January 22, 2021 - 702 views|
Here's what healthcare providers and payers need to know about the final rules for healthcare pricing transparency and how to get started on compliance.
Aside from healthcare, there’s no other service that expects us to engage without knowing the price upfront. That’s about to end: In an effort to bring transparency to healthcare pricing, the Department of Health and Human Services (HHS) has issued a set of final rules on price transparency for payers, which is based on a previously published, similar rule for providers.
The ruling enjoys strong support from both political parties, and in January, the Centers for Medicare and Medicaid Services began auditing, in a limited capacity, hospitals for compliance to the mandate.
In essence, they're a response to ample criticism of the opacity of healthcare pricing, from journalist Steven Brill’s riveting and infuriating autopsy of hospital costs, to oncologist Dr. Marty Makary’s chronicle of the connection between the lack of healthcare pricing transparency and financial crisis for many U.S. families. According to a recent JAMA article, one in five insured adults have had to deal with a surprise hospital bill, and on average, 18% of emergency department visits result in at least one surprise bill. In fact, 60% of U.S.-household bankruptcies are the result of unexpected medical bills.
Under the final rule, more than 200 million Americans with individual-market and employer-based insurance will have access to a list of real-time healthcare pricing information, including cost-sharing, enabling them to know how much their care will cost before going in for treatment.
The idea behind the rule is simple and laudable: Consumers with access to accurate healthcare pricing information can compare costs before receiving care and choose a healthcare provider that offers the most value and best suits their medical needs. The months ahead will be ones of preparation for providers and payers, not all of which agree that the ruling will have the intended impact.
Spelling out the rules
The implications of the ruling for the healthcare industry are widespread. Health plans will need to provide personalized out-of-pocket cost information, and the underlying negotiated rates, for all covered healthcare items and services, including prescription drugs online and in paper form to their members.
Health plans must provide three separate machine-readable files that include detailed pricing information detailing the following:
Hospitals must also make standard charges and payer-specific negotiated charges available to patients.
The requirements will take effect gradually over a four-year period:
The inevitable pushback
The American Hospital Association (AHA) has pushed back on the legislation on two grounds. It questions the usefulness of public disclosure of negotiated rates in making a comparative cost-based healthcare decision by consumers. The organization also questions the timing of the rules, arguing that hospital resources during the pandemic should be devoted to patient care. The AHA’s lawsuit challenging the ruling was ultimately dismissed by a federal judge in Washington, D.C.; in December, the group submitted an emergency stay of enforcement motion.
America's Health Insurance Plans (AHIP), the trade association of health insurance companies, on the other hand, argues that this level of transparency could set a pricing floor, instead of a ceiling, where some providers could demand higher reimbursement, and thus increase the overall healthcare costs.
This is the first time – in my 20 years of healthcare experience – that both payers and providers are on the same side of an issue. The reason is simple: Lack of price competition is financially beneficial to all players.
Reaping the benefits and opportunities
Despite the opposition to this regulation, it could introduce an array of benefits.
Health plans could increase member loyalty by enabling, encouraging and incentivizing members to shop for services from lower-cost, higher-value providers. Health plans that share the resulting savings with members will be able to take credit for such “shared savings” payments in their medical loss ratio (MLR) calculations. This means health plans won’t have to pay MLR rebates based on a plan design that provides a benefit to consumers that isn’t currently captured in an existing MLR revenue or expense category.
Publicly available, frequently updated, standardized pricing data would offer, for the first time, an opportunity for research, innovation and potentially new competition. For example:
The regulation could also encourage tighter collaboration between payers and providers, thus putting integrated delivery networks at a significant advantage.
Of course, the regulations also pose challenges for industry players and consumers, themselves. Making pricing data available does not necessarily mean that consumers will know how to make the best use of it. It’s also possible that consumers may not make price-based medical decisions. And patients with health insurance would usually experience very little variation across options when they’re able to stay within the network.
Getting ready for the new landscape
While healthcare organizations may get a temporary reprieve due to the pandemic, they need to begin strategizing on how to respond. Getting started will require two actions at the very least:
In the long run, providers cannot compete on price alone. They need to go beyond traditional patient satisfaction measures and think like consumer brands like Lululemon, Starbucks, Nike and others, which offer many lessons to other industries on acquiring customers and engaging with them to build loyalty. Once they do this, we will be well on our way to the consumer-driven, on-demand healthcare world of the future.