Transparency and the Hospital Chargemaster

Recent changes by the current federal administration have led to the public release of hospital chargemasters so that potential patients can access them online. However, whether such rules have led to a real change in pricing transparency is up for debate, in part because of the complex nature of these massive documents. Will accessing the hospital chargemaster to look up your upcoming procedure really give you an idea of the cost, or is this effort toward transparency simply an illusion?

What is a Hospital Chargemaster?

The chargemaster (also referred to more descriptively as a charge description master) is a list of all items that can be billed to a hospital patient or to their health insurance provider. It is a comprehensive listing of everything that can possibly be billed and it is critical to how hospitals handle billing. In practice, the prices on the chargemaster are highly inflated, with most insurance companies receiving significant discounts when they’re actually billed. In reality, the chargemaster serves as a starting point for price negotiations with insurance companies.

Chargemaster Transparency

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Originally, chargemasters were viewed by hospitals as a trade secret. However, efforts have been made to encourage (or in some cases, force) hospitals to be more transparent regarding their pricing. That effort has included requiring hospitals to place a machine-readable copy of their chargemasters on the hospital’s website, a rule put into place by the Centers for Medicare and Medicaid Services in January 2019. The goal of this rule was to make hospital pricing more transparent and easy for patients to understand, thus minimizing the surprise experienced by patients when they receive a bill.

Confusion or Transparency?

Some claim that these online chargemasters result in more confusion than transparency. These lists are massive (often hundreds of pages long) and involve medical codes and abbreviations that are practically impossible for a layperson to understand. They can also go into extreme detail — down to the cost of a single Tylenol or the rate for a 15-minute interval in a standard operating room. Because of this level of detail, it can be extremely difficult for you to track down services or treatments within these documents.

For example, perhaps you know that your doctor has recommended surgery for glaucoma, so you believe that, based on these transparency rulings, you should be able to go to the hospital website to see what hospitals charge for such a surgery. You soon find, however, that finding that information is not as easy as simply searching a document for a particular word or phrase. You manage to do a search, but there might be two or more codes related to glaucoma that seem almost identical but carry a substantial price difference. Without a thorough knowledge of the codes and the procedure represented, it would be impossible for you to know which one is applicable to your medical needs.

Ambiguity Within the Chargemaster

hospital chargemaster costs

Even if you can narrow things down to a single entry in the hospital chargemaster, the price listed may be ambiguous. Remember earlier when we said that the prices on chargemasters are highly inflated? It is impossible to know what you will need to pay without knowing the details of how the hospital will negotiate prices with your insurance company for the particular type of policy that you have, not to mention the need to factor in the amount of your deductible and copay. So, in short, having access to the hospital chargemaster really does not accurately answer any questions you may have about pricing because the actual price charged is determined by your insurance company. Those without insurance are often charged the exorbitant prices found within the chargemasters, perhaps reduced by a flat percentage of the final balance.

It is, however, important to note that the current level of ambiguity may be greatly reduced within the next few years. Because the chargemasters are machine-readable, enterprising app developers can create tools to help people navigate the chargemaster lists online and aid them in deciphering codes and abbreviations.

More Legal Changes Ahead

The Trump administration plans to use an executive order to take transparency a step further by forcing hospitals to publicize their negotiated rates with the hope that this will further aid in transparency. There is also a good possibility that further transparency will encourage hospitals to be more competitive in their pricing: why go to hospital A that charges a base price of $50,000 when hospital B has that same procedure in their chargemaster at $15,000.

Conclusion

Spreadsheet

Due to the complexity, ambiguity, and sheer size of documents such as the chargemaster, simply making them available online is not enough to achieve true transparency. However, such efforts are a good starting point to encourage transparency, support more competitive pricing among medical providers, and help Americans to better understand the cost of medicine. In time, such measures may help to significantly reduce the level of medical debt in the United States.

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