How Will the CMS’s New Health Care Price Transparency Rule Play Out?

January 28, 2020

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Source: BenefitsPRO, by Dan Cook

The hospital chargemaster list is the latest political hot potato to be gingerly handled by the Trump administration. With new disclosure requirements scheduled to take effect in 2021, the Centers for Medicare and Medicaid Services intends to provide health care consumers access to data never before made public in an effort to help them make better decisions concerning their health.

But will it work as intended? And what about the employer plan member? After all, most Americans are covered through their workplace.

We asked an array of parties involved in employer health plans to share their thoughts about the effectiveness of the CMS transparency strategy, and its possible application to employer plans.

Nothing’s done until it’s done

In general, our sources agreed that any attempt to increase hospital pricing transparency should have some positive outcome for consumers. However, most were skeptical that the new requirements will take effect as currently written. With more than a year to protest the highly detailed regulations, health care systems will doubtless have more to say about the rules that will be established.

Of greater concern is whether the rule as written could backfire. Here are three possibilities:

  1. 1. It asks for considerable pricing disclosure by hospitals; the resulting mountain of data could prove to be impenetrable and not very helpful, for most consumers.
  2.  2. It could actually drive higher prices, as hospitals seek to match the prices released by their competitors. While CMS is hoping transparency will lead to lower prices, the opposite could easily happen.
  3. 3. And, by forcing hospitals to lay out their pricing strategies, the rule could also undermine employer plan sponsor efforts to negotiate favorable terms for their plan members—terms most would rather not share with other sponsors.

Joseph Hopkins, director of business development at Premise Health, is among those who support CMS’s initiative to bring greater transparency to hospital billing.

The requirements have “the potential to create a more competitive care delivery landscape, allowing consumers the ability to have more control over the costs of care,” he says. “As more transparency in pricing finds its way into the general marketplace, I see there becoming more innovative ways that health systems will bundle services and prices for those services. Ultimately, there will be a market alignment, where lower-cost services will increase to meet the lowering of the highest cost services, and a middle will be created.”

Forging ahead

Large employers aren’t waiting for the government’s help in locking in better rates for plan members, Hopkins points out. Rather, they are increasingly turning to direct contracting with providers as a way to generate price predictability, higher quality outcomes and better overall employee health.

“The larger picture that is being missed is that employers are contracting directly in order to improve quality in the care that is delivered, understanding that better quality care may not have the lowest price, but it may end up being the lowest cost in the end,” he says.

Benefits advisor Allison De Paoli agrees that transparency requirements will eventually have a positive effect on pricing and medical decisions.

“Over time, it should make a difference,” says De Paoli, founder of Altiqe Consulting. “And there are two ways this will happen. First, CMS will make this data available. Every year, it becomes easier to parse this data, recognize patterns and develop plans that work more effectively for both the employer and the employees. Employers who have these price transparency tools available, and who are using them, will have better data to work with once the new law goes into effect.

“Second, for those who don’t use those tools or have access to this data, price comparison on the consumer level should become easier over time.”

Initially, system comparisons will be difficult to make due to the complexity of the data, she says. “But hopefully over time, we will see a standardization of coding to solve the comparison problem.”

Simply forcing hospitals to make massive amounts of pricing data public won’t lead to better consumer choices unless consumers and employer plan members have help understanding what the numbers mean, says Marcia Otto, Health Advocate’s vice president of product.

She notes that many transparency tools are already available to individual health care consumers and employer plan members. Indeed, the market has seen a slew of them emerge in the last five years.

But consumers often aren’t taking advantage of what’s already available to them, she says.

“We have lots of claims data from employer sponsored groups, and we made a tool to give estimates plus quality information. It is a tool to help consumers find what the true cost will be to them. Ours has done well, but there has been very low utilization in a lot of the tools out there,” she says.

One reason Health Advocate’s transparency tool has done better than others, she says, is that plan members can get help as they use the tool.

“People can phone in with questions, then we can direct them in how to use our tool. Twenty percent of searches are done by an advocate on behalf of an employee, not by the employee. People need concierge, advocacy and research help to understand the data and make better decisions.”

Competitive consequences

Otto is among those who suspect the publishing of chargemaster prices will lead to higher prices in some markets. “The hope is that people will look at the list and say they will go to another hospital with high quality and low cost. But I think the hospitals are going to copy each other,” with the lower-priced system increasing its chargemaster rates.

Another issue raised by some employer groups: At what point does the push for transparency run up against fair competition?

Brian Marcotte, former president and CEO of the National Business Group on Health, worries that if hospitals are required to make public all their prices with all parties, employers will have to divulge the terms of direct contracting with health systems. And that’s considered proprietary information by employers.

“Complete disclosure of all negotiated rates could be counterproductive,” he says. “Employers want transparency from the provider within their plan. Then you can see how it will impact the decisions they will make. But we don’t know what will happen when they put it all out in the public domain. There could be unanticipated consequences.”

Within a plan sponsor network, transparency is crucial to creating an effective health plan, he says. “What do employers need to make informed decisions? They want patients and doctors to have access to all costs, deductibles, out-of-pocket and the rest. They need access to quality and performance data as well within their specific health plan.”

But disclosure of all pricing information by health systems “is a very high bar” that could have repercussions such as raising prices in certain markets where systems with lower chargemaster list prices raise theirs to meet a competitor’s rate.

Further, he says, the fixation on price per service or procedure only reinforces the dominant fee-for-service system that organizations like NBGH and Health Rosetta are moving away from.

“From an employer perspective, it’s about value: quality plus delivery plus experience over cost. It’s the value proposition that businesses use,” Marcotte says. “Where is the quality proposition in the CMS regulations?”

Physicians and other health care professionals are the ones who need access to true costs and outcomes, he says. “When we talk about competition in health care, the competition is at the provider level. Where do I go for care? Where does my provider send me for care? That’s where we need transparency of price, quality and performance.”

Time to dive in

Health Rosetta’s Dave Chase is among those who applaud the transparency initiative by CMS.
“Greater price transparency is critical to fixing our broken health care system. It needs to happen on all fronts, especially hospitals,” he says. “Sadly, PPOs are now designed to facilitate price-gouging hospitals, and the majority of employers with high-deductible plans. In response, direct contracting and cash payments by employer sponsored plans bypass value-extracting PPO agreements. Consequently, this ‘real market’ (versus the rigged PPO market) has demonstrated the value of transparency.”

But, he says, the government can go much further in improving the U.S. health care system. “The most untapped facet of the federal government is that they are a large employer, with nearly 3 million federal workers. If you add state and local public employees, there are 22 million government employees, and taxpayers should have the ability to see where their money is being spent. We frequently see PPO arrangements absurdly paying 10 times Medicare rates. “An executive order by the president, governors and mayors could bring transparency overnight. Why are we waiting?”

So the transparency debate rages on. Whether it began as a political ploy in an election cycle or a sincere effort to reform health care, the regulations are now out there for all to see—and weigh in on. With a year to go before the current version becomes law, the test will be to see who moves this political football toward their goal: the Obama era reformers, or the powerful health systems.


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