The question isn't whether but when. What commitment are you willing to make?
This article appears in the September/October 2019 edition of HealthLeaders magazine.
Price transparency has become a major flashpoint in healthcare as the industry's payers and providers point blame at one another for the industry's runaway costs. But there's no reason to think this kerfuffle will fade.
The public is stressed over rising healthcare costs and looking for answers. That anxiety has been noticed by Congress and the U.S. Department of Health and Human Services, which are each pursuing transparency initiatives vigorously.
When the Centers for Medicare & Medicaid Services proposed in July to require hospitals to disclose the rates they negotiate with payers, the proposed rule was panned immediately. American Hospital Association President and CEO Rick Pollack said it "misses the mark, exceeds the administration's legal authority and should be abandoned."
Hospitals were widely expected to mount a legal challenge. It's unclear whether the courts would allow the Trump administration to force disclosure of information that is generally considered to be confidential.
But even if the rule were vacated or the administration were to decide not to finalize it, the core issue is too big to go away. The push for price transparency will continue. Ultimately, the debate will not be about whether price transparency is needed. Rather, the debate will center on how much and what kind of price transparency.
With that in mind, payers and providers have a choice to make. They can continue to obscure prices from consumers and risk an even heavier government intervention. Or, they can acknowledge that demands for price transparency are not going away and accept a version that provides consumers with fast, simple-to-understand, and accurate estimates for how much their care will cost.
In this issue, HealthLeaders spoke with payers, providers, and policy experts who understand the need for price transparency, the challenges ahead, and what it will take to get there.
It's all about out-of-pocket costs
Richard Miller, chief business strategy officer at Northwell Health, says the Long Island–based health system has been working on improving price transparency for a decade, and he believes he knows what healthcare consumers want.
"We've actually just completed some consumer research that backed up our assumption that what consumers are most interested in is what their out-of-pocket costs will be when they get various healthcare services," Miller says.
"If someone is going in for a joint replacement, they want to know, 'What is the amount that I'm going to have to write a check for in order to pay for the services that I'm going to receive?' "he says.
Those out-of-pocket costs, he says, are not controlled by hospitals, but are driven by the cost-sharing provisions in their insurance coverage.
"It's going to vary not only as a function of the provider they choose, but it varies more significantly as a result of the insurance that they've chosen and where they're at during the course of the year with meeting their deductibles," he says.
"Whether it's a bundled payment or any other type of value-based payment mechanism, or just old vanilla fee-for-service, we reach out to the insurer via a phone call and we work with them to identify what those cost-sharing amounts will be for the patient," Miller says.
Northwell is in the process of implementing new technologies that will allow it to specify patient cost-sharing provisions electronically "so that we can give them a really good estimate up front before they have their procedure," Miller says.
Northwell's research also found that cost takes a back seat to quality for many healthcare consumers deciding where to receive care.
"To have the cost discussion in the absence of any quality information is really not getting complete information," he says.
Because healthcare consumers are driven primarily by out-of-pocket costs and quality, Miller says, they probably won't care about accessing a provider's payer-specific negotiated rates, as CMS proposes.
"They're most interested in how the cost will affect them," he says.
Payers, providers pan disclosing negotiated rates
There is a growing acceptance among payers and providers about disclosing out-of-pocket and other consumer-borne costs. But those stakeholders also share an opposition to HHS' call for disclosing negotiated rates between payers and providers. Such transparency wouldn't help patients, who likely aren't interested anyway, and it could actually raise healthcare costs, they argue.
Whether or not the theory is true, it's become a key talking point for both the AHA and America's Health Insurance Plans (AHIP).
"Mandating the disclosure of negotiated rates between insurers and hospitals is the wrong approach," the AHA's Rick Pollack says. "Instead, it could seriously limit the choices available to patients in the private market and fuel anticompetitive behavior among commercial health insurers in an already highly concentrated insurance industry."
AHIP president and CEO Matt Eyles says the mandate is not needed because "virtually all plans (nearly 95%) empower consumers to comparison shop for a doctor."
"And the vast majority of plans (about 90%) can show consumers their likely out-of-pocket costs—like copays, coinsurance, and deductibles—for specific procedures and services," Eyles says.
Eyles raises a concern frequently noted by both hospitals and insurers that "disclosing privately negotiated rates will make it harder to bargain for lower rates, creating a floor—not a ceiling—for the prices that hospitals would be willing to accept."
"Publicly disclosing competitively negotiated, proprietary rates will push prices and premiums higher—not lower—for consumers, patients, and taxpayers," he says.
John Baackes, CEO of L.A. Care Health Plan, says that's what happened a decade ago in Massachusetts when then–Attorney General Martha Coakley acquired and published the reimbursement codes for every hospital in the state.
"For certain codes, the most expensive hospitals were getting twice the reimbursement from insurers than the least-costly hospital," Baackes recalls. "Coakley's thinking was they'll go to the hospitals and get them to reduce the cost so that there'll be a more-level playing field. All that happened is the hospitals that were at the low end came to the payers and said, 'Hey, give us what those guys are getting.' "
For that reason, Baackes says, insurers have been "reluctant to share what they're paying the providers because many insurers believe it is a competitive advantage."
Hospitals feel the same way, he adds.
"They honor the proprietary nature of the reimbursements from the insurer because if that particular insurer is paying them more, they're not going to want to jeopardize their relationship with the insurer by advertising that," Baackes says.
"And when the insurer figures out that maybe they're paying more than everybody else, or particularly if the insurer is paying less than the average of other insurers, they don't want that out there because then the other insurers will come to the hospital and say, 'Well, if you're charging them less, I want to pay less too,' " Baackes says.
This penchant for secrecy between payers and providers won't change, Baackes says, "until we get the notion out there that the reimbursement relationship is not proprietary, but it is based on some sort of cost-plus system, where the hospital can then be transparent about what its real costs are to provide the services."
Besides, he says, the difference in the reimbursements among insurers is immaterial.
"It's very small, because the providers will look for consistency with reimbursements, and there aren't too many favored-nation arrangements," he says.
Baackes says the price transparency movement could be greatly enhanced by dumping the chargemaster and transitioning to a cost-based system.
"The chargemaster is total fiction," he says. "Yet that's what's used when some poor sucker walks in the door who doesn't have an insurance card in their wallet. And that's what they hound them for and drive people into bankruptcy over."
When hospitals try to fashion reimbursements from insurers around the chargemaster, Baackes says "we avoid those like the plague."
"The chargemaster is in the control of the hospital, and they could tomorrow raise everything 10% and then our costs go up 10% as well," he says. "We like to have more specificity. We're going to pay them a fee based on a Medicare reimbursement, which is more of a standard, but that is not transparent. It's between us and the hospital."
Under a cost-based reimbursement system, Baackes says, charges would be transparent because they're the same for everybody.
"If we went to a cost-based system, where the hospital or the doctor says, 'It cost me this much to provide the service, and I have this much markup so that I can make a living or keep the doors open,' then everybody has a better idea of what the real value of it is," he says, "because the chargemaster rate at a hospital has nothing to do with the underlying costs. It's sort of, 'What can we get away with?' "
"Now, there could be some arrangement where there is a slight discount because the insurer pays faster, or you could go to an arrangement where the insurer pre-pays the provider and that results in some sort of discount," Baackes says.
"But again, until we get over this idea that what the insurance paid the providers is proprietary information, you're never really going to crack the transparency thing," he says.
What about value transparency?
Suzanne Delbanco, PhD, executive director of Catalyst for Payment Reform, says the healthcare sector historically has had poor transparency not just with prices, but with quality, too.
"If you're a patient, and you are trying to choose a hospital for X procedure, the chances that you can actually find the information that you want to compare hospitals on that particular procedure and get your out-of-pocket costs … and come up with some overall value choice is still largely impractical," she says.
"So, as consumers want to assess their options, it can be pretty challenging, and not just for the individual patient-consumer, but also for the employer-purchaser, trying to decide which health plan offerings to make available to their population," she says.
Delbanco says narrow networks pose their own challenges because patients want to be reassured that they're not compromising on quality for the sake of lower cost.
"If [employers] have a narrow network, are they going to be providing something that is a good value to their members or could they, without realizing it, be sending people to poor-quality providers?" she says.
A pushback for obscurity?
Even with the growing public support behind the price transparency movement, there are no guarantees that it's going to happen, Delbanco says.
In fact, she says, it could get muddier "as providers continue to consolidate and amass more market power, and therefore put more terms into their contracts that are favorable for them. We're going to see a resurgence of gag clauses that prohibit this information from being shared."
She says she sees a scenario where "must-have" providers with major market power for payer network adequacy or competitive purposes are able not just to dictate higher prices, but also prohibit information sharing on negotiated rates.
"I'm putting it out there," she says, playing devil's advocate.
"There's obviously a much bigger cry for transparency than there has been, but we're also seeing provider consolidation continue," she says. "As much as we could all say what the right thing is, I don't know that it will happen."
There are also concerns among providers of losing patient volume if they have to be transparent on their quality and prices.
"Will people know how to interpret that correctly and make the right decision?" Delbanco says. "There is the risk, for example, that a provider who charges a higher price for a given procedure might actually ultimately take care of that patient at lower expense than another system whose price was lower."
"For example, if the higher-price hospital does a better job at getting things right the first time and there are no complications and no readmissions," she says, "that could be cheaper, but that kind of stuff is challenging to convey."
Intervention is coming
With all the interest around price transparency, Delbanco foresees there being more state and federal intervention to make it happen.
"At the state level, we will see a handful more states pass laws that address these issues, and there are so many different ways to do it," she says. "I don't think we're going to see rate setting, where states try to say this is how much hospitals can get paid for X. We're more likely to see something like what Rhode Island has in place, putting a cap on how much prices can increase over time."
That legislative intervention could take the form of reference pricing, which Delbanco says has seen growing interest in recent years.
"In other words, if you tell the members of a health plan, that if you go to a provider that's higher than a reference price that we've set for something, then you have to pay the difference out of pocket," Delbanco says. "You can't do that, without transparency."
Whatever the method, Delbanco says, we're going to see more policy intervention for sure.
John Commins is a content specialist and online news editor for HealthLeaders, a Simplify Compliance brand.
Photo credit: John Baackes is CEO of L.A. Care Health Plan in Los Angeles, California (Roman Cho/Getty Images)
Even if government efforts to impose transparency in healthcare pricing fizzle, the core issue is too big to go away.
Ultimately, the debate will center on how much and what kind of price transparency.
Payers and providers can continue to obscure prices from consumers and risk an even heavier government intervention.
Or, they can acknowledge that demands for price transparency are not going away and accept a version that provides consumers with fast, simple-to-understand, and accurate estimates for how much their care will cost.