First Step to Price Transparency a Confusing One

stethoscope and moneyThe rule requiring hospitals to post their prices online, which became effective on January 1, 2019, really hasn’t done much to promote cost transparency. The problem is that the price lists, which payers refer to as chargemasters, break common procedures into complex, coded retail-priced components that mean little to the average consumer.

As an example, determining the cost of an ER visit would require knowing the codes and locating costs for all parts involved in the visit. Few people, if any, are familiar with these complex details. While giving consumers price information in an easy-to-understand format would be a big help, it appears that CMS Administrator Seema Verma was accurate when she described this as little more than a “critical first step”.

CMS Modifies Bundled Pay Requirements

hospital workersWhile hospitals in 34 geographic areas will still be required to participate in the Comprehensive Care for Joint Replacement Model, hundreds of acute care hospitals in other areas have received a reprieve. In addition to modifying CJR model compliance, CMS recently finalized plans to cancel the Episode Payment and Cardiac Rehabilitation Incentive Payment Models, both of which were scheduled to become effective on January 1, 2018.

While a number of hospitals will voluntarily participate in the CJR model and others have expressed interest to participate in the two cancelled models, the agency said there would not be enough time to restructure the models prior to the planned 2018 start date. Even though some have criticized the Trump administration for a lack of interest in value-based care, the administration has expressed a strong commitment to value-based payment, but says it prefers voluntary models.

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Will Bundled Payments Lower Costs?

moneyThe Centers for Medicare and Medicaid Services (CMS) began their initiative to tie payments to quality or value earlier this year by implementing their Comprehensive Care Joint Replacement Model (CJR). The mandatory program holds hospitals accountable for all costs, processes and outcomes associated with hip and knee replacements performed on Medicare patients. Since hip and knee replacements are the most common inpatient surgeries for seniors, the CJR model is expected to serve as a critical test to determine whether bundles can help control costs and increase quality.

The quality of treatment and aggregate spending for a 90-day period, including surgery, recovery and rehabilitation will determine whether the hospital owes money or will receive additional payment from Medicare. CMS is establishing specific bundled pricing for each provider, then using data to determine regional pricing after five years.

Looking Outside the Walls

This model is forcing hospitals to evaluate overall care for joint replacements since clinical and financial success requires coordination between hospitals and post-acute care providers such as skilled nursing facilities. While joint replacements may represent only a portion of a hospital’s revenue, the Medicare Star Rating System tied to CJR will make provider performance public. Low performance will make it difficult to compete for Medicare-funded joint replacements in the future and many think that if bundling shows positive results, CMS will likely look to other areas of care.

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