How Hospitals Can Compare Prices, Despite Not Having a Consumerism Model

The inability to compare prices is an often-cited reason for why healthcare hasn’t fully evolved into a consumerism model — patients don’t comparison shop among healthcare providers, using price as a significant factor in decision-making like they do when comparing other purchases.

The inability to compare prices is an often-cited reason for why healthcare hasn’t fully evolved into a consumerism model — patients don’t comparison shop among healthcare providers, using price as a significant factor in decision-making like they do when comparing other purchases.

So when the Centers for Medicare and Medicaid Services (CMS) rolled out a regulation that required hospitals to post their “chargemaster” rates online, as of Jan. 1, 2019, it was another experiment in creating a more price-aware environment.

Nearly a year later, the introduction of chargemaster data into the public sphere has had no discernible impact on use. The structure and volume of chargemaster data made comparisons too difficult, and the results too generalized to be predictive of the costs an individual with insurance would incur.

  • So will pricing information ever become a significant part of consumer decision-making?
  • Yes, although it remains several miles down the road, and likely will stay limited to services with less likelihood of medical complications, which adds in additional services and costs.

The most likely source of the data will be health plans that can associate its member’s benefits and the rates defined in plan-provider contracts to provide an estimate.

If the plans take it one step further and compare facilities within a geographic radius to present consumers with options, will that influence choice? And should pricing be a determinant of choice when other factors, such as provider expertise and facility quality, are also considerations?

It can be helpful to think of the CMS’ requirement of January 2019 as a directional change that opens the door to greater pricing scrutiny. Chargemaster rates are like “list prices” in the same way a hotel has list prices, but guests rarely pay the full amount. But that rule was just the first in what is likely to be a series of rules under consideration that will gradually pull back pricing layers until they become meaningful at a consumer level.

One rule — under consideration, but not finalized — would force hospitals to make public their standard charges, including payer-specific negotiated prices, in a format that is both machine-readable and “consumer friendly.” That would represent a significant expansion on price transparency. Assuming this rule is challenged in court, implementation likely will be delayed past its proposed January 2020 effective date.

One thing is certain: The external environment is shifting on price transparency.

If you are unsure where your facility falls on the cost spectrum vs. competitors, a data analyst can compare chargemaster data as one way of establishing context. Armed with this information, you can open the door with leadership to discuss this coming chapter in price-based competition.