More than 1,500 hospitals will get higher Medicare payments from the program in FY 2020.
Hospitals could receive as much as $1.9 billion from the federal government in 2020 under projections put forward this week for the Hospital Value-based Purchasing Program, the Centers for Medicare & Medicaid Services announced.
In FY 2020, more than 1,500 hospitals – about 55% of participants – will get higher Medicare payments from the program, which is in its eighth year.
The law sets aside 2% of Inpatient Prospective Payment System payments for the approximately 2,700 participating hospitals, which is then distributed to hospitals based on the quality and cost for inpatient care.
The Total Performance Score for hospitals is based on performance scores in four metrics; clinical outcomes, safety, person and community engagement, and efficiency and cost reduction. Each metric accounts for 25% to the total score.
Almost 60% of hospitals will see a small fluctuation in Medicare payments between -0.5% and 0.5% percent, with an average net payment adjustment of 0.16%. The average net increase is 0.60%, and the average net decrease is -0.39%.
The highest performing hospital in FY 2020 will receive a net increase of 2.93%, and the lowest performing hospital will see a net decrease of -1.72%.
The incentive payments earned back will depend on each hospital’s Total Performance Score, value-based incentive payment percentage, and money available under the program.
The payments will depend upon:
How hospitals performed—compared to peers—on quality and cost metrics during a performance period.
How much they have improved the quality of patient care over time.
Hospitals must have a domain score for at least three of the four TPS metrics to have a TPS calculated. Hospitals that don't do not have their payments adjusted in the corresponding fiscal year.
For FY 2020, the average TPS across all participating hospitals increased to 38.5 from 38.1 in FY 2019.
Rural hospitals performed better in the Safety, Person and Community Engagement, and Efficiency and Cost Reduction domains, while urban hospitals performed better in the Clinical Outcomes domain.
For FY 2020, the average TPS across all rural hospitals of 42.8 was greater than the national average TPS.
Smaller hospitals also performed better in the Safety, Person and Community Engagement, and Efficiency and Cost Reduction domains and had higher overall TPS. Urban hospitals performed better in the Clinical Outcomes domain.
For FY 2020, the average TPS across all rural hospitals is 42.8, which is greater than the national average TPS.
Medicare patients treated by clinicians who are later banned for fraud and abuse are 14% to 17% more likely to die than patients treated by non-excluded clinicians.
New research shows that Medicare fraud and abuse costs more than wasted tax dollars.
Johns Hopkins researchers estimate that Medicare fee-for-service patients treated by clinicians who later are banned from the federal healthcare program for fraud were as much as 17% more likely to die than patients treated by non-excluded clinicians.
In 2013, that fraud and abuse contributed to 6,700 premature deaths, and study lead author Lauren Nicholas says that number is a low-ball estimate because it does not factor in other government-sponsored health insurance, commercial health insurance or the uninsured.
"The biggest take home message for us was the extent to which fraud and abuse should really be thought of not only is a financial problem, but as a public health challenge," says Nicholas, an assistant professor in the Johns Hopkins Bloomberg School’s Department of Health Policy and Management.
The study also found that patients treated by later-banned providers were 11% to 30% more likely to experience an emergency hospitalization within a year.
Nicholas says the higher mortality rates of patients of later-banned clinicians are "directly related to the crimes that these perpetrators are committing in order to bill Medicare for additional revenue."
"A lot of these perpetrators do things like illegally disseminate dangerous drugs. There are cases where they're doing medically contraindicated surgery because surgery is a lucrative thing to bill for, or they're using fraudulent make-your-own chemotherapy," she says. "It's hard to believe some of the things that people will do to be able to bill for it, and these things are incredibly dangerous for the patients who then get exposed to it."
“We found that even a single visit with a provider later excluded for fraud and abuse increased the risk of dying compared to someone who lived in the same county and had the same health status but did not see an excluded provider,” Nicholas says.
In the analysis, the Johns Hopkins researchers looked at providers banned from Medicare for fraud and abuse by the Department of Health and Human Services’ Office of the Inspector General between 2012 and 2018.
The researchers linked the banned providers to a random sample of the Medicare patients treated by excluded providers.
The study sample included 8,204 Medicare FFS patients who were first treated by a provider later banned for fraud and abuse in 2013 and a comparison group of 296,298 patients treated by a randomly selected provider who had not been banned for fraud and abuse.
Before the fraud exposure, the two groups were in similar health. Nicholas and her colleagues followed patients for up to three years to identify differences in mortality and hospitalization.
Nearly one-quarter—23%—of patients seen by banned providers were non-white while 16.5% of patients treated by non-excluded providers were non-white.
Patients treated by banned providers were more likely to be disabled, (27.2% vs. 18.6%) and dually enrolled in Medicare and Medicaid, (34.7% vs. 21.9%).
More than 47,000 clinicians have been banned from Medicare and Medicaid, and the fraud and abuse associated with the program costs as much as $140 billion a year.
A further breakdown of the patient-clinician mix shows that 60% of patients in the sample were treated by providers committing fraud. Of those patients, 14% were treated by providers who had committed patient harm, and 24% were treated by providers practicing with a revoked license.
Providers excluded for fraud had the highest mortality rate. Their patients were 17.3% more likely to die than patients not treated by a banned provider.
Patients treated by providers banned for patient harm were 13.7% more likely to die, and patients who were treated by providers banned for revoked licenses were 14.8% more likely to die.
Residents who experience mistreatment during training have greater risks of burnout and suicidal thoughts.
Half of general surgery residents reported experiencing workplace harassment at least a few times a year, with much of the mistreatment coming from patients and their families, and attending surgeons.
The survey of 7,409 residents in 262 residency training programs across the nation — more than 99% of general surgery residents in the United States — found the most common workplace mistreatment were sex discrimination (32%), verbal abuse/bullying (30%), racial discrimination (16.6%), and sexual harassment (10.3%).
"Exposure to workplace mistreatment was the largest driver of surgical residents' burnout," study principal investigator Karl Y. Bilimoria, MD, said in comments accompanying the report.
"Preventing these types of mistreatment could reduce the huge problem of burnout in the specialty of surgery," said Bilimoria, director of the Surgical Outcomes and Quality Improvement Center at Northwestern University Feinberg School of Medicine, Chicago.
The survey findings presented Monday at the American College of Surgeons Clinical Congress 2019 in San Francisco and published on the New England Journal of Medicine website.
The survey found that:
Nearly 31% of residents reported the frequency of mistreatment as a few times per year, and 19% reportedly experienced mistreatment a few times or more each month.
Women, who represent less than 40% of the survey respondents, were twice as likely to report mistreatment as their male colleagues: 70.6% versus 36%.
Nearly half (47.4%) of the racial discrimination complaints and 43.6% of sexual harassment complaints were prompted by interactions with patients and their families.
Attending surgeons were the most frequent sources for verbal or physical abuse toward residents (52%) and sexual harassment (27.2%).
Symptoms of burnout—emotional exhaustion and depersonalization—occurred weekly among 38.5$ of residents.
Residents reported a 4.5% rate of suicidal thoughts during the past year.
Women were 33% more likely to report burnout symptoms. However, Bilimoria said that when the findings were adjusted for exposure to mistreatment, there was no sex-based difference in burnout frequency, suggesting that more frequent harassment explains women residents' higher incidence of burnout.
The prevalence of surgical residents' mistreatment is concerning, Bilimoria said, but he noted that some residency programs had very low or no rates of mistreatment, which he said shows that improvements are doable.
Bilimoria said he was surprised to learn from the survey that patients and their families accounted for the bulk of racial and sex discrimination for residents.
"It completely changes how we should intervene," he said. "We need to arm residents with the skills and ability to address discrimination from patients and patients' families affecting them and their colleagues."
Chronic Disease Fund, Inc., and Patient Access Network Foundation allegedly worked with drug makers to funnel money to Medicare patients taking drugs the companies sold.
Two foundations will pay a combined $6 million to settle allegations that they enabled pharmaceutical companies to pay kickbacks to Medicare patients, the Department of Justice said.
The foundations – Chronic Disease Fund, Inc. doing business as Good Days from CDF, and Patient Access Network Foundation – will pay $2 million and $4 million, respectively, to resolve the alleged violations of the False Claims Act, federal prosecutors in Boston said.
The government alleged that the two foundations worked with several drug makers to design and operate funds that funneled money from the companies to patients taking the specific drugs the companies sold.
"These schemes enabled the pharmaceutical companies to ensure that Medicare patients did not consider the high costs that the companies charged for their drugs," DOJ said. "The schemes also minimized the possibility that the companies' money would go to patients taking competing drugs made by other companies."
Federal prosecutors said that, from 2010 through 2014, CDF conspired with five pharmaceutical companies – Novartis, Dendreon, Astellas, Onyx, and Questcor – to pay kickbacks to Medicare patients taking their drugs.
Prosecutors also allege that, from 2011 through 2014, PANF permitted four pharmaceutical companies– Bayer, Astellas, Dendreon, and Amgen – to use PANF as a conduit to pay kickbacks to Medicare patients taking their drugs.
The settlements were determined based on analysis of each foundation's ability to pay.
The Anti-Kickback Statute bans drug makers and third-party co-pay foundations from paying any remuneration to induce Medicare patients to purchase the companies' drugs.
Andrew E. Lelling, U.S. Attorney for the District of Massachusetts, said the government's allegations made plain that "CDF and PANF functioned not as independent charities, but as pass-throughs for specific pharmaceutical companies to pay kickbacks to Medicare patients taking their drugs."
"As a result, CDF and PANF enabled their 'donors' (the pharmaceutical companies) to undermine the Medicare program at the expense of American taxpayers," Lelling said.
The curriculum addresses financial and regulatory issues facing rural hospital in Georgia.
A new law in Georgia requires rural hospital executives and board members to attend eight hours of classroom time to bone up on the issues and economics that smaller hospitals face.
The law, which allows the state to withhold funding and tax credits for hospitals that don't comply, was passed by the state legislature last year, and comes as the Peachtree State has seen seven rural hospitals shuttered since 2010. Another 26 small hospitals are considered to be at "high financial risk,"according to the consulting firm Navigant.
Chuck Adams, a former rural hospital CEO and now executive vice president of the Georgia Hospital Association, and director of the Center for Rural Health, spoke with HealthLeaders about the program, and what it hopes to achieve. The following is a lightly edited transcript.
HLM: Where did this idea come from?
Adams: The state set up a $60 million a year rural hospital tax credit program that allows companies and individuals to donate directly to the hospital and get that tax credit back. Because of that and because the state was putting other resources into rural healthcare they wanted to make sure that the education and resources at the local level were adequate. The legislators felt like it would set a baseline and help our rural hospitals.
The landscape of rural healthcare is changing, and these boards and leaders need to be open to all the new technology and new models that are out there.
HLM: How long is the course, and what does it cover?
Adams: It's very flexible. They selected Mercer School of Medicine in Macon, Georgia to be the institution that develops the Georgia Rural Health Innovation Center, which then developed the curriculum and training guidelines.
The guidelines came out in June and it involves eight hours of training for eight different standards. Current board members have to be trained by the end of 2020. They get their initial eight hours and it's good for two years.
It covers governance, regulatory agencies, financial and judiciary responsibilities, compliance, ethics, continuum of care, strategic planning, and grant management.
How much will this cost?
Adams: It's going to be about $2,500 per facility for unlimited participants. We're going to have training throughout the year in many different formats, live in person, live interactive webinars, on demand modules. We want it to be convenient for our hospitals and board members so they can do it on their own time.
HLM: This seems to be designed mostly for board members. Why should CEOs and CFOs be required to take these courses?
Adams: The state wants them to see the training that their board members are going through as well, so everybody's on the same page.
HLM: Describe is the typical rural hospital board member that this course is designed for.
Adams: They're leaders in the community who have a vested interest in that community and that hospital. They might not necessarily have a wealth of knowledge with respect to how hospital runs, but they've got the commitment.
HLM: What metrics will you use to determine if this program is working?
Adams: Every session will have a test. If they don't pass, they have to retake the course and can't go to the next course until they get through it. And there will be course evaluations that are the required. Every participant, once they take a course, will give us feedback so we can use our own quality control to make sure we're teaching what they need to be taught.
HLM: When does the course begin?
Adams: Right now they are no approved trainers in Georgia. Our application is in process and we know it will be approved. So, we're going to kick ours off on January 1st.
HLM: Are there penalties for hospitals that do not comply with the law?
Adams: If you read the legislation, it says the state "may" discontinue their involvement in the rural hospital tax credit program and other state funded grants.
HLM: If the Georgia Legislature is sincere about helping rural hospitals, why don't they expand Medicaid?
Adams: They're working on it. They did pass last year some legislation to begin the Medicaid waiver process, and the state has hired a consulting firm. We're hopeful that there will be some increased access of care through that.
As many as 5% of patients leaving the hospital with an infection have a 30-day readmission for that preexisting infection.
A disproportionately high number of seniors return to the hospital within 30 days of discharge for pre-existing infections that were presumably treated during the first hospital stay, according to a study from Michigan Medicine.
"We found that as many as 5% of patients leaving the hospital with an infection have a readmission for that preexisting infection—that's bad," said study lead author Geoffrey Hoffman, assistant professor in the U-M School of Nursing.
Hoffman and his colleagues looked Medicare records for more than 318,000 hospital discharges for patients 65 and older and found that 2.5% of them return because of linked infections.
The most common infection was Clostridioides difficile (roughly 5% readmission), followed by urinary tract infections (2.4% readmission).
The 2.5% readmission rate looks small, Hoffman said, but he stressed that hospitals know how to treat these infections, and know patient has the infection upon discharge.
"Presumably they've been treated for the infection since the hospital has already billed Medicare," Hoffman said. "Readmissions shouldn't be zero, but they should be much closer to zero."
The number of patients with the same diagnosis at readmission and discharge is very narrow, Hoffman said, so the number will by default be much smaller than overall hospital readmissions.
For instance, he said, heart failure and chronic obstructive pulmonary disease, or COPD, have about 10% and 8% linked readmission rates, respectively. Unlike infections, however, those complex conditions aren't entirely curable, so complications are more frequent.
Surprisingly, patients discharged home or to home care were 38% more likely to return with a linked infection than those discharged to skilled nursing facilities, Hoffman said.
"I was very surprised," he said. "This is somewhat conflated with the conventional wisdom, which is that skilled nursing facilities are warehouses for infection transmission."
"The fact that patients discharged to skilled nursing had lower readmission rates for Clostridioides difficile infections than people discharged home is pretty amazing, given that those patients by definition are sicker and would more likely to be readmitted than those discharged home," he said.
Hoffman said the findings show that infections spread at higher rates in SNFs, but they're also good at treating them.
"There are probably some gaps in self-care for patients going home with an infection from the hospital," he said. "This suggests home health care agencies aren't up to snuff with infection control and patients going home without home health care probably need better training, as do their caregivers."
The research was funded by the Agency for Healthcare Research and Quality, U-M Older Americans Independence Center Research Education Core and the U-M Pepper Center pilot.
ACOs with cardiologists may see lower spending for SNFs, ED visits, evaluation and management services and procedural care.
Medicare accountable care organizations that have cardiologists in their physician network save about $200 per patient per year when compared with ACOs that don't, new research shows.
Study senior author John Hollingsworth, MD, a urologist at Michigan Medicine, speculated that that the $200 annual savings in the ACOs with cardiologists was a result of lower spending for skilled nursing facilities, evaluation and management services and procedural care.
"While the mechanism is unclear, we speculate that ACOs with cardiologists may be more likely to develop efficient, appropriate, and value-centered referral pathways," Hollingsworth said in an email exchange with HealthLeaders.
The Agency for Healthcare Research and Quality-funded study looked at Medicare data for 1.6 million patients per year with cardiovascular disease, including heart attacks, atrial fibrillation, congestive heart failure and ischemic heart disease.
Although the number of ACOs more than tripled–from 114 in 2012 to 392 in 2015–from 2012 through 2015, the proportion of ACOs with cardiologist participation remained at 80% in 2012 to 83% in 2015.
Outcomes for heart failure admission rates, ED visits and hospital readmissions were the same between the two ACO models.
"We try to disentangle whether the reduced spending is related to cardiologist participation or other unmeasured characteristics of ACOs and find evidence to suggest the former," Hollingsworth said.
"For instance, in some practices, a new diagnosis of atrial fibrillation may lead to costly ED visits or hospitalizations, whereas in other practices it may be managed safely and effectively as an outpatient with expedited cardiology outpatient follow-up," he said.
Beyond the fears that public disclosure of negotiated rates could harm payers and providers, a reason why price transparency is lagging in healthcare is because "it's hard to do," says Suzanne Delbanco, PhD, executive director of Catalyst for Payment Reform.
"There are some logistical challenes to getting the information to people in a way that is accurate, understandable, and relevant," she says. "While health insurance companies themselves have gotten much better with the tools that they offer, there's still a lot of missing data; the functionality is still clunkier than it should be. We still have a way to go in terms of figuring out how to do it."
Kari Cornicelli, CFO at Phoenix Children's Hospital, says the pediatric provider works closely with patients' families to give them as accurate a cost estimate as possible, but challenges remain.
"If you're paying the bill, you want to understand what you're paying for, but when there are complexities related to a very difficult diagnosis, the care is going to change depending on how the patient reacts to each phase of care," Cornicelli says. "So, it's really hard to give solid out-of-pocket costs to the family."
"Many times, the family doesn't really fully understand the complexities of their care," she says. "Therefore, when they ask for pricing, and we give it for what we think they're getting, and then their services are actually different, that's where it becomes more challenging."
"We're really focused in on what is the difference between what they're going to be responsible for," she says. "We don't want to go into the whole complexity of their insurance product. We want to get back down to identifying what their copay or their deductible is going to be."
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.
Medicaid insurers offered the lowest-priced silver plan 72% of the time when competing with an MMCO.
Commercial insurers would likely lower premiums if they had to compete with a public health plan option, a new Urban Institute analysis shows.
That's because setting provider payment rates close to Medicare's would lower marketplace premiums, particularly in high-priced markets," the analysis found.
"As we have suggested elsewhere, a public option could catalyze competition in less competitive markets, leading other marketplace insurers to lower their premiums," the analysis said.
In 2019, areas with an MMCO selling coverage in ACA marketplaces had benchmark premiums about $30 per month lower than comparable areas without a participating Medicaid insurer, controlling for other market differences. Those Medicaid insurers offered the lowest-priced silver plan 72% of the time.
Researchers estimate the potential savings from a public option would have a particularly significant effect in areas with only one commercial insurer.
"Competition can encourage insurers to negotiate lower prices with healthcare providers," said Linda Blumberg, Institute Fellow at the Urban Institute. "A public option may deliver the catalyst that insurers and providers need to make coverage more efficient and affordable."
Using Medicaid Managed Care Organizations that existed before the Affordable Care Act as a stand-in for a public plan, the Urban Institute analysis attempted to understand how commercial insurers would respond to a public competitor with lower expenses.
Rather than fearing that they couldn't compete, Blumberg said the lower rates paid by a public option could give compete insurers more bargaining power over providers with market control, and that bargaining power would be critical to private insurers retaining significant market share.
"Providers could therefore accept lower payment rates, given the threat that a public option would dominate, and insurers could then offer lower premiums," the analysis said.
"A public option paying rates similar to traditional Medicare rates could offer coverage with premiums lower than those of insurers who pay commercial rates. Thus, many commercial insurers resist this reform, believing they cannot compete," the analysis said. "Evidence showing insurers would respond with somewhat lower rates and continue to compete with a Medicaid insurer could inform the conversation about the implications of introducing a public option."
MMCOs are not purely public options, but were used in the analysis because their coverage on ACA marketplaces resemble existing Medicaid networks, which allows MMCOs to pay providers lower rates than commercial insurers, Blumberg said.
The analysis was funded in part by the Robert Wood Johnson Foundation.
