Debunking Price Transparency Myths for Payers and Providers

On July 1, 2022, the Payer Price Transparency mandate began, requiring payers to publish negotiated rates for in-network providers and allowed amounts for out-of-network providers via machine-readable files (MRFs).¹ Most major national payers have published MRFs, and many stakeholders (payers, providers, employer groups, data aggregators, etc.) are using the information in their market differentiation strategies.

Nevertheless, some sources have been quick to discount payer MRFs as mere data overload. While it is true that the sheer size of the files (hundreds of terabytes of data comprising trillions of records) has made it challenging for many organizations to deconstruct, there are clear value levers associated with the data.

As such, several “myths” have surfaced around who should be using which price transparency solutions and the usability of the data. It’s time to debunk these myths and acknowledge the Centers for Medicare & Medicaid Services’ (CMS’) intended goals for price transparency. ²

Myth 1: Machine-Readable Files are Designed for Patients to Shop for Care

One of the biggest misconceptions of the purpose for MRFs is that they help consumers shop for services. This is not their primary purpose.

MRFs are intended to expose contracted rates between payers and providers and drive competition to eventually reduce healthcare costs. MRFs do not contain enough information for consumers to navigate the cost of the full-service package or their out-of-pocket costs, limiting usability for the average healthcare consumer.

That said, consumers are expected to benefit from the cost transparency tools that payers became required to publish on Jan. 1, 2023. These tools provide their members with out-of-pocket estimates for 500 services (expanding to all services in January 2024). The tools are designed to encourage people to shop for the most cost-effective care available. Additionally, through the proposed-but-delayed Advanced Explanation of Benefits, patients will be able to request a detailed estimate of expenses before care is received that includes provider charges, insurance contracted rates, and the patient’s expected liability (Figure 1).

By combining hospital requirements to post chargemasters and negotiated rates with similar payer requirements to post negotiated rates, CMS has created an environment for industry stakeholders (i.e., payers, providers, brokers) to negotiate with a full understanding of competitor prices to lower the overall total cost of care. While the MRFs continue to evolve in structure and completeness, this information is already being used in strategic negotiations.

Given the above, it is important for health systems and payers to go beyond the MRFs and tell the full story of the value of their services, including both reimbursement and quality measures (perceived and actual), to their stakeholders. As pressure builds from growing healthcare consumerism trends, health systems and payers need to position themselves as leaders in their market by accelerating both traditional technology and new digital engagement strategies.

Figure 1

Myth 2: Hospitals and Payers Face the Same Challenges with MRFs

There are challenges with both payer and hospital MRFs, but the challenges come from different sources and for different reasons.

One difference is that payer MRFs have a required layout that is far stricter than the hospital MRFs, allowing easier interpretation of the data (Table 1). However, due to payer layout requirements, uncompressed and flattened payer MRFs contain vast amounts of duplicative information because they must express all services across every contracted provider for both institutional (hospital-based) and professional (physician-based) claims. CMS attempted to minimize the duplication through optional changes to the required format; however, many payers have not utilized these changes in a consistent way. Despite this, payer MRF files are typically easier to interpret, with their relative size and volume constituting the major roadblocks in using the information.

Table 1

*Payer MRF example is a translation of a JSON coded file from CMS’s GitHub Price Transparency Guide³

Conversely, hospital MRFs lack standardization and completeness, making compliance a mixed bag and more open to interpretation. Some providers have posted MRFs in difficult formats, hiding them behind authentication pages (e.g., CAPTCHAs) and other hard-to-find locations, while others have uploaded complete datasets containing only those codes for which they had volume, all of which are strictly non-compliant tactics. Fortunately, CMS recognizes the challenges with hospital MRF compliance and hopes to standardize hospital postings with voluntary sample formats.

While payer and hospital MRFs have their respective challenges, these challenges are created by the specific nuances and nature of healthcare contracting and reimbursement. The complexities of healthcare contracting compound the amount of information payers is required to post, leading to data nuances (e.g., what might appear to be duplicative data and/or redundant files). However, the rules were not designed to change how contracts are written; rather, they expose contract details to the public.

Myth 3: Payer MRF Data is Useless

Prior to the release of MRFs, competing organizations heavily relied on patient claim aggregators to understand their reimbursement for providing care relative to their given market. While these sources provide useful market and utilization insight, they have historically been de-identified, limiting single competitor market comparisons. MRFs expand on patient claim aggregators by providing granular detail at the service code level (i.e., DRG, CPT) with a clear understanding of which provider, payer, and product that rate applies to.

Now, by combining payer and hospital MRFs and patient claim aggregators information, interested parties have the new ability to triangulate their market position and compare themselves specifically against the reimbursement standings of their main competitors or similar provider types.

Optimizing Price Transparency Data

Successful payers and providers will use price transparency tools and data to optimize their financial and consumer engagement strategy by:

1. Understanding where they are positioned from a rate perspective within their market through rate benchmarking (Chart 1)
2. Launching a revenue-balancing strategy to identify areas of opportunity across service lines and inform their contracting strategy
3. Generating a more defensible pricing strategy and solution across product types
4. Seeking payer parity to reduce pricing network effects
5. Developing consumer engagement strategies
6. Building the infrastructure and foundation to leverage MRF data for Cost Comparison and AEOB solutions, therefore going above and beyond the mandate

Chart 1

Triangulating MRF data, analyzing opportunities, and telling the consumer story is complex work. Guidehouse’s industry and data experts have worked closely with payers to design, implement, and launch payer MRFs, and we’re partnering with both payers and providers to download, parse, analyze, and compare competitor information.