has been established” must be shared.
- The requirement for a consumer-friendly display of “shoppable services” makes it clear that these regulations will have competitive ramifications, and places a premium on hospitals understanding their competitive pricing environment.
- The requirement for an annual update of this information, with more frequent updating “encouraged,” indicates that data currency is already a concern, and is likely to be an area of continued focus.
- The enforcement proposals seem to be modeled (at least somewhat) on HIPAA-like requirements, as hospitals will be required to provide a “corrective-action plan,” in addition to per diem monetary penalties, in cases of non-compliance.
Enforcement via Competition
But perhaps the most momentous change these rules may bring is one that isn’t explicitly stated in the new proposals (though it certainly can be implicitly discerned). That is: these proposals are set up to make competition the primary motivation for enforcement and, should any be needed, continued regulatory change. Though these proposed guidelines outline penalties and enforcement procedures, it appears that CMS itself doesn’t anticipate being the primary agent of enforcement. Instead, the market will provide that incentive. Competition, and ultimately, informed consumers, will make these changes take hold, and shape them for the foreseeable future.
We think it’s likely that providers who will win in this future-environment will need the courage to lead not only in compliance with these rules but in transparency as a core business practice.
Chargemaster data is our area of focus, so naturally, we see significant connections right away, but we encourage providers to consider closely how your chargemaster data might soon play a central role for you competitively. And this is especially true for those who wish to lead this change. After all, these regulations are designed to make your hospital’s competitive standing a matter of (easily accessible) public record. Knowing how your facility will show up is essential to making any adjustments for how you want to show up. Your ability to query and explore your own pricing data in comparison to others is something the right chargemaster management solution can make much easier. In the second part of this document, we’ll cover that idea in some detail.
But before we get further into those recommendations, let’s review the complete set of proposed changes from CMS.
Specifics of The New Transparency Proposal
The proposed addition to title 45 of the Code of Federal Regulations (CFR), if approved, would enact the following new requirements:
- Define a hospital to include any institution licensed as a hospital by the state or other applicable locality, regardless of whether or not the institution is enrolled in Medicare. This proposed definition would include critical access hospitals (CAHs), inpatient psychiatric facilities (IPFs), sole community hospitals (SCHs), and inpatient rehabilitation facilities (IRFs) operating in all 50 states, Washington DC, Puerto Rico, the Virgin Islands, Guam, American Samoa, and the Northern Mariana Islands.
- Provide an exemption to the requirements for federally-owned or operated hospitals, for Indian Health Services (IHS), Veterans Affairs (VA) hospitals, and Military Treatment Facilities (MTFs).
- Define “Items and Services” to include all items and services provided by the hospital including individual items and services, and service-packages a patient receives in connection with an inpatient admission or outpatient department visit, for which a standard charge has been established. This would include charges per DRG (diagnostic related grouping), where applicable.
- Require that hospitals post “standard charges” for all items and services as defined above. “Standard charges” would include gross charges in addition to payer-specific negotiated charges. (These will be defined as all charges that the hospital has negotiated with third-party payers for an item or service.) Note that this definition will include posting of negotiated charges with Medicare Advantage plans, but it won’t include charges negotiated with individual self-pay patients.
- Require that hospitals publish their “standard charges” publicly in two ways: 1) A machine-readable file of standard charge information for all hospital items and services, example formats include: .XML, JSON or .CSV; and 2) A consumer-friendly display of at least 300 “shoppable services” provided by the hospital, which will be derived from the comprehensive file.
Note that “shoppable services” will include services that can be scheduled by healthcare consumers in advance, and the definition also includes services that are routinely provided in non-urgent situations.
CMS has published a listing of 70 “shoppable” services including:
- Evaluation & Management (E/M) services, including psychotherapy sessions, consultations, and routine office visits;
- Routine laboratory tests;
- Radiology services, including but not limited to routine x-rays, CT scans, MRIs, ultrasound exams, and mammography;
- Routine surgical services, including spinal fusions, tonsillectomy, colonoscopy, gallbladder removal, vaginal and Cesarean delivery services, EKG, and sleep studies— among many others.
The proposed rule further requires that these files be posted to an Internet location that is publicly-available, prominently displayed with the hospital’s location clearly identified, digitally searchable, and made available without restrictions such as password requirements or submission of patient information prior to accessing the data.
It also requires the following data elements for all hospital items and services:
- A description of each item or service.
- The corresponding gross charge for each item or service.
- The corresponding payer-specific negotiated charge for each item or service.
- Any code used for purposes of accounting or billing for the item or service, including but not limited to: Current Procedural Terminology (CPT®) code, HCPCS code, DRG, National Drug Code (NDC), revenue code, or other common payer-identifier.
Finally, it specifies that this information is updated at least annually, although more frequent updates will be encouraged.
CMS plans to monitor each hospital’s compliance with these new regulations based on their own analysis of noncompliance, and through consumer complaints made to CMS. They’re also proposing a monetary penalty for non-compliance, following a written warning and request for a corrective action plan from the hospital. The current proposal includes a $300 per-day penalty that could be assessed if a hospital is deemed to be non-compliant with these regulations.
A Game Plan For Hospitals
What are the steps hospitals can take to respond to these changes? As noted earlier, maintaining your chargemaster data, and understanding its broader competitive context — are key tactical domains for anticipating, and responding to these proposed changes.
However, given the very wide breadth of possible connections here, we want to break this idea down into three key sub-components. They comprise two current attributes of good chargemaster management and a third, growing area (already important for many providers) that will significantly expand in prominence and importance as these new regulations go into effect. They are:
- Competitive Intelligence (Peer Review)
Table Stakes: Completeness
The first big step toward transparency is accuracy, and given the deeper level of granularity specified in the proposed regulations, completeness of chargemaster data will be crucial for adherence to these new rules. “Completeness” needs to be operationally defined, however, as nearly all hospitals will claim they have all their data...however scattered that data might be. But a truly complete chargemaster not only contains all of the hospital’s charge data, but it also makes that data accessible. It integrates all relevant charge data into one database, offers one uniform interface, and one fully integrated workflow for viewing and working with that data. It’s a chargemaster management solution that consumes ALL of your patient accounting information — and your pharmacy, professional, and other ancillary files, and all of your payer fee schedules.
For hospitals still synthesizing that data view with data-reassembly routines and spreadsheets, getting and staying current will be difficult at best. And doing a thorough competitive analysis in a patchwork environment has the potential for being very expensive — especially if IT resources are required whenever regulations change, or if consultants routinely have to be called in to push things across the goal-line.
The fact is, operating with a less-than-complete chargemaster is risky and expensive in and of itself: time, effort, errors, compliance challenges, and consultants happy to simply patch the leaks...continuously.
But with these new rules going into effect, the obstruction to competitive intelligence that incomplete or hard-to-access charge data will create may well become the biggest cost of all.
Keeping Up: Currency
Not very long ago, hospitals used to review prices on a yearly or even bi-annual basis. The increased scrutiny for hospital pricing that will accompany these new regulations will very likely go hand in hand with a more aggressive regulatory stance, and a stepped-up pace of change. (Regulations do have a way of begetting more regulations.) So even for hospitals now performing reviews twice annually, a quarterly or even monthly review schedule may become the new standard. With the right chargemaster and tool-set, elevating the pace of review can be done much more easily, because that review can be focused exclusively on areas known to have undergone change. It’s not unlike keeping any dataset, or even a physical space clean and tidy: the more often it’s done, the smaller the job, and the easier and faster it is to complete.
Competitive forces may further support the case for dedicated process and resources to keep chargemaster data and regulatory information up-to-the-minute, and for engaging in review processes more frequently, in a more focused fashion.
The New Standard: Competitive Intelligence
Sound decisions about pricing begin with assembling a clear picture of one’s own pricing across the full spectrum of services your facility offers. But transparency opens up an entirely new competitive landscape and makes deeper awareness of peer pricing an imperative for every hospital. Actually, awareness doesn’t really hit the mark: what’s really needed is competitive intelligence: insight about pricing and how your own facility fits into the overall picture within your locality, region, or state. It’s also reasonable to assume that any “snapshot” taken will also be subject to change, as greater pricing transparency is likely to have an effect on consumer behavior. Undoubtedly, a readily available list of “shoppable services” from every hospital will lead to...shopping. Just how much shopping remains to be seen. But that’s the kind of information you’ll want to start considering as you develop and adapt your own pricing strategy.
The big question is, how to best address this new challenge?
A Recommended Path For Response
In general, the broader the range of comparison, and the richer the dataset you consult for pricing strategy, the more effective your analysis will be. As you’re no doubt aware, the SAF (Standard Analytical File) available from Medicare is one of the most reliable datasets available, which is why it’s a great place to start. It’s published every 90 days and contains data from 93% of the paid claims by Medicare. In other words, it’s as real as real gets.
To make optimal use of this information, and make the most informed decisions for each CPT/HCPCS, hospitals should consider analyzing this data using the following key indexes:
- Weighted peer hospital averages.
- State averages.
- Hospital bed size averages.
- Urban vs. rural averages.
- National Percentile Data (i.e. 10th, 25th 50th 75th, 90th percentile).
- Teaching facility vs. non-teaching averages.
- APC and Medicare fee schedule amounts.
- CBSA (regional) averages.
To bring your own hospital into this broader analytical picture, you’ll need to have your payer fee schedule amounts in your CDM tool (not just one or two, but all of these schedules), and line them up against all of the indexes listed above.
By adding your revenue and usage files for a selected period of time, (you’ll need to make a good judgment on the most relevant time periods to select) your analysis can be even more telling. In essence, you can quickly map out how you compare using the various specified indexes to get several different “views” for comparison. This is the kind of thorough analysis that rises above a simple price-check and can truly be called competitive intelligence.
Of course, there are consulting firms who offer this kind of analysis, but having someone else do this for you can become expensive. Moreover, this cost is likely to become prohibitively high if you’re planning to keep up with the pace of change that will accompany the arrival of true transparency in the healthcare marketplace.
There are certain basic tactical capabilities your chargemaster and your mid-revenue team need to be able to do — readily — to perform this kind of analysis regularly. Ideally, you’ll have a solution and processes expressly designed to support these functions:
- Import of your entire CDM file and any ancillary files, including ALL payer fee schedules.
- Import of ALL revenue and usage for analysis, for ANY specified time period.
- Selection of ANY or ALL of the data elements from the SAF data to analyze your charges against.
- Displaying and saving all of this data — including payer fee schedule amounts, onto a single, easy-to-use “pricing analysis report”.
- The ability to export this data for further analysis and manipulation.
- For audits: storage of the results of the reports, along with the data in versioned tables so that you can go back to any date in the past and interrogate and display your pricing.
- Accessing CPT/HCPCS codes not currently listed in your hospital’s CDM file to enable future comparison in the case of changes.
The Case For Action
As you explore the potential challenges of the new competitive landscape that price transparency will create, you’ll undoubtedly recognize that being ahead of this curve will be the best place to be. To a certain extent, the case for action relies on your belief in the likelihood that the bulk of these changes (or similar) will, in fact, be made soon, with enforcement and audits close behind.
But there’s another thought-path open, which considers the advantage of making the most of these capabilities even before they’re demanded by regulation. As noted, we’re fairly confident that the arc of these changes won’t actually be defined by regulation, but rather, by competition between you and your peers. The key question is whether or not you have the knowledge at hand to lead, or whether you’ll be forced to follow.
What’s interesting about the path recommended above is that this information is public and available to any of your peers. However, your ability to understand it in the context of your own data is the crucial point of leverage, along with your ability to operationalize that insight, and from there, to continuously measure the effects of your actions, and adjust.
So, ultimately, this is about data and tools, and your willingness to adopt insight and agility as a competitive strength. In “brass-tactical” terms, it’s also about whether you want to be 12 months ahead of this curve, or 12 months behind.
Our belief is that the tools exist to do this work today. (Our own products, VitalCDM and VitalKnowledge, were in fact designed to support precisely the processes we’ve outlined above.)
From our perspective then, the ball is squarely in every hospital’s court, and in the hands of financial and business leaders to see the bigger picture that’s emerging.
It’s no doubt an interesting time for people who have spent their careers in the mid-revenue cycle and coding disciplines. These changes are putting a premium on our expertise and knowledge. We’re happy to say that we’re here to serve those who are ready to welcome these new challenges — ready to step into the spotlight to make the most of this decisive moment in the healthcare business.
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