What is Transparent Pricing? Operationalizing CMS Guidance From A Patient Perspective


The Centers for Medicare & Medicaid Services (“CMS”) issued final rule CMS-1694-F containing updates to the Inpatient Prospective Payment (“IPPS”) policies and amongst those updates, addressed its goal of achieving greater price transparency to further “create a patient-centered healthcare system”. 
Under current law, hospitals are required to establish, update and make public a list of the hospitals standard charges for the items and services provided by the hospital.  In FY 2015 IPPS final rule, CMS reminded hospitals about the requirement, but continued to provide hospitals with discretion in determining the manner by which they made public this information stating “hospitals should undertake efforts to engage in consumer-friendly communication of their charges to help patients understand what their potential financial liability might be for services they obtain at the hospital, and to enable patients to compare charges for similar services across hospitals.” CMS further noted “we are confident that hospital compliance with this statutory transparency requirement will greatly improve the public accessibility of charge information.”
In the FY 2019 final rule, CMS removed the discretionary component and effective January 1, 2019, is requiring hospitals make available a list of their current standard charges via the internet in a machine-readable format and to update this information at least annually, or more often as appropriate. CMS stated the information could be in the form of the Charge Description Master (“chargemaster”) itself, or another form of the hospital's choice.

Consumer Expectations for Price Transparency

While hospitals grapple with operationalizing the requirement for publishing their chargemaster on January 1, 2019, central to that deliberation should be the CMS primary objective as stated in the final rule: 
We indicated that we are concerned that challenges continue to exist for patients due to insufficient price transparency. Such challenges include patients being surprised by out-of-network bills for physicians, such as anesthesiologists and radiologists, who provide services at in-network hospitals, and patients being surprised by facility fees and physician fees for emergency department visits. We also are concerned that chargemaster data are not helpful to patients for determining what they are likely to pay for a particular service or hospital stay. In order to promote greater price transparency for patients, we stated that we are considering ways to improve the accessibility and usability of the charge information that hospitals are required to disclose under section 2718(e) of the Public Health Service Act.
In summary, CMS is cognizant that chargemaster data may not be beneficial to the patient from a financial liability perspective and in future rulemaking, intend on expanding the broader transparency initiative by requiring “shoppable” information on healthcare services that are typically scheduled in advance.


That said, the current guidance does not preclude hospitals from making available facility/professional charges, as well as quality information, to their patients.  In addition, creating a team that includes leadership from finance, clinical operations, customer service and business office as well as patient educators, marketing and individuals from the community, to develop a “patient-friendly” platform that is related to the chargemaster and posted on the website, will further promote the core objectives in the final rule.  While not required, the messaging should be geared at assisting patients by defining the differences between hospital charges and potential out of pocket costs in an easy to read format that refrains from medical terminology.  Including video and/or other instructional techniques that incorporate best practices for adult learners, will aid in promoting your message and mitigate potential increases in call volume and complaints attributable to potential mis-understandings inherent in publishing the chargemaster.

Current Objectives of Pricing Transparency

CMS published a Frequently Asked Questions (“FAQ”) article regarding the January 1, 2019 requirement, referencing the importance of educating the patient community “CMS encourages hospitals to undertake efforts to engage in consumer friendly communication of their charges to help patients understand what their potential liability might be for services they obtain at the hospital, and to enable patients to compare charges for similar services across hospitals.  A hospital is not precluded from posting quality information or price transparency information in addition to its current standard charges in its chargemaster”.
Consequently, when evaluating the mandatory components of the final rule, it is important to take into account CMS’s objective regarding patient-centered care and develop mechanisms to educate and inform patients regarding the following:

  • What do the charges really represent?

  • Chargemaster description crosswalk available in layman’s terms?

  • How does a patient determine patient liability?

  • Who should they contact for more information?

  • How to incorporate quality indicators?

While some hospitals have initiated price estimators and/or financial liability tools, the rates are often not guaranteed nor include the professional out of pocket costs.  Accordingly, the long-term goal, as referenced in CMS’s final rule, is to develop internal platforms and/or utilize outsourced tools that can inform patients of their financial obligation.  In the advent of soaring deductibles and rising out of pocket expenses, maintaining a focused and deliberate approach to assisting patients up front, while also collecting patient liabilities, will reduce administrative costs to collect in the backend as well as enhance the patient experience.

Potential Obstacles and Challenges

While many would say hospitals are about to take a huge step forward, publishing the chargemaster has its own set of challenges:

  • Chargemasters are not “patient friendly”

            - Descriptions
            - CPT/HCPCS Codes
            - Revenue Codes
            - Units

  • Drugs, implants and some supplies are not priced on the chargemaster

  • Charges do not equate to “reimbursement” or patient liability

Once hospitals’ charges are published in a machine-readable format, charge information will be available to compare charges for similar services within local, regional, state and national markets.  Implementing a proactive and ongoing defensible charging analysis strategy, will ensure hospitals can quickly react to and/or alter their charging methodology in this new environment.  Some elements for consideration include:

  • Compare overall charges to other hospitals (i.e., the market or other like specialty hospitals).

  • Benchmark current charges relative to national, state, and regional medians as well as Medicare fee schedules.

  • Incorporate cost from internal cost accounting data at the individual chargemaster code level.

  • Evaluate relationships for chargemaster lines with the same CPT/HCPCS code and different charges.

  • Evaluate inconsistencies and/or inappropriate leveling of charges for related services. Some examples include:

            - Services with and without contrast
            - Evaluation and Management levels
            - Time
            - Add on CPT codes

  • Evaluate simplified markups for drugs and implants, lower charges without impact to third party payer reimbursement, eliminate supply charges by incorporating into procedure.

Finally, we recommend developing a formal Patient Charging Policy, which articulates the charging methodology that is used in the establishment of chargemaster charges and relationship to the hospital’s overall mission.  Complementing the Patient Charging Policy with a formal Patient Liability Calculator as described previously, will not only enable hospitals to meet the current objectives but also long-term goals outlined by CMS.


Consistent and transparent charges, while always relevant, is becoming more important due to increased financial liability for patients.  Maintaining charges that will not erode net revenue but will enable providers to be competitive in the market is paramount.
The overall “defensible charging” objective is to develop a rational and transparent relationship between chargemaster charges that will facilitate a hospital’s ability to defend its charging philosophy, policies and procedures, and detailed prices.  Due to substantial changes in the industry, specifically in light of the January 1, 2019 mandate for publishing their chargemaster charges, hospitals are becoming more thorough and thoughtful in the manner in which they establish charges.
SunStone has personal, hands-on experience with innovative approaches to chargemaster price setting specifically geared to assisting hospitals manage the ever-changing regulatory environment.  If you have any questions, please contact Vonda Moon, Principal at vondamoon@sunstoneconsulting.com or Leonard Brauner, Senior Principal at leonardbrauner@sunstoneconsulting.com