Advice for Hospitals on Responding to Media Inquiries Regarding New Price Transparency Rules

By Erin Stewart posted 01-02-2019 12:06 PM

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Effective January 1, hospitals are now required to publicly post their charges as part of the Centers for Medicare & Medicaid Services (CMS) hospital inpatient prospective payment system final rule for fiscal year 2019. The information must be updated annually or as needed. CMS’ previous requirement that hospitals allow patients to view chargemasters upon request falls in line with the trend toward more transparency. However, the updated guidelines are the first time CMS has specifically required hospitals to post chargemasters online in a machine-readable format.

Knowing this significant change is sure to generate inquiries from the news media, the Georgia Hospital Association has developed the following talking points that may be helpful for all hospitals across the country in responding to reporters.

Media Talking Points

How hospital charges are determined

Hospitals charge the same amount for any particular service regardless of the source of payment. (Federal law requires that hospitals charge the same prices to all patients as a condition of Medicare participation.)
Non-governmental or private (commercial) health plans pay rates that are negotiated between the payer and the hospital through contracts. Patients with insurance will likely see an adjustment reflecting the difference in the hospital’s charges and the amount the insurance company has negotiated for services rendered.

Government payers: A guaranteed loss

Government payers, e.g., Medicare and Medicaid, pay the lowest rates and tell hospitals the amount they will be reimbursed for services, which usually does not even cover the cost of the service.
Medicare rates are pre-determined and are non-negotiable.
Georgia Medicaid pays a predetermined fixed amount for inpatient services based on patients’ diagnoses and treatments. Payments are not guaranteed to cover current costs.*
For outpatient services, Georgia Medicaid makes interim payments to hospitals based on a percentage of the hospital’s charge for a service and later uses actual cost to settle the difference between interim payment and the final payment.*

Reimbursement rates vary

Final payments from government payers for cost-based services to critical access hospitals and state hospitals are paid at 100 percent of cost. All other hospitals are currently paid at 85.6 percent of cost. However, some hospital expenditures are not considered in the calculation of cost.
Hospitals paid at 85.6 percent of cost are guaranteed by policy to lose at least 14.4 percent of their costs on Medicaid patients served in outpatient settings.
Uninsured and underinsured patients do not pay hospitals an amount that covers the cost of their care.
Indigent, charity and free care is provided to patients who typically do not have insurance and have family incomes that qualify for a hospital’s indigent or charity care policies.
In some cases, the hospital covers the entire amount of the patient’s bill. In other cases, the hospital will subsidize the cost of the bill and require the patient to pay some amount based on his or her income and a pre-established sliding scale.
Hospitals incur bad debt when a patient does not pay his or her bill and does not qualify for the hospital’s indigent or charity care programs. Hospitals must cover bad debt losses from positive margins gained from other payers.
According to the American Hospital Association, U.S. hospitals incur a loss of approximately $38.3 billion annually in unreimbursed care. Georgia hospitals incur a loss of approximately $1.8 billion annually in unreimbursed care.**

Having charges readily available may spur a renewed focus on the discussion surrounding prices and how they are determined. It is important for the media and the public to understand that prices for hospital services are not set arbitrarily and that several factors, including varying reimbursement rates and payer insurance status, can affect the amount the hospital is actually paid.

*There are state-to-state variations on reimbursement rates. Check with your state hospital association for additional requirements that may apply in your state.
**Check with your state hospital association for the amount of unreimbursed care in your state.

By Erin Stewart | Posted January 2, 2019
Director of Digital Media and Marketing
Georgia Hospital Association

2 comments

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Comments

Kristin Knoll

01-04-2019 02:40 PM

Erin, my boss forwarded this to me because he was so impressed with it. Little did he know we know one another. Well done!

Alan Shoebridge

01-02-2019 12:53 PM

Helpful advice.

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