Medicare Reimbursement: How CMS Price Transparency Proposal Could Hurt Labs & Patient Relations

Last April, CMS issued a proposed rule to make Medicare rates more transparent. While designed to “empower patients and reduce administrative burden,” the proposed changes would literally come at a price for labs, hospitals and other diagnostics providers.

What CMS Is Proposing
The proposed rule deals specifically with Medicare Inpatient Prospective Payment System (IPPS) and Long-Term Care Hospital (LTCH) Prospective Payment System (PPS) policies and rates. Under current rules, hospitals must either make publicly available a list of their standard charges, or their policies for allowing the public to view a list of those charges upon request. CMS is now proposing that hospitals be required to post those charges online. The idea is to make it easier for consumers to access relevant health care data so they can compare providers

The Case for Transparency
Transparent pricing has been shown to be beneficial to not only patients but also providers. For example, a Johns Hopkins University study found that among six ambulatory surgical centers that posted their prices online:

• Five reported an increase of patient volume and revenue;
• Three reported a reduction in administrative burden; and
• Five reported an increase in patient satisfaction and engagement.

Lab Concerns
While most healthcare professionals would agree with the principals of transparency, there’s also real concern about the potential costs and risks associated with the proposed rule. In addition to imposing new administrative burdens and restrictions on what labs can charge, providers cite two concerns to the unforeseen the proposal could have on patient relations and expectations.

1. Damage Due to Disconnect between Quoted & Actual Charges

Standard charges are based on customary care and don’t take into account emergency or acute situations. In other words, standard pricing assumes a best case scenario which doesn’t always prove to be realistic. This puts labs in a ticklish position when actual patient charges end up being higher than the previously quoted prices. The potential result is damage to not only customer relations but the trust on which the patient relationship is based.

2. Demand for Medicare Payment Information

The standard charges referred to in the CMS proposal are provider charges only. They don’t take into account what Medicare pays for the service. But if providers begin disclosing this information, patients may also expect and insist on receiving Medicare payment information as well.

Bottom Line
While transparency and patient empowerment are laudable objectives, the CMS proposal must, at a minimum, clearly define standard charges covered and consider the potential administrative burdens the change would place on providers as well as the expectations of patients.