Is There a Future for Price Transparency in Health Care?

New rule requiring hospital price disclosures aims to help

By Joanne Sammer November 21, 2019
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Employers seeking to rein in health care costs have been advocating for clear pricing for health care services for years, yet for the most part, ongoing efforts to increase price transparency have not yielded the kinds of results employers have been seeking. The Trump administration recently issued a new rule to push hospitals to be more open about the costs of their services, but some doubt it will achieve that goal. Nevertheless, employers can help employees take advantage of pricing information that is available.

A New Rule for Hospital Prices

Although the Affordable Care Act requires hospitals to disclose their prices, the data so far has been too detailed and complicated to be of much use, health plan administrators say. So, on Nov. 15, the federal government released a final rule requiring hospitals to provide a range of pricing information to consumers and payers, including:

Even this latest development, however, which is scheduled to go into effect in January 2021, could have limited effect, as hospitals are expected to challenge the new rules. "This will be tied up in the courts for years," predicted Kim Buckey, vice president of client services at DirectPath, a benefits education, enrollment and health care transparency firm. "No way will hospitals and insurers give up 'competitive' information without a fight."

Paul Keckley, editor of The Keckley Report, a health care industry newsletter, wrote that the Department of Health and Human Services (HHS), which issued the final rule through the U.S. Centers for Medicare & Medicaid Services, "deserves an A for effort, but this rule has flaws." He said HHS needs to modify the rule "to make it more useful to consumers and more impactful on competition among hospitals."

However, Keckley also believes that the rule "will advance discussion about hospital price transparency and stimulate app developers to create price comparison tools for simple, uncomplicated hospital services."

A Place for Transparency

How much price transparency is possible in health care and how successful it will be in reducing costs remain unclear. "The demand for real transparency is there, but there is also frustration," said Steve Wojcik, vice president of public policy with the National Business Group on Health (NBGH) in Washington, D.C. "Information is out there, but it is still not [delivered in] real time or personalized, and costs vary depending on where you are, with no rhyme or reason for those variations."

So where do employers go from here? Below are four ways employers can leverage the pricing data that is available and look ahead to more effective means of cost control.

1. Gather whatever usable prices are available for consumers.
Some pricing data can be obtained from providers. The trouble is, there is no single repository for this data nor technology available to make the data accessible through a single price or claims database. At best, the health care cost information available to consumers provides a range of costs for services and care.

Anyone trying to shop for health care services by comparing prices "has to get information here and there and rely on aggregate data to create a general understanding of costs," said Bridget Lipezker, senior vice president and general manager for advocacy and transparency with DirectPath. "It is a lot of work to find out how much a procedure costs and how much the patient's out-of-pocket costs are going to be, and then use that data to negotiate the price."

Rather than leave this process solely in employees' hands, employers can use health care concierge services to gather and share the necessary data, including the employee's out-of-pocket expenses and the employer's cost, for each procedure and provider. "When they get this sort of data, 94 percent of employees choose the lower-priced option," Lipezker said.

2. Give health care consumers a reason to shop.
No amount of health care pricing data will be useful unless individuals can utilize it to make more cost-effective health care decisions. It will be up to employers to educate employees about how and when to use price transparency tools and why it is important to do so. Clearer and more relevant communication about health care costs and programs that require employees to compare prices can be key elements of this effort.

"Employers have danced around the dollars-and-cents issue for too long," said Buckey, urging employers to share the amount of their annual health benefit spending and explain what's driving their costs up. Then they can show employees how using available information on prices when choosing clinics or hospitals for procedures can save them money "and save the company money, which, in turn, will save the employee [more] money going forward" through slower increases in premiums, deductibles and co-pays.

In other words, employers need to establish a clear connection between the use of health care prices and employees' own health care spending.

3. Tailor approaches to populations that may not respond to price data.
Not everyone will be interested in negotiating with providers or seeking out the lowest-cost care. Heavy users of health care services who exceed their plan's out-of-pocket maximums for the plan year—and then receive care free of co-pays or co-insurance—are insulated from health care costs, even though their care can be a key driver of their employer's health care spending. These heavy users are likely to search for the highest-quality provider, often based on recommendations from people they trust, rather than focus on costs.

Most insurers and employers already leverage case management services for consistent high-spenders, who often are living with chronic health conditions, but price and quality data could help steer these patients to less-expensive treatment locations that are highly rated for diagnostic testing, drug infusions and other key elements of care.

4. Look beyond fee-for-service models.
Some experts argue that shopping for individual health care services just reinforces the focus on an inefficient, itemized fee-for-service health care model. Instead, "employers are looking to manage the health of an entire workforce, focusing on coordination of care and not itemized costs," said Wojcik. For example, some large employers have begun contracting directly with accountable care organizations (ACOs) and high-performance networks (HPNs) to obtain care for their employees by paying a per capita fee. "This could grow in the future with enough provider interest to sustain it," Wojcik said.

A NBGH survey found that 31 percent of large employers plan to implement ACOs, HPNs or both in 2020, either directly or through a health plan. Sixty percent consider doing so by 2022. The survey was conducted in May and June with the participation of 147 large employers.

[SHRM members-only toolkit: Managing Health Care Costs]

Waiting and Seeing

The story of health care price transparency is still being written. In November, federal agencies issued a proposed rule that would require employer-sponsored group health plans to provide plan enrollees with estimates of their out-of-pocket expenses for services from different health care providers. Under the Transparency in Coverage proposal, plans would be required to make such information available through an online self-service tool to help enrollees shop and compare costs for services before receiving care. Comments on the proposal are due by Jan. 14, 2020.

There also could be federal legislation requiring greater sharing of price information nationwide by health care providers and insurers.

As more pricing data becomes available, the market could start to change. "Healthcare markets could work more efficiently and provide consumers with higher-value healthcare if we promote policies that encourage choice and competition," the HHS stated in its final rule on hospital prices, which Keckley noted in his report. "Transparency in healthcare pricing is critical to enabling patients to become active consumers so that they can lead the drive towards value."

Joanne Sammer is a New Jersey-based business and financial writer.


Related SHRM Articles:

Proposed Rule Would Require Health Plans to Disclose Out-of-Pocket Costs by ProvidersSHRM Online, November 2019

Employers Look to Value-Based Health Care StrategiesSHRM Online, November 2019

Chronic Care Management Keeps Health Spending Under ControlSHRM Online, November 2019

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