Consumer price transparency: The healthcare CIO's looming headache

Posting chargemasters online is just the first step; hospitals should also offer cost estimators based on patients’ insurance plans. Here’s what CIOs need to know as hospitals move into the era of healthcare price transparency.

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Some healthcare CIOs are thinking ahead of the new government requirement that they post their chargemasters (price lists) online. Their hospitals and healthcare systems are also offering patient cost estimators that tell people how much common tests and procedures will cost them out of pocket.

The healthcare organizations that do this have found they are meeting pent-up demand from their patients, especially those on high-deductible plans. At the same time, they’re positioning themselves for the future as the Centers for Medicare and Medicaid Services (CMS) ramps up its initiative to help consumers compare healthcare prices.

Since January 1, CMS has required hospitals and health systems to post chargemasters in a machine-readable format (e.g., Excel) on their websites. It’s not very difficult for hospitals to share their chargemasters — although there are some challenges in making them consumer-friendly. Most hospitals appear to be complying with the new regulation. But CMS has bigger plans that might require significantly more from hospital IT departments.

Last summer, CMS Administrator Seema Verma noted, “This [proposal to require the posting of chargemasters] is a small step towards providing our beneficiaries with price transparency, but our work in this area is only just beginning.” After CMS’s proposal was finalized and implemented this year, she reiterated her stance. She added that hospitals could go beyond chargemasters, citing some facilities’ adoption of patient cost estimators.

Price lists have limited value

Hospital executives know that chargemasters offer little value to patients. Nobody pays chargemaster prices; even the uninsured get a discount. Insurance companies negotiate much bigger discounts that are reflected in their members’ bills.

“A chargemaster could help the average consumer understand the order of magnitude of cost for a hospital service or procedure,” notes Suzanne Delbanco, executive director of Catalyst for Payment Reform, a nonprofit consultancy firm that works with large employers. “It could help consumers see differences across hospitals. But it won’t resemble what the patient’s insurer ends up paying or the portion of the cost he or she has to pay.”

That’s where cost estimators come in. By combining information about a patient’s insurance coverage with the costs of a procedure or test and the contract between a healthcare provider and the patient’s insurance company, these applications can quickly generate an estimate of how much the person will owe for a particular service or an episode of care.

In most cases, patient cost estimators are being applied only to hospital charges. However, they could also be used to calculate a patient’s estimated costs for physician services, rehabilitation or home health care after an operation, notes Niall Brennan, director of the Health Care Cost Institute, a nonprofit research firm.

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