No grace period! Price transparency requirement is effective January 1, 2019

No grace period! Price transparency requirement is effective January 1, 2019

Notice to all Baker Tilly hospital and health system clients and contacts:

The Centers for Medicare & Medicaid Services (CMS) issued a final rule this past August updating Medicare payment policies. The rule requires hospitals to publically display a list of their current standard charges via the internet.

Many hospitals are assuming that there is an 80-day grace period with respect to implementation of this Medicare requirement. These hospitals are pointing to H.R. Bill 6509 (Section 249) which refers to the 80-day implementation grace period. Bill 6509 has only been introduced and referred to the H.R. subcommittee on health; however, it has NOT been signed into law and therefore does not provide any formal grace period.

The Medicare requirement to post charges is effective January 1, 2019.

The CMS rule mandates that charges for all services provided (to include DRG pricing) be readily available to patients, including drugs and biologicals. The hospital’s charge description master (CDM) can be posted or shared through other means as long as the information can be downloaded and/or imported into a computer system (e.g., XML, CSV). Hospitals need to evaluate how to communicate their charges with respect to the new mandate. It is recommended that hospitals consider displaying their charges through service line bundles and through average DRG pricing methodology to increase consumer understanding (in addition to the line item details required by the final rule). The charges need to be updated annually or more often as appropriate to reflect current charges.

Hospitals may want to publish their CDM as a second level of charge detail underneath or behind the DRG or procedure details. We recommend that this be done through a link on your website that allows patients the ability to download the CDM in a machine readable format. You should provide context here that posted DRG charges may vary from the CDM due to a variety of reasons, such as length of stay and medical complications.

Hospitals are under pressure to remain competitive with respect to appropriate cost-driven pricing and should consider implementing a thorough review of their current CDM in support of the CMS posting requirement and as a go-forward pricing strategy.

Baker Tilly can assist hospitals in conducting a quick but comprehensive review and analysis of their current CDM to optimize the charge structure with recommendations for overall CDM updating and pricing revisions. This can be accomplished by:

  • Benchmarking and pricing determinations by service lines through analysis of available hospital cost information and market peer hospitals
  • Developing revenue-positive or revenue-neutral pricing strategies as your organization moves towards a more transparent and cost-based pricing methodology
  • Identifying initial charge reduction strategies based on transparency concerns and/or specific decreasing utilization trends (and then assessing the associated revenue impact).
  • Review of commercial managed care agreements as it relates to charge increase language and any payment methodologies that are impacted by charge adjustments.

CMS notes that charges do not necessarily allow for patients to determine what their financial liabilities will be; however, feel this is an initial step in the right direction towards full transparency. With this in mind, hospitals are encouraged to provide context around charges with respect to what patients might owe due to negotiated discounts or fixed pricing with payers. Hospitals are not required to provide payer specific pricing information.

Baker Tilly healthcare specialists can provide suggested language that hospitals can use on their website that discusses charges and patient financial liability with respect to the Medicare price posting requirement.

For more information on this topic, or to learn how Baker Tilly healthcare specialists can help, contact our team.

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