Medical Bill Five health systemshave banded together to explore whether a recent proposal from theCenters for Medicare and Medicaid Services might upset theirbilling system.

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Is the shadowy world of health system chargemasters about to seea few rays of the light of day?

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It could happen. Under pressure from many sides to reveal true costsof services, a group of systems is considering opening up a bit. At this point, they appearwilling to talk about how chargemaster prices are set, and how theymay adjust them. They are doing so because they fear Medicare maychange its reimbursement methodology in a way that would not fullyreimburse them.

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Related: Unraveling the complexity of our health carebilling system

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The hospital chargemaster is the list kept by each health systemof the reference price for each procedure and service.Chargemasters are unique to each system, and closely guarded. Wheninvoicing a patient (or payer/insurer) for a health care activity,hospital personnel consult the phone-book-like list as a startingpoint for choosing a value. Prices listed are essentially thehospital's version of reference-based pricing, in that thecorresponding number is generally only a starting point forbilling. They charge different payers different rates in theirattempt to balance the full payers against those who pay less, ornothing, for services.

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"Hospitals use their chargemaster prices to negotiatereimbursement rates with private payers. And most patients do notsee the chargemaster price from their hospital encounter unlessthey are uninsured and must actually pay the chargemaster rate,"said a 2018 article in RevCycle Intelligence. "Consequently,hospitals tend to set chargemaster prices to remain competitive andnegotiate higher rates from private payers. As a result, theirprices are usually significantly higher than actual costs ofcare."

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The article notes that few patients or insurers are permitted tosee the chargemaster list. However, because Medicare does haveaccess to it to set reimbursement rates, Medicare has been basingreimbursements on a percentage of the chargemaster rate.

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Five health systems have banded together to explore whether arecent proposal from the Centers for Medicare and Medicaid Services(CMS) might upset the system. The five: AdventHealth, GeisingerHealth System, SSM Health, Trinity Health and Health Resources.They created the Chargemaster Alternatives for Medicare PaymentAlliance over concerns that, if they lowered chargemaster prices,Medicare might not adjust its reimbursement rate to recognize theadjustments.

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Again, pressure from the outside is behind their coalition.Critics of the wildly varying prices charged by systems for thesame procedure has led to pressure to reveal chargemaster rates andactual invoiced bills. The Centers for Medicare and MedicaidServices (CMS) released a price transparency proposal in July(Medicare Outpatient Prospective Payment System) that would forcehospitals to release more information on what they actually chargepatients.

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It appears that the proposal triggered the alliance's formation.The coalition members don't want to lose out on any Medicaredollars because of chargemaster reductions, and they have submittedlengthy comments to the proposal for CMS's consideration. Ofcourse, they also do not want to have to make their chargemasterlists public either. But that may be a fight they can no longerwin.

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Dan Cook

Dan Cook is a journalist and communications consultant based in Portland, OR. During his journalism career he has been a reporter and editor for a variety of media companies, including American Lawyer Media, BusinessWeek, Newhouse Newspapers, Knight-Ridder, Time Inc., and Reuters. He specializes in health care and insurance related coverage for BenefitsPRO.