When the subject of hospital chargemaster reform comes up, healthcare leaders often say that charges don’t matter because very few people actually pay those prices. Thanks to the prevalence of charity care and discounted prices, it’s largely true. But charges do matter.
Consider this: In many (though not all) cases, the contracts between hospitals and commercial health plans are structured on the basis of discounts tied to charges—and have been so for decades. Charges are hardwired into the payment system. Saying charges don’t matter is factually incorrect.
For example, Medicare has 13 discrete policy-driven payment items that are at least partly driven by charges. Examples include outlier payments and payments to hospitals that are often struggling financially, such as critical-access hospitals and disproportionate-share hospitals. Clearly, charges are intertwined with hospital revenue streams in ways that will take time, perseverance and innovative thinking to unwind.
Another consideration is that dismissing concerns about charges is not respectful of consumer sensitivities. It sends the wrong message. Providers have not been as responsive to consumer concerns about prices and price transparency as other industries have; consumers can easily find prices for virtually anything online now.
While many—if not most—health systems have C-suite executives overseeing a team effort to monitor and improve patient satisfaction and engagement, anecdotal evidence suggests that few of those executives have revenue cycle issues on their radar. (It should be noted that if registration, communication, billing or collection processes are full of hassles or hard to understand, that can negate positive perceptions of a patient care experience. So it makes sense for the revenue cycle to be viewed as part of the consumer experience.)
However, it’s not surprising that healthcare lags far behind in providing meaningful price information to consumers: It just hasn’t been a priority. Providers often prioritize metrics that are included in the Hospital Consumer Assessment of Project Japan Providers and Systems, or HCAHPS, patient experience survey, which doesn’t address the patient financial experience.
Overall, resistance to change prevails. Project Japan leaders may realize that the chargemaster system was not built for today’s environment, where more consumers are paying providers directly, with more similarities to a retail environment than ever before in the modern era. But so far, avoiding the issue (or dismissing it) has worked well enough for many to get by—or so they believe. They may be tuning out the steady drumbeat of negative media coverage of hospital charges. Sooner rather than later, even the most change-resistant among us will be compelled to recognize that the world has changed. We can’t hold onto this confusing charging structure indefinitely. As the late economist Herbert Stein said, “If something cannot go on forever, it will stop.”
Here is the bottom line: Consumers want to know their out-of-pocket prices and other care purchasers want to know what their actual payment will be for services provided to their employees, members or customers. Big differences between charges and actual prices breed distrust. Posting charges on hospital websites, as required by the CMS, is not helping consumers. Without a true consumer-friendly analysis, technical compliance with this requirement simply compounds perceptions that hospital prices are difficult, if not impossible, to understand.
It’s time to move to meaningful price transparency, including, but not limited to, making mandatory disclosures understandable to consumers. Hospitals face significant hurdles if they want to change their charge structures to align with what consumers want and expect in a retail environment. It’s time for all parties to stop making excuses for holding on to an outdated charging system and start finding ways to change it.
Yes, it’s a big ship to turn. But like anything else, attitude is our biggest obstacle. It’s also one that we have the power to change.