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The 21st Century Cures Act- What is Price Transparency?

The 21st Century Cures Act- What is Price Transparency?

By: Bridget Keaton
September 22 2021

In December of 2016, President Obama signed the 21st Century Cures Act (the Cures Act) into law.  Created to promote and accelerate medical development, ease regulatory burdens, and advance interoperability, this bipartisan act seeks to increase choice and access for patients while improving and modernizing the medical system.  With over 300 pages, the Cures Act is massive.  It has already made impactful strides, but big changes are on the horizon.   

Tackling the challenge of data access is at the forefront of the 21st Century Cures Act’s agenda. With the recent Price Transparency Act, access to healthcare data has the possibility to empower and inform consumers to make healthcare choices that best suit their needs.   This article will outline the fundamentals of the Price Transparency Act, explain the resistance, discuss compliance difficulty and lastly, describe the benefits of understanding costs.  

The Price Transparency Act strives to empower consumers to make informed healthcare decisions through greater access to medical billing information.  On January 1st, 2021, the Price Transparency Act took effect, requiring hospitals to provide a “comprehensive, machine-readable, file with all items and services” and “a display of shoppable services in a consumer-friendly format” ("Hospital Price Transparency"). These machine-readable files (for example, a CSV or JSON file is machine-readable where a pdf is not) are to include gross charges, discounted cash prices, payer-specific negotiated rates and minimum and maximum negotiated charges, all of which would give easy to read, detailed information to the consumer for informed medical decision-making.  Similarly, the display of shoppable services (services that a healthcare consumer can schedule in advance), must include at least 300 services, must be stated in plain language, and include the same price transparencies as the machine-readable files ("Hospital Price Transparency").  The Centers for Medicare and Medicaid Services (CMS) has specified 70 services that require cost transparency and left the remaining 230 up to the hospital's selection with the understanding that not all services are shoppable due to emergencies, specialty procedures or complex care (Kurani, Nisha). Providing pricing information to the consumer presents great value that empowers informed decision making and promotes autonomy, however, publicizing these costs has met substantial opposition from hospitals and insurance companies.  

While hospitals operate for the benefit of patients, the business side of healthcare is laden with complex billing, negotiated insurance deals and a shortage of resources which makes the Price Transparency Act challenging to implement.  As a result, numerous hospitals pushed back which culminated in a lawsuit by the American Hospital Association (AHA) against the federal government in 2020. This lawsuit was argued on the grounds that many rates cannot be determined until after the patient receives care and there is no way to determine cost beforehand. For most emergency, specialty, and complex procedures, it is too difficult to predict pricing beforehand and this act would put the hospital in a difficult situation. Additionally, they argued, that prices are sensitive because they are negotiated with insurance companies.  Because of these complex negotiations between hospitals and insurance companies, patients would not get the full picture of their negotiations with pricing of only some services published (Kilff, Sarah). And lastly, hospitals argued that this new regulation came at a time when resources were already stretched thin due to the Covid-19 pandemic.  As the pandemic has taken a toll on hospital staff, resources and morale are low.  Implementing price transparency procedures would further strain employees at a time when they need support.  However, the AHA lost the lawsuit and the Price Transparency Act was upheld on the grounds that their arguments were “weak and did not present a strong case as to how the rule is harmful to their businesses” (Minemyer, Paige). Moving forward, the Price Transparency Act will continue its implementation procedures with stricter enforcement beginning January 1st, 2022.  While it may be difficult for hospitals to implement, this initiative has the potential to create positive change, but the success of the initiative will rely on hospital compliance. 

Despite the fact that the Price Transparency Act went into effect on January 1st, 2021, many hospitals remain noncompliant and, thus far, have had little pressure to change.  In February 2021, the journal Health Affairs conducted a study of 100 of the largest hospitals in the country and found that 82% had either failed to include payer-specific negotiated rates or were noncompliant in general (Henderson, Morgan).  While these hospitals are ignoring the law, the penalty is currently relatively low, especially for larger hospitals.  As it stands, if hospitals were noncompliant on April 5th, 2021, they received a letter from the government reminding them to comply.  If the hospitals were not in compliance by the July 1st deadline, they received a second letter requesting a plan of action.  After a further 90 days with no action, hospitals will be fined $300 a day for each day of noncompliance or $109,500 a year.  However, the CMS has proposed to increase the daily fines to a maximum of $5,500 for hospitals with bed counts that exceed 30 with a total yearly fine of $2,007,500 due to a lack of compliance thus far.  The CMS will “publicize noncompliant hospitals on a CMS website" (“Hospital Price Transparency”). The combination of an increased financial penalty mixed with social pressures could be enough to encourage resistant hospitals to act but it may take time and persistent enforcement before data is made available to the consumer.   

The Price Transparency Act, a bipartisan law, was created with the intent to empower consumers.  With access to data, decision making is more strategic and people are empowered to make choices that best fit their needs. In healthcare today, much of this data is hidden from the public due to challenges in reporting, limited resources and sensitive negotiated rates.  However, the past three presidential administrations have aligned on the belief that citizens should have access to hospital pricing.  With an ability to compare prices for standardized procedures, patients will be enabled to choose the organization that is best for their needs as well as create competition within the industry.  Competition promotes advancements and can lead to a stronger medical system overall, boosting the economy.  So, while compliance to the Price Transparency Act may put hospitals and insurance companies in a difficult position at first, eventually, it will lead to an increase in medical advancements and better care for the patient.  

Today, the direction of healthcare transparency is promising.  With three different presidential administrations in support of greater data access, it appears that hospital price transparency is on the horizon.  Going forward, consumers will have the power to control their healthcare decisions, create competition, and spark medical innovation for a stronger health system. 

Sources:

“Hospital Price Transparency”, Centers for Medicare and Medicaid Services, CMS.gov, 1 Jan. 2021, https://www.cms.gov/hospital-price-transparency 

Kurani, Nisha; Rae, Matthew; Pollitz, Karen; Amin, Krutika; Cox, Cynthia. “Price Transparency and Variation in U.S. Health Services”. Health System Tracker, 13 Jan. 2021. https://www.healthsystemtracker.org/brief/pricetransparency-and-variation-in-u-s-health-services/ 

Kilff, Sarah; Katz, Jason. “Hospitals and Insurers Didn’t Want You to See These Prices. Here’s Why”. The New York Times, 22 Aug. 2021. https://www.nytimes.com/interactive/2021/08/22/upshot/hospital-prices.html  

Minemyer, Paige. “Appeals Court Ruling Paves Way for Price Transparency Rule to Go into Effect 1 Jan”. Fierce Healthcare, Questex LLC, 30 Dec. 2020. https://www.fiercehealthcare.com/hospitals/aha-seeks-to-delayenforcement-trump-admin-s-price-transparency-rule  

Henderson, Morgan. “Low Compliance from Big Hospitals on Hospital’s Price Transparency Rule”. Health Affairs. 16 March, 2021. https://www.healthaffairs.org/do/10.1377/hblog20210311.899634/full/