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Price Transparency Rules Take Effect, Slated to Empower Patients

A CMS rule for hospital price transparency is expected to help patients make informed healthcare decisions.

price transparency

Source: Thinkstock

By Sara Heath

- As of January 1, 2019, hospitals across the country are responsible for full price transparency, a move that will allow patients to make informed decisions about care access.

The mandates come as a part of the 2019 inpatient prospective payment system (IPPS) and long-term care hospital prospective payment system (LTCH PPS) rules, which were finalized in August 2018.

Per the IPPS and LTCH PPS rules, hospitals must list their prices online in a “machine-readable format.” Previously, hospitals were required to make their prices publicly available, but not necessarily in a digital format. Digital price transparency will enable patients to more easily access this information, CMS explained in August.

Increased price transparency will ideally improve the patient experience of care, CMS suggested. Although price transparency itself does not lower healthcare costs, it may create market pressure that in turn lowers patient costs. Additionally, price transparency allows patients to “shop” around for the best care option for their needs.

Price transparency is not a new concept in the healthcare space, as industry experts have identified it as a strategy to help patients manage increasing financial responsibility.

However, research indicates few patients actually use the price transparency tools that are currently available. Limited patient uptake likely stems from lack of knowledge about the price transparency tools or inability to use the tools.

As noted above, CMS mandated that these new price transparency resources be in a “machine-readable format.” After collecting public comment on the most efficient way to do this, CMS has called on all hospitals to list their chargemaster prices on a publicly-available Excel spreadsheet. The spreadsheet, which must be searchable, will ideally make it easier for patients to use the tool.

But questions remain about this approach. Critics claim that chargemaster prices are not always helpful for patients, who between insurance, subsidies, and other payment design usually pay less than chargemaster price. Additionally, the feasibility of an Excel spreadsheet housing all prices remains in question. As more organizations publish their price transparency lists, hiccups with the presentation may come to light.

CMS is not just tackling price transparency in hospitals; the agency plans to address price transparency for prescription drugs, as well.

In October 2018, the agency also proposed a rule for price transparency in direct-to-consumer drug advertisements. Again, the agency and HHS intend to create market pressures that could lower the price of prescription drugs, said HHS Secretary Alex Azar.

“This historic proposal is an important way to create new incentives for drug companies to start lowering their list prices, rather than raising them,” Azar said in a public statement. “President Trump’s drug-pricing blueprint called for HHS to consider how to accomplish this goal, and now we are following through on this measure to better inform patients, help them lower their drug costs, and reduce unreasonable spending in Medicare and Medicaid.”

Specifically, drug manufacturers would need to disclose costs for a typical dose of acute treatments such as antibiotics, or for a thirty-day prescription for drugs used in chronic care management plans. Drugs costing less than $35 would be exempt from the rule.

While the proposal faced considerable pushback from the pharmaceutical industry – its leading trade group, PhRMA, threatened a lawsuit – it has received praise from other stakeholders. The American Academy of Family Physicians (AAFP) said drug price transparency will help consumers make better decisions about their healthcare.

“The AAFP wholeheartedly supports the policy objective of ensuring beneficiaries are provided with relevant information about the costs of prescription drugs and biological products,” AAFP board chair Michael Munger, MD, wrote in a December letter to HHS.

“The inclusion of the list price in DTC advertisements will allow patients to make more informed decisions that minimize their out-of-pocket costs and total expenditures borne by Medicare and Medicaid.”

These rules highlight an industry trend toward more consumer-centric healthcare. As patients assume more financial responsibility for their care, industry leaders prioritize efforts to help the consumer patient navigate high costs.

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