Leverage healthcare price transparency data to promote financial sustainability

As healthcare organizations look for ways to transform revenue cycle management and gain competitive advantage, CFOs need look no further than the hospital price transparency rule and the No Surprises Act (NSA). Together, these two complementary laws — along with the health plan price transparency rule — provide fertile ground for creating optimal patient and payment experiences that enable financial sustainability.

“It’s about looking beyond basic compliance with the laws,” said Chris Severn, CEO of Turquoise Health. “A lot of people think about today or the next six months, but they need to be thinking about the future — where things are headed in the next five or 10 years and beyond.”

This article is based on a presentation given by Severn at HFMA’s Academic Medical Center CFO Executive Council meeting on Feb. 2. The Council, sponsored by Kaufman Hall, brings together healthcare executives who operate in like environments and discuss emerging issues.

Leveraging the growing momentum

The push to eliminate opaque healthcare prices continues to steadily unfold. On Jan. 1, 2021, CMS required hospitals to publish a machine-readable file (MRF) that includes standard charges for all hospital items and services, including gross charges, discounted cash prices, payer-specific negotiated charges and de-identified minimum and maximum negotiated charges. CMS also required hospitals to publish a patient estimate tool for at least 300 shoppable services. The agency gave payers until July 1, 2022, to publish their MRF and until Jan. 1, 2023, to publish a patient estimate tool. Meanwhile, the NSA has seen an ongoing rollout since Jan. 1, 2022.

Seventy percent of hospitals currently meet minimum price transparency requirements, according to recent CMS analysis, and penalties, education, monitoring and enforcement activities continue to drive compliance, said Severn.

As hospital compliance continues to grow, there’s an organic increase in data quality, coverage and tooling that has led to increased data utility.

“My biggest piece of advice is to form a cohesive strategy to use this data,” said Severn. “The overlap with the hospital and health plan price transparency rules and NSA creates a really great opportunity for managed care and revenue cycle — especially front-end revenue cycle — but also in terms of contracting and payer relations.”

Improving the patient experience

To start, healthcare organizations can — and should — use price transparency data to create packaged, accurate upfront estimates that build healthcare consumer trust, engagement and retention.

“Using the excuse ‘our contracts are complex’ as a reason not to disclose prices isn’t going to cut it anymore,” said Severn. “As patients and employers start to consume these bundled packaged rates, they’ll naturally gravitate toward providers who make it easy to know the price upfront. Likewise, they’re going to steer away from providers that don’t simplify the process.”

Healthcare organizations shouldn’t rely on patients, for example, to understand multiple outpatient procedure discounts or facility versus professional fees, he added.

“We’re past the era of bad press around noncompliance,” said Severn. “I would be way more focused on good press — how you stand out — how you go beyond the mandates and make this easier for patients and employers to purchase your services. That’s the bar that will be set.”

Healthcare organizations may want to consider absorbing some level of risk for the sake of simplicity for the patient. For example, a hospital provides a good faith estimate of $1,200 but ends up billing $1,450 and then writes off the $250 difference to honor its original estimate.

“You could potentially lose money, but I think everyone knows the moment the patient is out the door, the likelihood of collecting on a large balance is very low,” said Severn. “Being super upfront about the price at the time of service is always going to lead to more collections.”

Digging into the data for nuanced insights

As hospital and payer data matures, it becomes easier for CFOs to gain insights into financial opportunities and risks. For example, site-of-service data is easily accessible in payer MRF data.

“Hospitals can now see telehealth versus in-office versus in-facility rates,” said Severn. “CFOs should have their eyes wide open. They may need to make some tough decisions and focus on different service categories that are profitable and be more proactive about pursuing those.”

 Price transparency data may also cause some hospitals to re-evaluate their prices altogether.

“In some cases, hospitals could have gotten away with rates, but now that may not be possible,” said Severn. “That’s just the reality of it.”

Leveraging microeconomic strategies

On the flip side, the ability to combine quality, location and price data also enables hospitals to create what Severn terms “micro centers of excellence.” For example, hospitals now have access to data showing whether their surgeons outperform local and regional competitors and at a lower price point.

“This was never possible in the past because we couldn’t see competitors’ rates,” he added.

Price transparency data also enables other types of microeconomic strategies with payer contracting at the top of the list.

Severn said: “I think a lot of health systems have always thought about payer contract negotiations at a regional macroeconomic level — how do we get more volume from a large payer, for example? What’s changing with the granularity of this price transparency data is that it does allow for a bit more precision.”

Instead of focusing solely on large national and regional carriers, he said these questions become relevant to the conversation about financial sustainability:

• What is the potential customer base (including individuals and employers) who would drive to our facility?
• What insurance carriers do they have, and do they contract directly with these carriers?
• What services are top of mind for them?
• How can we be very precise about driving volume to the services that are our own center of excellence?

“When you start thinking about microeconomics, you get more into a dynamic pricing mindset,” said Severn. “I like seeing these more thoughtful approaches that draw from economic disciplines in other industries.”

When negotiating payer contracts, price transparency data gives CFOs more insight than ever before.

“You can get an idea of the other providers contracting at percent of charge and who in your region has effective and term dates coming up,” said Severn. “If you read into the metadata present in these MRFs, you can glean quite a bit more.”

Armed with this information, for example, CFOs may want to consider timing contract negotiations with term dates of competitors or promoting the fact that simplified payer contracts make for a more positive patient financial experience.

“You can get more creative about your contracting strategy and how you quote prices based off the trends in your region,” said Severn.

Collaborating with payers

In a new era of price transparency, there are also opportunities for payers and providers to let go of antiquated and adversarial processes and instead focus on common goals.

“At Turquoise Health, we call this era a ‘farewell to arms,’” said Severn. “Payers and providers are asking where can we mutually win? It’s about improving the patient financial experience and eliminating administrative costs on both ends.”

Severn said these questions will be paramount:

• How can payers and providers work together to create accurate good faith estimates?
• How can payers and providers work together to guarantee pricing upfront?
• How can payers and providers simplify plan design?

Preparing for what’s next

As price transparency laws continue to evolve, CFOs will face pressure to transform. For example, in July 2023, CMS published a proposed rule that would require a standardized format for the MRF effective Jan. 1, 2024, with an enforcement grace period set to expire March 1, 2024. The proposed rule is currently open for a 60-day comment period that ends on Sept. 11, 2023.

“For many hospitals, it will take some work to meet the newly proposed standard,” said Severn. “A lot of hospitals cobbled together a very low-tech solution to meet the requirement. For these hospitals that have a shoestring solution, it will be harder to adapt to the new standard. For other hospitals that can grab their charge description master, contract matrix and rates, it may be something as simple as adding or removing or renaming some columns.”

However, with the newly proposed MRF standard, comes even richer data, said Severn. For example, it will be easier to compare data across hospital files as well as hospital versus payer data. This, in turn, will make it easier to validate rates and spot anomalies.

Conclusion

The price transparency rules and the NSA provide countless opportunities to promote financial sustainability. Healthcare organizations that look beyond regulatory requirements will derive maximum benefit from the data.

“Hospitals can start conversations now about how to use this data to their advantage both financially and from a patient engagement standpoint,” said Severn. “Let your data tell the story you want patients to hear. Create your own narrative and know how that narrative compares to your peers. Your data is truly your greatest asset.”  

If you are a CFO at an Academic Medical Center and are interested in learning more about the council, please contact Andrew Donahue at [email protected]. If you are interested in exploring more about standardized price transparency data, visit get.turquoise.health/hfma/

About Kaufman Hall

Kaufman Hall is a trusted partner for organizations in dynamic, disrupted, and transforming industries. With a unique combination of consulting services, Kaufman Hall uses rigorous analytics to help leadership achieve transformative outcomes. With particular expertise in healthcare and higher education, Kaufman Hall hires the best of the best to solve the toughest business problems on Earth.

_{This published piece is provided solely for informational purposes. HFMA does not endorse the published material or warrant or guarantee its accuracy. The statements and opinions by participants are those of the participants and not those of HFMA. References to commercial manufacturers, vendors, products, or services that may appear do not constitute endorsements by HFMA.}