Healthcare Providers Concerned, Unsure How to Address CMS Price Transparency Final Rule

Report

The only constant in life is change. This statement is very applicable to healthcare reimbursement today, as payer contractual and strategic pricing processes must integrate and evolve.

High-deductible health plans are now commonplace in 2019, a recent trend that requires providers to collect an ever-increasingly higher portion of the cost of care from the consumer. Also, hospitals are now required to post their charges publicly, but this list of retail prices is not easily connected to the consumer’s cost.

These shifting dynamics are putting more pressure on hospital executives to set charges, negotiate payer contractual allowables, and provide accurate estimates of cost. The result leaves patients to assume greater financial responsibility than ever before.

Healthcare providers recognize that reimbursement negotiations still take place with the organization’s payers, but the patient is quickly becoming a consumer of healthcare services—versus a recipient of services.

Greg Kay, Senior Vice President of Revenue Strategy at PMMC, detailed the ways contract governance is evolving in a consumer-focused, value-based payment system, and outlined best practices for negotiating payer contracts in a recent HealthPayerIntelligence.com webcast.

“To facilitate bending the cost-growth-curve, the underlying premise is that consumers must become more engaged with their healthcare expenses, which will translate to a higher level of price shopping,” said Kay.

To ensure patients are well-informed of the costs associated with different payers, health plans, and contractual reimbursement, CMS is pushing providers to offer patients transparent access to quality and pricing data. A key requirement will be clearly differentiating charges (the “retail price”); price (the “allowable” or “discount price”); and cost (the “consumer’s cost” or “financial responsibility”).

“This will be the new normal, and it’s going to require new processes, new technologies, and new components when monitoring payer activity; for example, utilizing scorecards to improve negotiating payer contracts,” said Kay.

Additionally, healthcare has unique complexities in terms of how providers are paid.

“Patients often don’t understand the contractual reimbursement relationship between providers and payers, especially the fact that their insurance company negotiated significant reductions with the ‘allowable’ or ‘discount price,’” said Kay.

“The concept that charges are priced high so that payers (the insurance companies and/or the patient employers) can receive large discounts on paper can be a challenging concept within the industry, and even more perplexing for those outside of healthcare. Other retailers and industries do not operate with such weighty contractual discounts at the very beginning of the purchasing process,” he explained.

Accurate payer contractual reimbursement is traditionally viewed as the starting point of the payer negotiation process.
“As we think about these changing consumer demands and the need for accurate allowables (for both modeling and the shift to consumerism/patient price shopping), we have to view the importance of an accurate allowable in a much broader perspective,” said Kay.

“As the industry and related revenue cycle processes are changing and evolving, the fact is your charges are now transparent because of the requirement to publish them online,” said Kay.

In this new reality, healthcare providers should be revisiting how their charges compare and understand how reimbursement by payer and service line is performing with the consumer in mind. This kind of approach will likely lead to an increase in payer contractual re-negotiations.

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