Medic Management Aug 14, 2020 7:04:25 AM 8 min read

The 4 Steps You Must Take to Prepare for Price Transparency

By Ronnen Isakov, Managing Director – Advisory Group, & Robert Hague – Associate Director, Medic Management Group, LLC.

Think about the last time you went to a grocery store to buy food. Now think about what it would be like if there were no prices on the items you were purchasing. How could you figure out what you were spending? How could you stay within your budget?

Ironically, that’s often the situation when patients go to a doctor’s office or hospital. As the system is currently constituted, there is frequently no way for a patient to know how much they will be paying for a procedure or an office visit until long after the procedure is performed or the office visit is over.

That’s why the idea of price transparency has become a mission-critical topic among health care professionals. In its simplest iteration, price transparency means that patients, when they are preparing to have medical procedures done, would have a better understanding of what it will cost them out of pocket.

What the Affordable Care Act Says

Under the Affordable Care Act (ACA), hospitals are required to publish “list prices” for all their procedures, which in theory would allow patients to shop around for the lowest price for a given procedure. While the rules were supposed to go into effect on Jan. 1, they were delayed.

The Trump Administration has already published preliminary rules that they believe will revolutionize the way Americans purchase their healthcare. They establish a competitive marketplace among hospital systems that will require hospitals to publish their prices on 300 “shoppable” services, including 70 mandated by the Centers for Medicare and Medicaid Services (CMS).

And it’s not just hospitals. Eventually, the price transparency rules will apply to all health care professionals, whether they are associated with hospitals or not. While it will be easier for smaller practices, since many independent physicians already have fee schedules available, they will eventually have to navigate the price transparency waters as well, which means they should start preparing now.

Four Steps Toward Price Transparency

With less than a year before the rules become immutable, it’s time to start thinking about what steps are necessary to move toward price transparency. Here are four steps all hospitals and physician practices need to follow to prepare for the time when all health care professionals will fall under the price transparency rules.

1. Figure out what it costs to run the practice. When setting a price of any good or service, the first item on the agenda is to determine how much it costs to produce it. That starts with an in-depth analysis of “all” the costs associated with running a practice. That includes (but is not limited to):

  • Wages
  • Benefits
  • Training
  • Supervision
  • Space Rental
  • Technology

2. Evaluate essential vs. non-essential costs. Once you’ve established what it costs to run the practice, it’s time to take a closer look  at individual line items. By doing this deep-dive exploration, the people in charge can determine what are essential costs and what costs can be lowered by specific actions. Only after you’ve determined the definitive costs of running the practice can you accurately calculate the costs of procedures and office visits—and determine what patients should be paying.

3. Educate the team. Once price transparency becomes the law of the land, patients are going to start talking to front office staff about getting the prices of their procedures. If there hasn’t been an educational effort, your patient intake people may give them misinformation, so it’s up to hospital and practice managers to get out ahead of such an eventuality.

Most of them will not have heard of price transparency, so it’s up to the managers to explain what it is and why it’s important. Talk to them about how their jobs are going to change in the new era and provide them with the necessary tools to talk to patients about pricing.

The more demystifying that can be done, the better. Front-line staff will feel empowered if you take the time to educate them about the whys of the new procedures, instead of simply asking them to do something new without an explanation. Change is always nerve-wracking, and education is the key to ensuring the changes in practice management go smoothly.

But it’s not just the front-line staff that needs to be educated—don’t forget to raise the issues with the physicians in your hospital or practice. Like the front desk personnel, many of them won’t have given a second thought to what price transparency will mean to them, so take the time to explain it to them. Alert them to who on staff will be handling the discussions with patients. They don’t need to be experts, but they should know enough to answer basic questions as they come up.

4. Seek outside help if necessary. All these steps can seem overwhelming if taken as one large group of tasks. Fortunately, there’s absolutely no reason that hospitals and physician practices have to go it alone. Instead of making your internal staff do all the work, consider bringing in an outside advisor who has been there before.

Companies like management service organizations (MSOs) can help navigate each step of the way and could well bring about better outcomes than if hospitals and physician practices try to manage the journey to price transparency on their own. They can be the calming influence in the face of change and can be there with the team every step of the way.

Make no mistake: Price transparency is coming, and it’s better to be prepared than not. It’s time to start planning now so you’re not caught flat-footed when the rules become permanent next year.