September 27, 2019
The Honorable Seema Verma, Administrator
Centers for Medicare & Medicaid Services
Department of Health and Human Services
P.O. Box 8013
Baltimore, MD 21244–1850
RE: CMS–1717–P (Medicare Program: Proposed Changes to Hospital Outpatient
Prospective Payment and Ambulatory Surgical Center Payment Systems and Quality
Reporting Programs)
Submitted via regulations.gov
Dear Administrator Verma:
Consumers First is a new alliance that brings together interests from consumers,
children, employers, labor unions, and primary care providers working to change the
fundamental economic incentives and design of the health care system. Our work is to
realign the incentives and design of health care so that the system truly delivers the
health and high quality care that all families across our nation deserve. Together, we are
working to ensure that the nation’s health care system finally fulfills its obligation to the
people it serves by providing affordable, high-quality, cost-effective care to everyone.
Medicare payment policy often establishes a standard that is then adopted by other
payers including commercial payers and Medicaid. Consumers First offers these
comments both to strengthen Hospital Outpatient Payment for Calendar Year 2020, and
because the policy changes reflected in this comment letter represent an important step
toward realigning the fundamental economic incentives in the health care system to
truly meet the needs of all families, children, seniors and adults across the nation. These
payment changes could catalyze the transformational change that is needed to our
payment systems to drive high value care into the health care system and across health
care markets in the U.S.
Consumers First appreciates the opportunity to provide comment on the Medicare
Hospital Outpatient Payment System rule for 2020. We ask that these comments, and
all supporting citations referenced herein, be incorporated into the administrative
record in their entirety. These comments represent the consensus views of the
Consumers First steering committee. Some individual members of the steering
committee are also submitting their own comments on the rule.

 Given our focus on transforming health care payment and delivery systems to ensure the
system is delivering the high value care consumers need, our comments are focused on
two policies outlined in the proposed rule:
•
•

Price Transparency
Payment for Excepted Off-Campus Provider-Based Departments

Price Transparency
Consumers First supports the Centers for Medicare and Medicaid’s (CMS) efforts to
significantly increase transparency in how hospital systems set prices to make health
care more affordable. As noted in the rule, the lack of price transparency is a significant
factor in increasing health care costs,1 and real transparency in the actual prices paid by
purchasers is critical to engaging in cost containment.2
The rule would require hospitals to publicly display “standard charge” in two forms:
gross charges (also known as “chargemaster” prices) and certain payer-specific
negotiated charges. The posting of gross charges is only significant to those consumers
who are uninsured or are receiving services out-of-network. The public posting of the
specific rate negotiated between payers and each provider holds promise in providing
actionable information to key stakeholders, including consumers, employers, workers,
providers, researchers, and policymakers. Of course, to avoid the risk of unintended
adverse consequences, the measures taken to enhance transparency should be carefully
considered as outlined below.
Gross Charges
Hospital chargemaster prices represent the “gross charge” made by a hospital, not
including any discounts offered to commercial payers. Typical chargemaster prices are
completely disassociated from the actual cost of providing care.3 Although hospitals
often use chargemaster as the starting point to negotiate prices with insurers, both
hospitals and insurers leverage their market power in price negotiations, often leading
to prices that are both highly inflated, and that do not represent high value care to
consumers. A 2015 study found that large hospitals typically mark up their
chargemaster prices by more than three times above the Medicare-allowable costs, with
significant variation between hospitals.4
Chargemaster prices do not reflect what most consumers actually pay.5 Further,
chargemasters are effectively unintelligible or even misleading to consumers as medical
procedures are often listed using medical acronyms.6 While we do not oppose the
requirement of publicly posting chargemaster prices, we do not believe this requirement
alone will directly benefit consumers, nor provide meaningful information for
policymakers or researchers.

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 Negotiated Prices
While we are skeptical of the value in posting chargemaster prices, we commend CMS
for its efforts to improve price transparency in order to lower health care costs.
Importantly, the pricing information that is most critical to achieve price transparency
is the specific rate that is negotiated between payers and each specific provider. In
addition, any publically disclosed price information should also be paired with quality
information. While we understand that additional work is needed to arrive at and
report on a harmonized set of quality measures, we strongly believe that it is critical to
establish a standard where publically disclosed price and quality information are always
paired together in order to achieve meaningful transparency of cost and quality for
consumers, researchers, and purchasers.
Disclosing price and quality data could represent a bold and important step in providing
meaningful transparency in the quality of care and the prices paid for hospital system
care, and ultimately the health care system more broadly.7 While health plans are
directly negotiating prices with providers, it is consumers and employers that are
ultimately paying for the health care provided through insurance premiums,
deductibles, and copays. The notion that the actual purchasers of health services are
unable to find out how much they are paying for care until it has already been furnished
must be changed.
Some academic researchers have postulated that full disclosure of prices negotiated
between hospital systems and insurers could result in higher prices as hospital systems
use the public information to drive up negotiated prices.8 Namely, researchers have
cited studies on the impact of price transparency laws on concrete prices in Denmark
and gasoline prices in Australia.9 However, there is very little empirical evidence for
researchers to analyze the impact in the United States health care market. Indeed, in the
United State health care market, recent research shows that disclosing price may
actually help to reduce health care costs in some markets and for some services.
Researches from University of Michigan analyzed the impact of New Hampshire’s
healthcare price transparency website. The website unveils out-of-pocket costs for
privately insured people across a range of medical procedures. Researchers found that
the website saved individuals $7.9 million and insurers $36 million on X-rays, CT scans,
and MRIs from 2007 to 2011.10
The proposed rule would require hospitals to post the payer-specific negotiated charges
for 300 “shoppable” services. Of those, 70 services would be mandated by CMS and 230
would be decided upon by the hospital system. While we support the intent to provide
consumers with actionable information, we urge CMS to take a different tack. Evidence
suggests that health care price transparency alone has little-to-no impact on consumer
behavior.11 There are a number of reasons this may be the case, including difficulties in
understanding even well-intended transparency information; lack of quality data
against which to compare price; and the attenuation of the impact of prices on out-ofpocket costs.12 It is also important to note that while achieving price and quality
transparency among hospitals would help move transparency efforts forward, there are
other critical actors in the health care system that would also need to disclose price
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 information to achieve full price and quality transparency across the health care system.
Thus, we recommend that CMS refocus the target of its price transparency efforts from
changing consumer behavior to changing the behavior of providers and payers, and to
informing policymakers and regulators. Individual providers (physicians and other
clinicians who direct most health care spending in the United States), however, can
effectively use price and quality information to encourage patients to access lower-cost,
higher-value referred providers.13 The same holds for employers and other payers, who
can use transparent price information to drive care toward higher value providers.14
There is also evidence to suggest that high-cost providers may change their pricing
behavior due to public scrutiny.15
We recommend that CMS pair all price data with available quality data. Consumers
First strongly supports the development and use of meaningful quality data. However,
lack of relevant quality data on certain services should not be used as an excuse to not
move forward with price transparency for those services.
Consistent with the below strategies to mitigate unintended consequences, rather than
focusing on 300 “shoppable” services (including 230 to be defined by the hospitals
themselves), we recommend that CMS instead mandate transparency on a smaller, but
nationally uniform set of high cost and high volume services provided in the inpatient
and outpatient settings. A reasonable requirement would be the publication of 100 total
services:
•
•
•
•

25 highest price inpatient services
25 highest dollar value inpatient services (defined as the product of price per
service multiplied by number of services provided)
25 highest price outpatient services
25 highest dollar value outpatient services

While research is inconclusive as to whether broad public transparency of negotiated
prices will drive up costs, the possibility of higher prices warrants serious consideration.
To mitigate the risk of higher prices and gain more meaningful data regarding the effect
of price transparency on health care costs, we recommend CMS take the following
precautions:
•
•
•
•

Pilot full public price transparency in several health care markets and conduct
longitudinal studies on the impact of the policy on negotiated prices.
Make provider- and plan-specific negotiated prices available to plan sponsors and
researchers in the large group market.
Provide negotiated prices to individuals, plan sponsors, and researchers in the
small group and individual markets.
Provide limited information to the public on negotiated prices. This could include
providing statistical information including the range and distribution of privately
negotiated rates between providers and health plans for each of the services
identified by CMS.

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 To the extent CMS seeks to move forward with consumer-facing price transparency, it
should ensure that it conducts robust consumer outreach and engagement to
understand which services consumers most need or want increased transparency and
how this information can be communicated to them in an actionable way. As part of this
effort, CMS should ensure that it engages with a racially and ethnically diverse group of
consumers, including consumers who have limited English proficiency and individuals
with disabilities.
Just as CMS suggests, the new requirement “should be viewed in the context of the
broader price transparency initiative.” In future rulemaking, we will continue to push
CMS to accelerate price transparency for hospitals, insurance plans, pharmaceutical and
device manufacturers, and other key sectors of the health system.
Summary of Recommendations:
•

•

Consumers First strongly recommends that CMS include quality data in the
requirement that hospitals post payer-specific negotiated prices, with the
following changes:
o Refocus audience for price transparency to payers, providers, and
policymakers.
o Establish a nationally uniform set of prices to be published based on high
cost and high dollar value services in the inpatient and outpatient
settings.
If CMS seeks to move forward with consumer-facing price transparency, it
should conduct robust outreach and engagement, particularly to underserved
and racially and ethnically diverse communities.

Payment for Excepted Off-Campus Provider-Based Departments
Over the last decade, our nation has seen a trend of once independent physician
practices have becoming affiliated with major hospital systems.16 This movement is part
of a larger trend of consolidation among health systems and physicians. Consolidation,
in turn, has allowed health systems to use their market power to leverage higher prices
for all consumers.17 Further, the drive toward higher-cost hospital-based outpatient
services has had a direct negative financial impact on Medicare beneficiaries, who pay
higher copays at hospital outpatient departments (HOPDs) than they do in physician
offices,18 and on Medicare expenditures, as HOPDs are paid more than twice as much as
physicians paid under the Medicare physician fee schedule for the same service.19
In 2015, Congress acted to mandate that new HOPDs not on the hospital’s main campus
be paid at the physician fee schedule rate. CMS followed Congress’ lead in mandating
“site-neutral payments” for non-excepted HOPDs in the 2020 OPPS rule. In the current
proposed rule, CMS proposes to complete the two-year phase in of site-neutral
payments for OPPS services.
Although we support site-neutral payments, we are concerned about the impact of this
payment change on safety net health systems which provide access to outpatient care for
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 many of our nation’s low-income and vulnerable residents. Indeed, the rule finds that
because of their larger-than-average outpatient footprint, public hospitals, major
teaching hospitals, and large disproportionate share hospitals would face a disparate
share of the payment cuts under the proposed rule’s site-neutral payment policy.20 We
recommend CMS consider policy modifications to reduce the impact of the site-neutral
payments on safety net health systems. This could be accomplished by providing the
OPPS rate to outpatient departments located in federally designated Health Professional
Shortage Areas (HPSA)s or Medically Underserved Areas (MUA)s. Use of HPSA and
MUA designations would be consistent with longstanding and successful federal policies
designed to enhance access to care in underserved areas.
Consumers First supports the movement to site-neutral payment for health care
services as a significant way to promote greater value in health care to the extent the
regulatory changes are permissible under federal law. Where CMS lacks authority to
implement site-neutral payments, we urge Congress to explicitly mandate site-neutral
payments per the recommendations in this letter.
Recommendation: To reduce the incentive for hospital systems to further
consolidate outpatient care and to protect patients from higher out-of-pocket costs,
and to the extent permissible under federal law, we strongly recommend CMS finalize
the two-year phase in of reduced payment for excepted off-campus provider-based
departments while developing a mechanism to protect outpatient services at vital
safety-net health systems.
Thank you for considering the above recommendations. Please contact Shawn
Gremminger, Senior Director of Federal Relations at Families USA
(sgremminger@familiesusa.org) for further information.
Sincerely,
American Academy of Family Physicians
American Benefits Council
American Federation of State, County, and Municipal Employees
Families USA
First Focus on Children
Pacific Business Group on Health
1

Federal Register, Vol. 84, No. 154, Page 39573
ibid.
3
“What is a chargemaster, and what do hospital administrators need to know about it?,” George Washington
School of Business, https://healthcaremba.gwu.edu/blog/chargemaster-hospital-administrators-need-know/
4
Ge Bai and Gerard F. Anderson, “Extreme Markup: The Fifty US Hospitals With The Highest Charge-To-Cost
Ratios,” Health Affairs, Vol. 34, No. 6, (June 2015), https://www.healthaffairs.org/doi/10.1377/hlthaff.2014.1414
5
Harris Meyer, “Hospitals vary in publishing CMS chargemaster prices,” Modern Healthcare, Jan. 7, 2019,
http://modernhealthcare.com/article/20190107/TRANSFORMATION04/190109931/hospitals-vary-in-publishingcms-chargemaster-prices
2

6

 6

ibid.
The Secret of Health Care Prices: Why Transparency is in the Public Interest. California Health Care Foundation.
https://www.chcf.org/publication/secret-health-care-prices/#related-links-and-downloads
8
Brent D. Fulton, “Health Care Market Concentration Trends in the United States: Evidence and Policy Responses,”
Health Affairs 36, no. 9 (2017): 1531, doi:10.1377/ hlthaff.2017.0556, and;
David Cutler and Leemore Dafny, “Designing Transparency Systems for Medical Care Prices,” New England Journal
of Medicine 364 (Mar. 10, 2011): 894, doi:10.1056/NEJMp1100540.
9
Svend Albæk, Peter Møllgaard, and Per B. Overgaard, “Government-Assisted Oligopoly Coordination? A Concrete
Case,” Journal of Industrial Economics 45, no. 4 (1997): 429, econpapers.repec.org., and;
David P. Byrne and Nicolas de Roos, “Learning to Coordinate: A Study in Retail Gasoline,” Amer. Economic Review
109, no. 2 (Feb. 2019): 591, doi:10.1257/
aer.20170116.
10
Kelly Gooch, “New Hampshire's price transparency website helped patients save money,” Becker’s Hospital
Review, Jan. 30, 2019, https://www.beckershospitalreview.com/finance/new-hampshire-s-price-transparencywebsite-helped-patients-save-money.html
11
Mehrotra, Ateev, et al., “Promise and Reality of Price Transparency,” New England Journal of Medicine, Vol. 378,
No. 14 (April 5, 2018), and;
Whaley, Christopher, et al., “Association Between Availability of Health Service Prices and Payments for These
Services,” Journal of the American Medical Association, Vol. 312, No. 16 (May 3, 2018).
12
Austin, D. Andrew and Jane G. Gravelle, Does Price Transparency Improve Market Efficiency? Implications of
Empirical Evidence in Other Markets for the Health Sector, Congressional Research Service, Washington, D.C. (July
2007).
13
Carman, Kristen, et al., “Understanding an Informed Public’s Views on the Role of Evidence in Making Health
Care Decisions,” Health Affairs, Vol. 35, No. 4 (April 2016); and Levinson, et al., “Not All Patients Want to
Participate in Decision Making-A National Study of Public Preferences,” Journal of General Internal Medicine (June
2005).
14
Robinson, James, and Timothy Brown, Evaluation of Reference Pricing: Final Report, letter to David Cowling of
CalPERS (May 15, 2013). Available at: https://kaiserhealthnews.files.wordpress.com/2014/05/reference-pricingcalifornia-berkeley.pdf.
15
Wu, Sze-jung, et al., “Price Transparency for MRIs Increased Use of Less Costly Providers and Triggered Provider
Competition,” Health Affairs, Vol. 33, No. 8 (August 2014).
16
Jeff Lagasse, “Hospitals acquired 5,000 physician practices in a single year,” Healthcare Finance, March 15, 2018,
https://www.healthcarefinancenews.com/news/hospitals-acquired-5000-physician-practices-single-year
17
Bela Gorman, Don Gorman, Jennifer Smagula, John D. Freedman, Gabriella Lockhart, Rik Ganguly, Alyssa Ursillo,
Paul Crespi, and David Kadish, Why Are Hospital Prices Different? An Examination of New York Hospital
Reimbursement, New York: New York State Health Foundation, December 2016, https://nyshealthfoundation.
org/wp-content/uploads/2017/11/an-examination-of-new-yorkhospital-reimbursement-dec-2016.pdf
18
Federal Register, Vol. 84, No. 154, Page 39616
19
Federal Register, Vol. 84, No. 154, Page 39616
20
Federal Register, Vol. 84, No. 154, Pages 39620-39623
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