Unveiling the Future of Healthcare Pricing Transparency

What Are the New Requirements?

Joe Wisniewski, the assistant vice president of channel sales at price transparency software startup Turquoise Health, highlights three main changes that hospitals need to prepare for. Firstly, they must post "drug unit of measurement" and "drug type of measurement." This means hospitals will have to specify how a medication's quantity is measured, such as by milligram or milliliter, and also indicate the format, like tablet or injectable. Instead of simply listing "Medication A – $200," they will now need to provide more detailed information like "Medication A, 50 mg vial (injectable) – $200." In the past, there was more flexibility in how this information was presented, but now it must adhere to specific guidelines.

The second change is the addition of modifiers to their codes. Modifiers are two-character alphanumeric codes attached to a procedure or service code to provide additional details. For example, "LT" and "RT" indicate the side of the body on which a procedure was performed, and modifier 95 denotes that a service was provided via telehealth. These modifiers help to provide a more comprehensive picture of the services being offered.

The final new piece of information CMS requires hospitals to post is the "estimated allowed amount," which refers to the anticipated reimbursement amount a hospital expects to receive from a health plan for a particular service. This provides more transparency into the financial aspects of healthcare.

Will These New Requirements Help Patients?

Wisniewski has little faith that these changes will significantly enhance Americans' ability to shop for care. The average patient is often unfamiliar with modifiers and lacks the skills to calculate complex drug pricing information. As he points out, the way price transparency works in healthcare is distinct from other industries. Shopping for healthcare is like going to a car dealership and having to piece together the cost of individual components rather than being given a total price. This places an unfair burden on patients.

Another expert, Hal Andrews, CEO of market research firm Trilliant Health, notes that CMS' regulations only apply to hospitals and exclude other settings. About half of hospital admissions come from the emergency department, where patients are in a crisis and unlikely to be concerned with price transparency. In fact, hospital visits only make up about 10% of total visit volume in the country. So, while these requirements are important, they represent a small part of the overall healthcare picture.

Things Are Better Than They Used to Be

Although CMS' new price transparency requirements may not have a strong immediate impact on patients, hospitals still need to take them seriously. Another healthcare expert suggests that hospitals can no longer approach these changes in a slow and haphazard manner. The old logic of sending over messy machine-readable files is giving way to a more transparent and efficient approach. The market is moving quickly, and there is increased interest from private equity and new companies entering the space. This is forcing health systems to comply and work towards making pricing information more patient-friendly.

Both Byrge and Wisniewski believe that hospitals' disclosure of more detailed billing information will benefit tech companies like Tendo and Turquoise. Hospitals are already burdened with patient care and facility operations, and they cannot be expected to translate complex billing information into easy-to-understand estimated costs on their own. Over time, as more healthcare pricing information becomes publicly available, these tech companies can develop tools to empower patients and make pricing more accessible.

Wisniewski also notes that hospitals' price transparency compliance has improved in the last couple of years. Although there were initial difficulties in meeting the requirements, most hospitals are now compliant, and response times to stricter rules are faster. This means there is more pricing data available for consumers to use and bundle.

What Could the Future of Price Transparency Look Like?

Byrge of Tendo believes that hospitals need to start thinking about pricing from a consumer mindset. In the future, healthcare providers may set different prices for different types of payers, such as cash-paying patients, health plans, and employers. Technology platforms could facilitate this marketplace dynamic, allowing patients to compare prices and services in real-time. This could lead to bulk purchasing, with employers negotiating for packages of services at lower rates.

Byrge also predicts that more health systems may explore direct contracts with employers or patients, bypassing traditional insurance companies. Many health system partners are frustrated with their contracts with large insurers and want to establish direct-to-employer or direct-to-patient contracts based on price transparency. If pricing data is available, these direct contracts can be created, providing more control and transparency for all parties involved.