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Price Transparency Transforms Payer-Provider Conversations

Contents

What is Price Transparency Data?

Price transparency helps consumers know the cost of a covered item or service before receiving medical care. The Centers for Medicare & Medicaid Services (CMS) has issued two price transparency mandates: one for Hospitals (Transparency in Care) and one for Health Plans (Transparency in Coverage):

  1. Hospitals: Starting January 1, 2021, each hospital operating in the United States will be required to provide clear, accessible pricing information online about the items and services they provide in two ways. As a comprehensive machine-readable file with all items and services. In a display of shoppable services in a consumer-friendly format. This information will make it easier for consumers to shop and compare prices across hospitals and estimate the cost of care before going to the hospital.
  2. Payers: Beginning July 1, 2022, most group health plans and issuers of group or individual health insurance will begin posting pricing information for covered items and services. This pricing information can be used by third parties, such as researchers and app developers to help consumers better understand the costs associated with their health care. More requirements will go into effect starting on January 1, 2023, and January 1, 2024 which will provide additional access to pricing information and enhance consumers' ability to shop for the health care that best meet their needs.

Data is available for each hospital's Gross charges, Discounted cash prices, Payer-specific negotiated charges and De-identified minimum and maximum negotiated charges.  Data is also available for each health plan's negotiated reimbursement rates for all covered items and services between the plan or issuer and in-network providers, as well as allowed amounts for, and billed charges from, out-of-network providers. Reimbursement rates include fee for service, bundled and capitation rates.  This data is updated monthly.

How do Payers and Providers Engage in Contracting?

There is no one standard process that hospitals use to renegotiate contracts with payers. The process may vary depending on the specific circumstances and negotiations between the hospital and the payer. However, there are a few general steps that hospitals may follow when renegotiating contracts:

  1. Preparation: Before negotiations begin, hospitals may gather data and information to support their position in the negotiations. This may include data on the hospital's patient volume, cost of care, and other relevant financial information.

  2. Negotiation: Hospitals and insurance companies may negotiate the terms of the contract through a variety of methods, such as face-to-face meetings, phone conversations, or email exchanges.

  3. Contract review and revision: After the negotiation process is complete, the contract may be reviewed and revised as necessary to reflect the agreed-upon terms.

  4. Approval and execution: Once the revised contract has been reviewed and finalized, it must be approved by both parties before it can be executed.

Contracting Process

It's worth noting that hospitals may also engage in negotiations with multiple payers at the same time, in order to ensure that they have a sufficient number of contracts in place to provide coverage for patients.

How does Price Transparency Data Change the Conversation?

Price Transparency data levels the contracting negotiation table by giving perfect information to hospitals and payers.  Hospitals can now confidently calculate what other similar hospitals are paid by their payers.  Payers can also now confidently assess what other payers have negotiated with their providers. 

As prices normalize over time, the conversations between hospitals and payers will evolve from zero-sum price negotiations to strategic conversations about value-based care and deeper partnerships to evolve the relationship where "1 + 1 > 2".  
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