CMS Rules of “Price Transparency” Impact on Organizations

CMS Price Transparency Proposition

Over the past decade, the Centers for Medicare & Medicaid Services (CMS) has ardently pursued the implementation of  an elaborate hospital price transparency policy with the primary intention of allowing American citizens to know the price of services and products offered  beforehand. The rapid rate of change experienced recently within the healthcare sector has prompted calls for the introduction of new standards to provide a new course to be chartered with regard to price transparency in the United States. Beginning January 1, 2021, hospitals operating within the United States will now be required to abide by a new executive order hinging on a new proposed Inpatient Prospective Payment System (IPPS) rule for price transparency.

Price transparency

            The initial introduction of price transparency in the healthcare sector was a bold move officially sanctioned by the Department of Health and Human Services (HHS). According to Canady (2018), this new policy sought to cede a considerable level of healthcare control to patients to foster pricing transparency by both insurers and providers (p. 89). The CMS later proceeded to implement this new policy, marking the beginning of a new era in healthcare where providers were more forthcoming about the cost of products and services on offer to patients. Lynch et al.(2019) opine that this new initiative was significant in its ability to build trust between insurers, healthcare providers, and patients. The seemingly simple and mundane act of implementing price transparency within a healthcare setting was significant in allowing patients to know what prices to expect which would ultimately translate into improved relations with patients. This was projected to foster better care, timely payments, and reduced frequency of unexpected billings known for straining patient’s budgets.

New proposed CMS rule for price transparency

            The new proposed CMS rule for price transparency stems from a growing need by hospitals to provide comprehensive information regarding costs within a given establishment. It is another attempt to further empower citizens by requiring healthcare providers to post a catalogue of their standard charges online. This proposed requirement will now allow patients tom conduct thorough price comparisons prior to committing to avert the possibility of out-of-network bills being instituted by physicians. It is through this patient-first approach that the CMS seeks to regulate the healthcare sector by requiring providers to offer individualized information regarded all costs likely to be incurred within a given facility. Dubbed the 2021 Inpatient Prospective Payment System (IPPS) rule, the new policy would now allow create a payer-specific median charge for all plans under Medicare Advantage (Centers for Medicare & Medicaid Services, 2020). Furthermore, this particular price would be further negotiated by the Market-Based Medicare-Severity Diagnosis-Related Group (MS-DRG) in the event that third-party payers were involved within the United States.

Financial implications                      

It is worth noting that the proposed legislation would present a considerable added burden to healthcare facilities and related organizations within the sector by requiring them to essentially report all gross and negotiated costs. This additional reporting will require healthcare organizations to now refer to negotiated costs rather than reported costs within the actual facility. Additionally, the newly proposed CMS rule for price transparency has failed to elucidate the use of the Medicare Advantage (MA) in the calculation of IPPS relative weights (Lu et al., 2020). This particular system fails to acknowledge cost differences bound to be recorded in a wide array of scenarios. Conversely, organizations would benefit more by replacing this system with a cost-based one since the new proposal would only overburden healthcare facilities without refining Medicare IPPS rates.

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