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New Year, New Rules: Are You Ready for Healthcare Cost Transparency?

The calendar flipping over to 2021 not only marked the start of a new year but also marked two new healthcare transparency rules going into effect.

As healthcare costs continue to rise, The Centers for Medicare & Medicaid Services (CMS) projects healthcare spending to consume almost 20% of the economy by 2027. Economists argue that transparency will allow patients to make informed decisions about how they spend their healthcare dollars; patients, facing increasing copays and out of pocket costs, agree.

So what does cost transparency really mean in light of the new rules? How can healthcare organizations prepare to brave these new rules? Finally, most importantly, what will this mean to patients? Let’s decode the new rules and their impact on providers and patients.

What are the new healthcare rules?

The Centers for Medicare & Medicaid Services (CMS) new rule pertaining to Hospital Price Transparency went into effect January 1, 2021. Under the new rule, hospitals must make an annually-updated, machine-readable file available on a public website including gross charges, payer-specific negotiated charges, discounted cash prices, de-identified minimum and maximum negotiated charges, along with any accounting or billing code used by the hospital for the item or service.

Hospitals must make charges public for 300 “shoppable” services – defined as those service packages typically provided in non-urgent situations that can be scheduled by a patient in advance – displayed and packaged in a consumer-friendly manner and including plain-language descriptions of each service.

Hospitals with internet-based price estimator tools will be considered compliant, as long as the tool: allows patients to obtain a cost estimate for a shoppable service; provides estimates for about 70 CMS-specified shoppable services, plus hospital-selected shoppable services for a combined total of at least 300; and can be used via the hospital’s website without charge and without registration or a user account.

The rule empowers CMS to monitor and audit hospitals’ compliance with the new cost transparency rules as a result of complaints and through reviews of hospital websites. Hospitals deemed non-compliant will be required to implement corrective action plans and could be assessed civil penalties of up to $300 per day.

Health plans and health insurance issuers also face new requirements. The Transparency in Coverage final rule, which went into effect on January 11, requires group health plans or health insurance issuers to disclose in-network provider negotiated rates, historical out-of-network allowed amounts, and drug pricing information through three machine-readable files posted on an internet website for plan years beginning on or after January 1, 2022 and to update these files monthly.

Individual and group plans and insurance issuers are expected to provide cost-sharing information for individual services, as well as those provided as part of bundled payment arrangements, at the request of participants or beneficiaries for 500 healthcare items and services for plan years beginning on or after January 1, 2023, and for all covered items and services for plan years beginning on or after January 1, 2024.

Cost-sharing information must be made available through a searchable, self-service tool on an internet website without a subscription or fee that provides information current at the time of the request, or on paper, as requested by plan participants.
In making the rule, the U.S. Department of Health and Human Services also finalized amendments to its medical loss ratio (MLR) program rules that will allow issuers offering group or individual health insurance to receive credit in their MLR calculations for savings shared with plan participants that result from enrollees shopping for and receiving care from lower-cost, higher-value providers.

What do these rules mean for providers?

Compliance with the new transparency rules will require provider and payor organizations alike to think through and track data from procedures to service packages to payments. Nerdery has worked with some of our nation’s largest health systems and with Fortune 500 companies mapping data ecosystems and developing data strategies.

Through contextual inquiry and user ethnography, Nerdery can help your organization understand the way patients and beneficiaries think about medical procedures, connecting the dots between search terms and concepts, and partner with you to create useful, usable online price-estimation and cost-sharing tools, designed to capture and clearly communicate brand value.

How will this change in cost transparency impact patients?

The U.S. government considers price transparency key to containing rising healthcare costs by giving patients the ability to shop for care, avoid surprise costs, and spur competition in the market.

The new transparency rules are likely to bring about a real shift in the ways consumers leverage information in making care choices. The ability to understand customer segments and how their use of cost information differs will create competitive advantages. Organizations that invest now in solid data strategies and ecosystems and carefully designed digital tools will be a step ahead.

While cost transparency will bring a much needed relief to patients to help make informed decisions about their healthcare costs, there is much more to be seen and understood. How comfortable will patients be in assessing the costs? How will it impact the decisions they make in seeking more affordable care? How will this impact different stratas of society? Will this demystify or further expose the loopholes in the US healthcare system? Or will it truly be a starting point for democratization of healthcare? Nerdery teams will continue to monitor this change and keep you informed.

For more information on the new healthcare rules:

New provider transparency ruling in Federal Register: CY 2020 Hospital Outpatient PPS Policy Changes and Payment Rates and Ambulatory Surgical Center Payment System Policy Changes and Payment Rates. Price Transparency Requirements for Hospitals To Make Standard Charges Public

New payor transparency ruling in the Federal Register: Transparency in Coverage