CMS challenges hospitals to deliver cost-effective, quality care

February 25, 2020
Easy access to hospital prices increases the importance of patient experience.
Molly Gallaher Boddy

In August, we wrote about the particular analytics and reporting needs of hospitals, highlighting the Center for Medicare and Medicaid Service’s (CMS) increasing attention to hospital performance and, in particular, rural facilities.

Today, I’d like to explore CMS’ continued push to bring consumers price and quality information, and what we believe this push means for hospitals. As hospitals struggle to preserve and expand their revenue in an increasingly competitive, consumer-centric market, CMS’ mandate is clear: patients must have healthcare cost information and payers as well as states must work to control healthcare costs. This direction will have lasting hospital and health system impacts.

2019 closed out with two important cost transparency announcements:

  1. Outpatient Prospective Payment System (OPPS) & Ambulatory Surgical Center (ASC) Price Transparency Requirements for Hospitals to Make Standard Charges Public Final Rule, and
  2. Transparency in Coverage Proposed Rule.

On its website, CMS explains the standard charges rule will make hospital pricing more readily available to consumers, including gross, discounted, payer, and third-party negotiated rates. In addition to asking hospitals to post services as well as supplies, procedures, room and board, and facility charges (among other “items and services”), the rule is ultimately important because it highlights ease and access:

CMS notes that online price estimator tools will help meet this shoppable services requirement.

Meanwhile, the Transparency in Coverage Proposed Rule will allow consumers to “both understand how costs for covered health care items and services are determined by their plan, and shop and compare costs for healthcare before receiving care.” CMS is hoping to “drive price comparison and consumerism” with availability of allowed in-network and out of-network provider rate data. Additionally, patients may be the recipients of shared savings programs involving lower-cost, high-quality providers through plans that include provisions.

January also brought additional news around consumer choice and hospital transparency, with CMS announcing that 786 hospitals will see a reduced Medicare payment due to hospital-acquired infections. In addition, CMS is making new hospital Star ratings available to consumers seeking quality rankings on its website.

Clearly, patients themselves are being called upon to help move the country towards value-based care, with CMS deeply focused on getting consumers cost and quality information that can better inform their healthcare choices. Calls for transparency may not be new, but they are becoming more pronounced. 

What does this mean for hospitals? At Geneia, our experience provides us a few initial thoughts:

  • First, hospitals can no longer rely on nearby location to drive traffic. With consumers more informed and empowered, they will be able to look more easily at their coverage and local hospital costs, helping them decide if a more cost-effective site of care might better fill their needs. The end result may be heavier reliance on urgent care, 24/7 nurselines, primary care or similar options by patients who might have otherwise used the emergency department (ED).

    Patient experience, and not just proximity, will be key drivers of hospital services. We already know that hospital consolidation—which defines the current hospital market—can lead to higher prices and lower patient experience ratings, so hospitals will need to leverage talented staff, improved technology and connected experiences to drive patients to their location(s). We believe a customer (or patient) relationship management solution (CRM) will no longer be an optional investment, but a core technology to understand the patient as consumer.
  • Second, and related, hospitals must look beyond the ED and certain inpatient services for reliable revenue. Part of the likely impact of cost transparency measures will be to help consumers find ways to reduce inappropriate ED and inpatient usage, particularly as insurance plans incentivize them to use less-expensive, remote and preventive options. Hospitals, in turn, will look to expand service lines they may not have considered before. Take, for instance, a recent CMS decision to cover acupuncture for Medicare patients with chronic low back pain. Hospital systems may need to consider newer, non-traditional and preventive services to draw patients in for care.
  • Third, and perhaps most importantly, hospitals concerned about competition and its impact on revenue may increasingly find answers through improving their quality ratings and keeping costs down to drive volume. We’ve stressed that deeper, hospital-specific performance analytics are crucial to overcome cost and quality challenges, but the stakes are only getting higher. States and health plans will be increasingly asked to take on financial risk, suggesting that hospitals are likely to be rewarded if they partner with these entities to drive high-quality, low-cost car

2020’s continued health system (and physician group) mergers, as well as ongoing payer-provider collaboration, will create further impact for the hospital market. Expect more from us in coming months as we continue to explore the hospital landscape, and what the move towards pricing transparency means for healthcare consumers.