Starting January 1, 2025, Hospital Price Transparency regulations take effect for US hospitals. These regulations impose strict requirements and demand adequate preparation. Otherwise, hospitals could risk non-compliance for missteps, which could erode patient trust and reputation. This article explores this issue and how hospitals can stay compliant.
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Is hospital price transparency the solution to healthcare's trillion-dollar spending? The Centers for Medicare and Medicaid Services (CMS) thinks so—at least partly.
CMS projects that national health spending will outpace economic growth and reach $5.6 trillion in 2025. Analysts expect public and private healthcare spending to exceed $21,000 per American in 2032.
With a heightened focus on cost containment, CMS aims to reduce healthcare expenditures through federal regulation, such as hospital price transparency, while driving related efforts, like helping patients find the best providers, minimizing unnecessary procedures or tests, and enhancing clinical quality.
Still, questions remain about whether these initiatives will reduce costs and eliminate care access barriers as intended. In the meantime, hospitals face regulatory pressure due to four possible consequences of non-compliance.
To enforce regulations, CMS may:
1. Issue a warning notice.
2. Request a corrective action plan.
3. Impose a civil monetary penalty.
4. Publicize the penalty on the CMS website.
How can hospitals prepare for a transparent future?
With compliance requirements taking effect in January 2025, healthcare leaders must prioritize understanding the impending regulations and maximizing technology resources with minimal disruption. Doing so will accelerate price transparency compliance and strengthen ties between patients and their clinical care providers.
Hospital price transparency regulations require hospitals to make standard charge information available to the public online in two ways: a machine-readable file and a consumer-friendly list for a limited set of shoppable services.
Key milestones that began July 1, 2024, required each hospital to conform to the CMS template layout, data specifications, data dictionary, and other technical instructions. Additionally, three new compliance requirements will take effect in 2025, further complicating the pricing transparency puzzle that hospitals must solve.
According to a notice published in the Federal Register, beginning January 1, 2025, hospitals must comply with the following:
1. Estimated Allowed Amount: The estimated allowed amount, the average dollar amount the hospital has historically received from a third-party payer for an item or service, will be a required data element.
○ This must be displayed when hospitals base the negotiated rate on a percentage or algorithm that can’t be expressed as a straight dollar amount for every patient.
○ Suppose a hospital establishes a standard charge that is only expressed as a percentage or algorithm. In that case, the hospital must describe the algorithm and calculate and display an estimated allowed amount in dollars.
2. Drug Pricing Information: This information must include the drug unit and unit of measurement as separate data elements from the general description.
3. Modifiers and Standard Charges: The hospital must encode any modifier(s) that may change the standard charge corresponding to a hospital item or service, including a description of the modifier and how it would change the standard charge.
○ Suppose a hospital has established a payer-specific negotiated charge dependent on a modifier (or revenue center code or any other code). In that case, CMS directs hospitals to include it in the machine-readable file (MRF).
CMS hopes the regulations address barriers to access to quality care and increase competition among healthcare providers as a method to lower costs. However, healthcare delivery’s complexity and fluidity make price determination and the factors dictating costs in healthcare environments difficult to ascertain for consumers and providers. This raises the question: Can hospital staff, who are already managing workforce challenges and increased responsibilities, take on even more policy requirements?
Provider organizations that struggle with people, technology, or process inefficiencies may find it challenging to generate the required pricing and MRF elements. Fortunately, hospitals can adopt advanced price transparency software to comply with the rigorous healthcare price transparency requirements and lighten staff workloads.
Innovative offerings should effectively organize and display an organization’s chargemaster data and a comprehensive list of shoppable services. In addition to utilizing price transparency technology, such as Vitalware Hospital Price IndexTM, health systems must establish a defensible pricing strategy (DPS) to justify the cost of medical treatment. Therefore, an organized approach to charge description master (CDM) data management and all related files could save hospital staff significant time.
Furthermore, many hospitals consolidate these files into a single system, enabling administrators and teams to view the data within one connected solution. Specifically, streamlining critical data and processes will:
● Promote transparent operations.
● Enable strategic pricing for hospital services.
● Present an accurate bill or claim.
By utilizing advanced technology and professional services, hospitals can reduce the manual effort in consolidating pricing files and standardizing charge data. This improves their pricing strategy and payer relations and ensures the accuracy of their completed CMS templates or files. As a result, hospitals may lessen their workforce burdens and can confidently comply with federal regulations.
That said, many hospitals may find they need extra support navigating evolving regulations. With effective technology solutions and consistent monitoring, however, hospitals can avoid costly transparency errors and maintain their reputation while boosting patient confidence and building community trust.
Stay compliant with price transparency guidelines. Learn more about Vitalware® or speak to one of our qualified specialists today.
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