Pushing Ahead on Price Transparency at Alabama’s Jackson Hospital

A little less than a year ago, the Trump administration issued an impactful final rule for hospitals that will require them, starting Jan. 1, 2021, to make public how big a discount they offer cash-paying patients, as well as to disclose rates negotiated with insurers.

With that compliance deadline just a few months away, hospitals are racing to make preparations, though it remains to be seen just how many are actually ready. A recent survey of 151 health system chief financial officers, and financial and revenue cycle executives, found that only 12 percent of executives said their organizations are currently ready to comply, with one-third suggesting they are unprepared. Concerns about disclosing rates to payers, media, and consumers (38 percent), and lack of an analytics infrastructure (26 percent), are cited as the biggest obstacles for compliance, the research showed.

As expected, the regulation was met with major pushback, as provider groups even went as far as suing the Department of Health and Human Services (HHS) and the Centers for Medicare & Medicaid Services (CMS) over the final rule. Some hospital organizations might have even pinned their hopes on this ultimately unsuccessful court challenge led by the American Hospital Association (AHA). They specifically argued that the rule the rule will “introduce widespread confusion,” and could actually have the opposite effect on pricing as is intended, as the now transparent negotiated rates between hospitals and payers could hamper future talks between the two sides.

Essentially, stakeholders believe, each side would have much more clarity on the contracted rates that the other side brokers with its competitors, leading to the possibility of bidding up prices, which will eventually increase costs. Nonetheless, in his decision, U.S. District Judge Carl Nichols pulled apart the AHA’s claims, pointing out that patients can already see the negotiated adjustment in their explanation of benefits, but that hasn’t increased costs, according to an analysis of the situation from MedCity News.

On the flip side, there are those organizations that have been proactive, taking the rule seriously from its inception. One such patient care system is the Montgomery, Ala.-based Jackson Hospital, a 344-bed community hospital with executive leadership that strongly believes hospitals owe it to their patients to provide transparency in billing prior to service whenever possible.

Regarding the AHA’s argument, David Ralston, assistant vice president of revenue cycle at Jackson Hospital, says that if he knew what his competitors’ rates were, it would actually give him more leverage for higher reimbursement. “And if I knew I’d get higher reimbursement from the insurance companies, I’d be able to reduce my price. [The regulation] has created a competitive market, but your insurance companies are the ones defining what the competitive market is going to be in your area,” he says.

Ralston contends that Jackson Hospital has always had reasonable pricing and already runs lean, so it will be a benefit for them to be able to show this information to the public and let them make comparisons within the local market. “For us, we knew that [price transparency] was going to a be a regulated piece anyway, meaning we have to deal with it. Hospitals need to look at this as providing the best quality service at the best price, since that’s what everyone is looking for,” he says.

In a Healthcare Innovation feature story published earlier this year, Christopher Kerns, vice president of executive research and insights at the Washington, D.C.-based Advisory Board, noted that the rule is designed to put enough sunshine on provider pricing disparities between payers in order to make them lower their prices over time. “So this sunshine is designed to force organizations that are largely not-for-profit to push down their prices over time, or at least to normalize them relative to other payers in the marketplace to essentially ‘embarrass’ those [entities] that have huge discrepancies in payments for similar services. There’s a strategic angle [on the part of the government] designed to help force providers to justify the prices they charge today,” Kerns said. President Donald Trump has previously stated that patients have “been getting ripped off for years,” with HHS Secretary Alex Azar calling the requirements a “revolutionary’ change for the industry.”

Leaders at Jackson Hospital never thought that the court challenge would be successful, so they pushed ahead on getting ready for Jan. 1, 2021, even though hospitals have not given up their push for at least a delay in the starting compliance date, asking HHS this summer to postpone the rule’s implementation until after the COVID-19 pandemic passes. So far, however, the government has not budged.

“We were prepared for it; we knew it was one way for the government to show that there needs to be an openness to what we charge,” says Ralston. “Healthcare is the only service that you buy [without] knowing what you are paying until your bill actually gets there. There’s nothing that tells you what the exact cost is, pre-service. Things change in the operating room; you can start with one procedure and could end up with another one. You really don’t know what your outcome will be. So in the spirit of price transparency, I didn’t think [the court overturning the rule] was ever going to happen,” he says.

In January, Ralston and his team started their preparations, partnering with revenue cycle management company AccuReg, utilizing the company’s suite of solutions, including a price estimator tool that gives consumers a means to pull accurate estimates for “shoppable” procedures and services. The estimates, for non-emergent services, are based on the specific procedure, the patient’s insurance information, and the CPT code. They are “consistently accurate,” Ralston contends, adding that there isn’t a whole lot of change between what the estimate was and the final procedure cost, given that no additional procedure is added, in which case there will be an added cost transferred to the patient.

Ralston says the price estimator tool is a patient satisfier, since it gives consumers a true representation of what the procedure will cost in total, what it will cost the patient himself or herself, as well as what the insurance coverage amount is. “The patient knows exactly what they’re in for before having the procedure. And if the patient needs to reschedule, or we need to [create] a patient loan or payment plan, or we determine that the patient needs a financial clearance to make a payment, we can make that happen ahead of time. It really takes the burden off the patient and lets them think about the procedure and healing since the financial side has already been taken care of,” he says.

From all of AccuReg’s patient access tools being used by Jackson Hospital, the organization is seeing less front-end denials, as well as an increase in point-of-service cash collections of about 15 to 20 percent per month from the prior average. “There is a cost-to-collect savings there; it doesn’t have to go to a bill, there’s no statement, there’s no extended business office, and there’s no collection agency, so we’re collecting at the lowest cost per service. And you are getting the money up front, too, so there is no follow up on the patient since the he or she has already been cleared and paid,” Ralston explains.

Put all together, Jackson Hospital has put itself in a good position to not only be compliant with the rule, but also welcomes the concept of price transparency, compared to some other organizations that know their prices are higher than their market and may want to protect that. Ralston notes that per the rule, the penalty for non-compliance can be upwards of $300 per day, per facility—meaning if a health system has three facilities that don’t comply for a year, that penalty would total nearly $330,000. “We’re comfortable in where we are at and it’s one of the things I have told our CFO and finance committee. We’re prepared and ready for it,” he says.