Federal health officials’ November 2019 announcement of sweeping changes to the rules governing hospital pricing transparency came with an admission that didn’t mince words – Centers for Medicare & Medicaid Services (CMS) Administrator Seema Verma called the applicable former rules “clear as mud” to patients, while U.S. Department of Health and Human Services (HHS) Secretary Alex Azar admitted that “right now, our system probably deserves an ‘F.’”
Now, with barely three months to go before the new rules take effect, providers are rushing to ensure that they earn a passing grade.
Panacea Healthcare Solutions CEO, Fred Stodolak, a recognized and trusted industry expert in preparations for the new normal, recently discussed the steps providers will need to take during a frank conversation with Mike Passanante on the award-winning Hospital Finance Podcast.
“There are essentially two broad requirements,” Stodolak said. “The first is that hospitals must develop a unique list for each hospital within their health system, of 300 shoppable items and services that includes 70 that are already defined by CMS, and the items and services selected must be their top items based on volume or revenue.”
“The second broad requirement is that for all items and services, and for each hospital within a health system, the same information must be put in a machine-readable file and made accessible on the hospital’s website,” Stodolak added. “This file is actually primarily for payers, employers, researchers, and vendors to access.”
Hospitals that don’t have an online patient estimation system on their website by Jan. 1, 2021 must at a minimum, for those 300 “shoppable” items, display the description of the item or service, Stodolak explained. They also have to display the de-identified lowest and highest negotiated rates, as well as the negotiated rate and/or the charge for all payers, excluding federal payers, but including Medicare Advantage plans.
Other factors that must be disclosed include the hospital setting (inpatient versus outpatient) and, if a hospital has a self-pay discount program, the discounted charge.
All in all, it marks a heavy lift for the nation’s 6,000-plus hospitals.
“There’s also more than meets the eye in terms of the data requirements – for example, the NDC (National Drug Code) and the implied quantity-level information and fee schedules and contract information for employed physicians and non-physician practitioners must be included,” Stodolak told Passanante. “Additionally, hospitals may not be aware that the shoppable list is likely to include MS-DRG and same-day surgery items; they’re not just simply chargemaster items.”
In an interview earlier this summer with Healthcare Financial Management Association (HFMA) Senior Writer and Editor Rich Daly, Stodolak suggested that hospital executives may be unaware of two specific aspects of implementing the new requirements: first, the new rules call for health systems to create and post online separate and unique shoppable lists of elective procedures for each hospital within their system, while two, some calculations will be necessary to make comparable lists of different health plans’ payment rates.
On a more granular level, Stodolak told Hospital Finance Podcast listeners, individual procedures might be particularly problematic.
“There are many grey areas, for sure, in where the requirements as written may not seem logical. For example, whether in the consumer display or the patient estimation system, hospitals must include MS-DRG 470, which is a hip and knee replacement procedure,” he said. “They must show not only the negotiated charge, but the de-identified lowest and highest negotiated charge.”
“It certainly would be misleading to calculate and only show a consumer a minimum and maximum, or in other words, a de-identified low and high for those payers that are paying based on an MS-DRG, when the rule does require for this shoppable item and for this DRG that we show the negotiated rate for all payers,” Stodolak added. “So to provide the consumer with the most meaningful information and to ensure that the displayed de-identified low and high negotiated charges are comparable, and inclusive mathematically for all payers, our company will regroup all inpatient records to an MS-DRG and calculate and display the negotiated reimbursement, regardless of the method being based on a per diem or a percentage of charge, a DRG, or some other negotiated terms.”
There are also plenty of other examples of the new rules’ nuances that have yet to be fully grasped across the industry at large, Stodolak added; for example, the rules actually apply regardless of any given hospital’s participation in the Medicare program. And they apply not only to acute-care hospitals, but critical access hospitals, inpatient psychiatric hospitals, sole community hospitals, inpatient rehabilitation hospitals, children’s hospitals, and other forms of specialty hospitals as well.
Stodolak said Panacea is recommending that clients get started immediately on implementing a project plan and timetable, and they’re actively guiding them through the process needed to do it.
“In the month of August and early September, we’ve been gathering critical 837, 835 patient financial system information for a recent 12-month period, along with payer contract terms, fee schedules, and chargemasters, and we’re loading that data and testing it,” Stodolak said. “Once tested and approved, we proceed to run our company’s disaggregation algorithm and report, set to develop a unique shoppable list for each hospital within the health system. It’s produced the charge and payment and allowed payment profiles for all items and services, not just the shoppable items.”
“Our goal has been to complete this step by the end of September or sooner,” Stodolak added. “Concurrent with these first two steps, while not required, we do analyze the hospitals’ chargemaster prices, with focused analytics on shoppable items, and if necessarily, restructure the chargemaster with careful growth in that revenue modeling to ensure that these items are priced rationally and competitively. This step will be complete by the end of October or mid-November for those clients that are starting soon (August and early September).”
From there, Stodolak said, with the shoppable list developed, the chargemaster restructured, and the gross and negotiated charge information in hand, Panacea is then ready to create a validation report. And at that point, the company is also ready to produce the machine-readable file, the consumer display, or, if requested, an online patient-facing estimation system.