CMS’ price transparency rule requires hospitals to publish a consumer-friendly display and machine-readable file of their standard charges for what the regulator calls “shoppable services.” However, complying with the requirements won’t be enough for hospital leaders looking to derive maximum value from these efforts.
Cost-Cutting Pressures
Savvy hospital revenue cycle leaders are taking advantage of new rules requiring hospitals to post previously confidential data on the prices they charge for shoppable services. Combined with reimbursement benchmarking, this new data set can improve gross charges, hospital profits, and net revenue yield.
The challenge is that the data sets could be more organized, consistent, and often easier to interpret. Crucial information, such as the contracting method and payer class, must be included. Moreover, the lack of machine-readable formats makes it challenging to collate, clean, and analyze this price transparency data set for its intended purpose.
Furthermore, whether patients will utilize these tools to shop around is still being determined. This is especially true given that physician referrals still strongly influence patient choice, and many health plans are not transparent about reimbursement terms.
New Growth Opportunities
As regulatory demands around price transparency become more stringent, healthcare leaders must rethink revenue growth strategies. Those who can make this transition successfully will be rewarded with an opportunity to drive organic revenue growth.
Savvy hospitals are taking advantage of new legislation and leveraging the available data with better hospital profit margins. They’re building a capability to analyze competitor pricing for shoppable services, adjusting their gross charges to optimize their revenue yield, and ensuring that their charge description master (CDM) is defensible.
Hospitals are also gaining visibility into their payers’ negotiated rates, which can be useful during contract negotiations. They can then use this information to create pricing models to support their commercialization efforts while ensuring their rates align with the market.
Incentives To Keep Patients In-Network
Since 2021, federal law has required most hospitals to publicly post negotiated rates for common procedures, allowing consumers to shop for care. However, the quality of this data varies considerably.
Many negotiated rate data sets could be clearer and understandable, making them easier for patients to utilize. The data also varies by the method used to calculate statistics (for example, calculating averages and medians based on a particular number of rates), which could introduce biases.
In addition to allowing patients to compare rates, the transparency rule gives providers valuable insight into competitors’ reimbursement rates, which can be used in negotiations and disputes. Nevertheless, many hospital leaders believe that the Trump administration’s push for price transparency creates confusion and could backfire.
Insurers have warned that hospitals will see their opportunities to raise prices, and they may choose to do so to compete with lower-priced competitors. This will result in a vicious cycle that could drive costs up rather than down.
Reimbursement Benchmarking
Transparency aims to enable consumers to shop for care and promote competition. While these data sets are a welcome step in the right direction, making them useful for consumers and researchers remains challenging. Many of the hospital-sourced negotiated rate files need more consistency.
For example, they often contain multiple unique negotiated rates for the same revenue code (e.g., MRI) and do not follow the same formatting as payer-sourced files. Calculating statistics based on the number of negotiated rates reported may skew results.
This is because a hospital that reports more negotiated rates will count more heavily in the analysis than a hospital that provides less granular information in its files. This can sway the results of comparisons and impact how a hospital ranks in a given market.
