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Lessons learned during the first year of the hospital price transparency law

Mar 01, 2022

It’s been a full year since hospital price transparency requirements took effect in January 2021, and during the last 12 months some lessons for hospital leadership have emerged.

Research groups found varying levels of compliance with price transparency during 2021. Some estimates show half of U.S. hospitals or more still have work to do to meet the requirements of the price transparency law.

Some hospitals have already been hit with requests for corrective action to become compliant, and monetary penalties that vary by hospitals size could follow for any institutions that delay compliance.

To be sure, launching the price transparency requirements in the middle of the global COVID-19 pandemic is difficult timing for hospitals. While it may be tempting for hospital executives to throw up their hands and say grappling with a pandemic while compiling a mountain of pricing data and sharing it with the public is too much to ask, the law is the law.

Here is what we’ve learned in the past year to help make the process less painful.

Lesson 1: Start with the largest contracts and go from there

A common question from hospitals trying to meet price transparency compliance is: Where should we focus?

With all the variances in pricing, it can be easy to get dragged into the details. Stay away from the obscure procedures that might fit one patient per year. Save those for later.

Start with the highest revenue commercial contracts. Look at revenue by payer and sort it by focusing on the top 10 categories that generate the most revenue for the hospital. Then move on to the next 10 and so on, saving the smallest contracts for the end. This approach has been modeled effectively by hospitals during the last year.

Lesson 2: Consider outside help

Some hospitals have attacked the price transparency project internally while others have hired external help. Both approaches have pros and cons, but if the task seems too mammoth for your internal staff to handle alone, go get some help. There will be costs involved, sure, but those are likely cheaper than the prospect of paying daily fines for delayed compliance with the law.

The approaches that price transparency vendors use to assist in preparing the files vary, too. One common method is to use internal contracts and publish based on those. Other vendors are using adjudicated claims and publishing those, although pricing may differ from contractual rates. Regardless of the approach, the goal is to attempt to accurately estimate your prices for services by insurance contract.

Lesson 3: Early feedback is murky

One of the early criticisms of the price transparency law is that pricing information would be too complex for it to be useful for patients.

Different insurance plans plus deductible status along with additional treatments that might go along with one hospital procedure and could vary by patient make it difficult or even impossible for a patient to know the true cost of treatment before a hospital visit.

Early feedback from hospitals that have posted their pricing online suggests that patients are not clicking on those data sets in great numbers. Are patients not interested in the data? Will it take some time for the general public to learn how to use it? Or were early skeptics correct that pricing data has too many variables to be useful to patients?

The evidence so far is mostly anecdotal, so it’s too soon to make any broad conclusions.

Lesson 4: Embrace the benefits

One ancillary benefit to the price transparency law is hospitals can now see the prices their competitors have negotiated with insurance companies and see how they stack up. This could an opportunity to revisit old contracts and revisit terms, especially if competitor hospitals have negotiated more favorable pricing.

Author(s)

Nicholas E. Smith
Principal
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