As of January 1, 2021, regulations require U.S. hospitals to post to their websites all of their negotiated payment rates in one sprawling machine-readable file, although many hospitals may not meet the initial deadline. The aim of the regulation is to increase price transparency with the goal that such transparency will lead to increased competition, improved customer choice, and ultimately lower prices. There will be challenges, though, to extract useful competitive information from the files. This article by Milliman professionals examines those challenges.
In November 2019, the Centers for Medicare and Medicaid
Services (CMS) released a final rule establishing requirements for hospitals
operating in the United States to establish, update, and make public a list of
their standard charges for items and services they provide. The provisions of
the final rule go into effect on January 1, 2021.
The lack of price transparency in the U.S. healthcare market is well known. There are several reasons that can make estimating costs before care difficult for consumers. One of the main challenges is the variation in billed charges and negotiated rates between insurance companies and providers. The majority of Americans have health insurance coverage through insurance companies (or payers), which negotiate prices with hospitals and providers. The negotiated prices between payers and providers have historically been confidential and subject to nondisclosure agreements.
Health economists and other experts believe that
transparency in pricing is key to healthcare cost containment. Opponents of the
policies adopted in the CMS final rule say that these requirements will impose
a significant burden on hospitals and may lead to confusion without providing
any relevant information.
In this paper, Milliman actuaries and consultants provide a summary of key provisions of the final rule that apply to hospitals, briefly touching on topics that require additional consideration by parties affected by the rule.
The key message at the 8th Asia Conference on Healthcare and Health Insurance centered on the sustainability of the health insurance industry in India. This article in Asia Insurance Review (subscription required) cites Alam Singh, who said the industry needs to, “Collaborate, as it is everyone’s problem!”
It is crucial for insurers to create an internal culture of information sharing so processes and guidelines evolve quickly. Insurers also need to provide regular training to sales, underwriting and claims employees and invest in data analysis and also offer rewards to whistleblowers,” he added. The industry as a whole should have a mechanism to share case studies, tools and training and should also create data standards that facilitate analytics, which is the unique provider code.
…The industry [needs] to collaborate in data analysis and to collectively engage with policy makers and consumer bodies. The industry also needs to collaborate with media to increase public awareness that fraud will not be tolerated and finally demand tougher laws and facilitate prosecution.
A new article in Insight offers a way to infuse more transparency into healthcare financing. Here is an excerpt:
In no other area of our economy do consumers receive services where they do not know the cost in advance and are not able to make comparisons to alternative suppliers. As a result, healthcare provider costs have remained immune from the economic forces that could control them. This immunity has contributed to greatly increasing provider costs, a major component in today’s rising healthcare costs.
The lack of price information stems from the confidential nature of negotiations between providers and payors. Providers compete with each other trying to get the highest payment from payors, and payors compete with each other trying to set the lowest payments to providers. In hopes of getting the best deal, both providers and payors want their negotiated rates to be kept confidential. Information is kept from the consumer that is necessary to make the best choices and drive an improved market.
A transparent cost network is designed to break down this limitation, giving consumers the price information they need to make informed decisions. Payors that can deliver this valuable product offering to consumers will likely gain market share for this lower-cost product.
The full article is available here.
Today’s Milwaukee Journal Sentinel reports that the community data pooling organization, Wisconsin Health Information Organization (WHIO), has launched a database that will now be available to large healthcare systems and, eventually, to consumers. The database will improve transparency and allow better understanding of healthcare quality and cost dynamics:
The database is drawn from the experiences of more than 1.6 million people and 72 million treatment services. In April, WHIO will add data from Dean HMO and Medicaid, which includes BadgerCare, the state health program for the working poor, adding the experiences of 1 million more insured people to the database.
“To us, the real opportunity is to look across all the claims aggregated here and get a picture of where we have cost-effective health care being delivered in Wisconsin, and where we have an opportunity to improve the cost-effectiveness of health care,” said Karen Timberlake, secretary of the state Department of Health Services and a WHIO board member.
“There isn’t a database like this that’s been available to providers to measure these sorts of things. And if you can’t measure it, you can’t improve it,” said Larry Rambo, chief executive of Humana’s Wisconsin, Michigan and Illinois markets.
Wisconsin is among a handful of states – including Minnesota, Massachusetts, Oregon and Washington – that have put infrastructures in place for pooling health data to improve quality and transparency, according to a briefing paper written this year by the consulting and actuarial company Milliman.
Click here for more information on these information exchanges.
Milliman consultant Troy Filipek, who has published previously on the topic of pharmacy benefit manager (PBM) transparency, offers some perspective to the Wall Street Journal. PBMs may find they no longer have a choice in disclosing certain pricing negotiations. Quoting the article:
Typically, pharmacy-benefit managers have carried out pricing negotiations behind closed doors, leaving insurers and other outsiders little idea of the actual prices PBMs negotiate for drugs or their profit margin.
The PBMs argue such secrecy is necessary to negotiate lower prices, but critics say it only helps PBMs pocket more money at the expense of others.
The president of the pharmacy-benefit managers’ trade group called the provisions a bad idea. “One of the great services PBMs provide is to play drug companies off one another and get big discounts on drugs,” said Mark Merritt of the Pharmaceutical Care Management Association. “The thing that drives prices down is competition, not this kind of transparency which tends to help suppliers keep prices higher.”
Greater transparency could result in drug makers giving smaller discounts to PBMs, which could lead to higher drug costs for insurers and consumers, according to analyses by the Congressional Budget Office of previous legislative proposals.
The Weiner provisions aren’t in versions of the health-care bill passed by other House committees. In the Senate, Maria Cantwell (D., Wash.), a member of the Finance Committee, said she wanted her committee’s health-care bill to include similar disclosure requirements for PBMs.
Some companies that offer drug benefits to employees are taking action on their own. Nearly 60 large employers accounting for more than $4.9 billion in annual drug spending, including McDonald’s Corp. and International Business Machines Corp., have banded together to demand greater transparency from pharmacy-benefit managers.
They have signed on 15 PBMs, including industry leaders Medco Health Solutions Inc. and CVS Caremark Corp., that are willing to disclose to the companies their acquisition costs for drugs and pass along any additional discounts they get.
One of the companies, Caterpillar Co., also negotiated prices for the drugs its employees buy from Wal-Mart Stores Inc., although it still uses a PBM to handle claims.
Troy Filipek, an actuary at consulting firm Milliman Inc., predicted that more companies will seek alternatives to traditional PBMs. “I think in general, plans just want to have an understanding of where PBMs are making their money,” he said.