Price transparency in healthcare

Turn the final rule into an opportunity for growth

Price transparency in healthcare

Turn the final rule into an opportunity for growth

Price transparency in healthcare

Turn the final rule into an opportunity for growth

Price transparency in healthcare

Turn the final rule into an opportunity for growth

Executive summary

Executive summary

Executive summary

Executive summary

How healthcare providers and leaders can prepare for the new price transparency in healthcare mandate

How healthcare providers and leaders can prepare for the new price transparency in healthcare mandate

1 min read
01

About price transparency in healthcare

About price transparency in healthcare

About price transparency in healthcare

About price transparency in healthcare

Learn more about this mandate and its potential effects on healthcare providers and consumers.

Learn more about this mandate and its potential effects on healthcare providers and consumers.

3 min read
02

Understand shoppable services

Understand shoppable services

Understand shoppable services

Understand shoppable services

Pricing of shoppable services will be an important and timely strategy for hospitals.

Pricing of shoppable services will be an important and timely strategy for hospitals.

3 min read
03

Consider consumer behavior

Consider consumer behavior

Consider consumer behavior

Consider consumer behavior

Considering consumer behavior is critical to an effective healthcare price transparency strategy

Considering consumer behavior is critical to an effective healthcare price transparency strategy

5 min read
04

Know your market

Know your market

Know your market

Know your market

Market discovery is essential to a consumer-focused, shoppable service strategy.

Market discovery is essential to a consumer-focused, shoppable service strategy.

3 min read
05

Explore IBM price transparency solutions

Explore IBM price transparency solutions

Explore IBM price transparency solutions

Explore IBM price transparency solutions

Harness industry expertise for the adoption of price transparency in healthcare.

Harness industry expertise for the adoption of price transparency in healthcare.

3 min read
06

Start planning

Start planning

Start planning

Start planning

Let Watson Health help you develop a strategy and implement a consumer-friendly price transparency tool

Let Watson Health help you develop a strategy and implement a consumer-friendly price transparency tool

1 min read
07

Price transparency in healthcare: Turn the final rule into an opportunity for growth

01

1 min read

Executive summary


In November of 2019, the Centers for Medicare & Medicaid Services (CMS) finalized the new healthcare price transparency rule, "Improving Price and Quality Transparency in American Healthcare to Put Patients First." This new rule, which was upheld by a US District Court in June, 2020, is scheduled to go into effect on January 1, 2021. It is intended to support a more patient-driven healthcare system by making prices for services provided by all US hospitals more transparent for patients. As a result, patients will have the opportunity to become more informed as to what they may pay for hospital items and services.

A man sitting on a sofa reading on a tablet

Turning risks into opportunities

With COVID-19 consuming their resources, hospitals and health systems have had little time or attention to devote to adequately preparing for this rule. But in light of the recent court ruling, providers, health plans and employers should be evaluating their current plans and planning for how they will deliver detailed pricing information on services and benefits to consumers.

Amidst the numerous changes this mandate will cause for healthcare systems, leaders of healthcare organizations must consider the potential risks – many of which are only beginning to come to light.

This paper explores the executive order that spurred the price transparency rule, and the importance of considering consumer behavior and market dynamics in meeting the rules requirements. Additionally, you’ll learn how data-driven insights can help healthcare providers optimize performance under the new rule.

02

3 min read

About price transparency in healthcare


During the next seven years, the growth rate of national health spending is projected to average 5.7% and reach nearly USD 6 trillion. Personal healthcare prices are projected to grow by 2.7% per year partly due to faster expected growth in health-sector wages.

A chart showing the growth rate of national health spending

In response to increasing costs, the US government is requiring hospitals to disclose prices they negotiate with health insurers for a wide range of services. Hospitals will also be required to disclose prices they charge patients who are paying with their own money.

Requirements for healthcare providers

Starting January 1, 2021, hospitals must publish, in a consumer-friendly format, pricing information for 300 “shoppable” services that patients can use to shop for their personal healthcare services. Shoppable services are procedures, diagnostic tests and other services that patients can schedule in advance. Of these 300 services, 70 are defined by the CMS, including certain evaluation and management, laboratory and pathology, radiology, and surgery services. If hospitals offer any of these services, they must display that service’s applicable negotiated rates. The remaining 230 services will be hospital-chosen and must include plain-language descriptions, billing codes and payer-specific negotiated charges for each service, as well as the location where each service is provided.

At the same time, an accompanying rule issued by the CMS requires health insurers to detail how much patients could be asked to pay out of pocket for various medical services.

Potential effects of price transparency

Price transparency, according to the executive order, is critical to empowering consumers to become more active and engaged patients by enabling them to shop for the most cost-effective healthcare available.

Additionally, price transparency will potentially drive prices and costs of healthcare services down as providers and insurers compete for market share. With all price and patient cost-sharing information being shared ahead of time, it’s even possible that healthcare spending could decrease. And since price transparency may encourage comparison shopping, it could put consumers in control of their own health and wallets.

Source

03

3 min read

Understand shoppable services

As part of the new mandate, hospitals must make public the standard charges for at least 300 shoppable services, including 70 CMS-specified and 230 hospital-selected services. To comply with the CMS regulations, hospitals and health systems are required to display these prices in a consumer-friendly manner.

A woman using her laptop

What hospitals must do to comply

To meet requirements, hospitals must:

  • Display payer-specific negotiated charges, deidentified minimum and maximum negotiated charges, and discounted cash prices for at least 300 shoppable services.

  • Include plain-language descriptions of each shoppable service, an indicator when a CMS shoppable service isn’t offered by the hospital or health system, and a location at which it’s provided.

  • Select services based on use or billing rate of services, which is commonly provided to the hospital’s patient population.

  • Include charges for services that the hospital provides in conjunction with the primary service that’s identified by a billing code.

  • Make sure that all information is displayed prominently on a webpage and clearly identifies the hospital location where the charge information is associated.

  • Ensure that data is easily accessible; free of charge; doesn’t require a user to register, establish an account or submit private information; and is searchable by service description, billing code and payer.

  • Update the information annually and clearly indicate date of the most recent update.

Additionally, hospitals are required to provide patients with an internet-based price estimator tool. The tool must provide estimates for many of the 70 CMS-specified services provided by the hospital and much of the 300 shoppable services overall. Plus, the tool must be prominently displayed on each hospital website and will only be deemed user-friendly if a patient doesn’t have to register or establish a username and password.

Choosing a plan of action

During the past few months, the clock has continued to tick on achieving compliance with the requirements above. However, in your market, there may still be a strategic opportunity in being the first to choose shoppable services. Choosing well can strengthen market position; choosing poorly can create a race to the bottom.

So what’s the best plan of action? In the short term, it’s simply meeting the requirements. In the long-term, it’s identifying the right areas of focus and building a shoppable services strategy that’s tailored to your market and consumers.


Source

CY 2020 Hospital Outpatient Prospective Payment System (OPPS) Policy Changes: Hospital Price Transparency Requirements (CMS-1717-F2), Centers for Medicare & Medicaid Services


04

5 min read

Consider consumer behavior

Consumers aren’t just curious about the cost of groceries, automobiles, or traditional “consumer-oriented” products and services anymore. With prices posted nearly everywhere these days—especially the internet—consumers are becoming more empowered to take control of how their money is being spent.

Healthcare is shifting toward a more consumer-centric model

Now that healthcare is shifting toward a more consumer-centric model, patients are shopping for healthcare services like they would for any other product. Consumers can already check reviews online and on social media and compare pricing as if they were purchasing an item from their favorite online store.

Each month, IBM® Watson Health® polls people across the US to gauge attitudes and opinions on a wide range of healthcare issues. The April 2019 IBM Watson Health PULSE® Healthcare Survey polled consumers on price transparency in healthcare and consumer sentiment.

Animated results of the April 2019 IBM Watson Health PULSE® Healthcare Survey

34%

of respondents indicated that they looked for prices of healthcare services in the past 12 months.


72%

of respondents who looked for pricing information indicated that they were able to find pricing information for the care they needed.



34%

of respondents indicated that they looked for prices of healthcare services in the past 12 months.


72%

of respondents who looked for pricing information indicated that they were able to find pricing information for the care they needed.


The most frequently cited sources of pricing information were:

Insurance companies at 26%
Internet at 22%
Physician’s office at 16%

Employer at 15%
Hospital at 10%
Other at 12%

Potential influence on consumers

Americans are becoming increasingly engaged in what they’re spending. With growing financial responsibility for their healthcare costs through rising deductibles, co-pays and co-insurances, consumers can’t be blamed for desiring and demanding price transparency in healthcare, especially given the personal nature of those services.

If and when prices of healthcare services become more readily accessible, it’s hoped that consumers will become more engaged and proactive in their personal healthcare experiences, rather than skipping or missing appointments because of their lack of ability to pay for services.

Healthcare decision making

18%

of all respondents indicated that they had postponed, delayed or cancelled healthcare treatment in the past three months.

82%

of respondents who sought pricing information said it influenced their healthcare decision-making process.


Ability to pay

22%

of respondents indicated they had difficulty paying for healthcare services within the last three months.

26%

of all respondents said they were either “likely” or “very likely” to have difficulty paying for healthcare services in the next three months.

05

3 min read

Know your market

What matters most to the consumers in your market? This question may be the most important one to ask yourself when developing your shoppable service strategy. Without knowledge of consumer needs, you can’t accurately deliver the most comprehensive or cost-effective services.

Getting an early lead in your market

Here’s how to determine the right areas of focus for your strategy and get an early lead in your market:


Gather data to help segment populations not only by demographics and zip codes, but also by behaviors, lifestyles and decision-making patterns.

Be aware of your competition. If competitors are leading the market in pricing and accessibility, it may be worthwhile to focus on different services that provide more of an advantage for your hospital or health system.

Understand internal costs to deliver services more efficiently than your competitors, and understand which services can be delivered more efficiently by others.

Think of the customer experience and put that first. Know how to provide only the most positive customer experience.

While this move to price transparency may come with its share of challenges, knowing how to make it work best for consumers and your organization should help health systems adapt more quickly and seek opportunities for consumer-centered strategies.

06

3 min read

Explore IBM price transparency solutions

Understanding market and consumer behaviors will require a focus on data as price transparency becomes a reality. That transition leaves the question: What technologies are needed for success with price transparency?

IBM Watson Health offers solutions that provide data-driven insights that can help hospitals and health systems hold financial ground and better address their market.

Meeting the requirements

IBM Watson Health offers a comprehensive solution that can help hospitals and health systems quickly comply with the price transparency rule. IBM Price Transparency not only meets both the web-based tool and machine-readable file requirements, but includes many other features to help make shopping for healthcare a snap for patients.

IBM Price Transparency: Solution demo

Building a market-specific strategy

IBM Watson Health specialized consulting services are supported by robust analytics that can be applied to help hospitals and health systems prepare for price transparency. Our healthcare experts can help hospitals and health systems meet CMS requirements and deadlines by implementing consumer-friendly price estimator tools, making data- and strategy-based recommendations on which shoppable services to choose, and highlighting where opportunities and threats may exist. We can also model potential revenue impacts of the various market shifts that may result from price transparency.

In addition to helping you meet price transparency requirements through data-driven, consumer-centered strategies, IBM Watson Health consulting services can help you:

Reach sustainable clinical improvement through a multidisciplinary approach and demonstrated, data-driven methodology.

Transform your strategy by balancing your financial bottom line with operational quality.

Maximize your value with performance improvement programming, designed to help you overcome barriers standing in the way of greater efficiency.

Understanding your local consumers

Our consultants use publicly-available consumer data to help healthcare providers better understand and anticipate healthcare needs and buying habits within their communities.

Localized, market-specific data can help ensure that your strategic plans align with what's going on in your market.

Engaging patients with cost information

The IBM Treatment Cost Calculator (TCC) is an online solution designed to engage patients with pricing information and support a health organization’s need to increase price transparency.

Initially created for payers and newly adapted for providers, the solution can help hospitals and health systems meet price transparency requirements by:
  • Supporting better decision-making by allowing consumers to research and plan for healthcare expenses
  • Estimating an individual’s out-of-pocket costs
  • Basing estimates on intelligent methodology and a comprehensive data set
  • Helping to increase the health literacy of your consumers and encourage more interaction with providers
  • Providing convenience and accuracy
  • Helping to meet CMS’ requirements for consumer-friendly, easily-accessible pricing information (machine-readable file formats also available)

In short, teaming with Watson Health can help you maximize your opportunity for success as you comply with the new price transparency rule.

07

1 min read

Start planning

As healthcare providers and payers evaluate their plans to deliver price transparency in healthcare, it will be important to seek opportunity, while acknowledging and attempting to mitigate the potential risks and challenges ahead.

Put
patients first

Always keep patients in the front of your mind. Prepare to provide exceptional customer experiences while providing support and information –not just pricing on a website.

Keep things
simple

Simple, thorough information will help patients better understand the benefits of receiving proper and timely care.


Provide additional
support

Educating consumers will be very important. Providing clear and pertinent information will provide them with the support they need to make the best decisions for their health.

Tie price
to quality

Price transparency and quality of care should interlock. Relationships between patients and providers will make all the difference when selecting services.

Seeking and receiving healthcare services can be an emotional, and, often, an expensive, experience. It’s important to know your patients and your market while preparing for price transparency. Choosing unmatched technology solutions can help you take the lead in your market and provide exceptional care to those you serve.

To learn more about Watson Health solutions, please contact your IBM representative or IBM Business Partner, or visit:


How was it possible that mathematical optimization could do in five seconds what simulation took us 48 hours to do?

— Susara van den Heever, Product Manager, IBM Decision Optimization

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Produced in the United States of America
February 2020

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Source

CY 2020 Hospital Outpatient Prospective Payment System (OPPS) Policy Changes: Hospital Price Transparency Requirements (CMS-1717-F2), Centers for Medicare & Medicaid Services