Price Transparency Laws and the Future of Healthcare
December 16, 2019
by Nick Jaworski, Digital Community Builder of Circle Social, Inc.
Price transparency has been one of the hottest topics in the medical field as of late.
The Affordable Care Act (ACA) requires hospitals to make their prices transparent by making public their list prices, otherwise known as “chargemasters,” for all the services they provide.
Congress included this stipulation in the law because it acknowledged that employers are increasingly offering high-deductible health plans to their workers and because many plans sold in the ACA marketplaces would have high deductibles. This meant that more and more people are being exposed to high out-of-pocket costs.
But is it really doing what it set out to do?
What Does Price Transparency Really Mean?
With many insurance plans switching to a high-deductible model, this is putting more of the cost on the patient or consumer. As in any fair market, you shouldn’t have to wait until the service has been completed before you know how much you will have to pay.
For instance, you wouldn’t go in to get your oil changed and not know what the prices were beforehand. Furthermore, if you were handed a bill for $2,000 for an oil change, you’d certainly want to know why!
In theory, price transparency gives patients the information they need and the ability to shop around for the most effective, lowest-cost health care.
It should also drive down prices as health care providers compete for their share of the market. This promise of cost control through consumer knowledge and empowerment has made transparency a popular goal among policymakers on the right and left.
On June 24th of 2019, President Trump signed an executive order on healthcare price and quality transparency. This executive order was meant to:
“…Enhance the ability of patients to choose the healthcare that is best for them. To make fully informed decisions about their healthcare, patients must know the price and quality of a good or service in advance.”
The new executive order was intended to compel insurers, doctors, and other health-care providers to disclose more information about their prices.
It will further direct the Department of Health and Human Services to require hospitals and insurers to publish negotiated rates for services, as well as provide patients with out-of-pocket costs before their procedures. This is, in addition, to requiring pharmaceutical companies to disclose the price of their prescription medicines in television commercials, with the ultimate goal being price transparency across the board.
Will Price Transparency Actually Drive Down Costs?
While that is the ultimate goal, there is a mixture of opinions on this subject. Advocates of the order say that this will cause a free market where people are able to choose the lowest priced services for the best quality. But there are many concerns that this will actually cause prices to rise.
If Consumers Want Price Transparency, Why Aren’t They Using It?
One of the first concerns revolves around how many services are shoppable and how much the consumer understands about the billing process. Many consumers don’t have enough knowledge or information to make an educated choice about which products and services to purchase, and from whom.
When we are talking about emergency treatment, there is no time to shop around, and the patient may not even be conscious to make an informed decision.
Then there is the care provided to people with complex conditions. That may require several different specialists and/or other services that could be hard to coordinate with the consumer’s choice.
People are also creatures of habit. In a study published this year, The Journal of the American Medical Association found that even given access to the Truven Treatment Cost Calculator (a calculator designed to provide users with not only the cost of the treatment or service but also their portion of the payment) only 10% of the people used it the first year and only 20% the second year.
And this study isn’t alone. Many providers offer cost estimator tools on their sites but they are rarely used.
For example, Aetna offers a price transparency tool to 94% of its commercial market enrollees, but only 3.5 percent use it. Another study from New Hampshire found that only 1% of its residents used the state’s health care price comparison website over the course of three years.
Another issue may be due to confusion. Given the many different options for their area, and the difficulty navigating some sites, many patients will opt to go with their doctor’s referral, whether it’s more expensive or not, just to avoid the hassle.
What Happens to Provider Negotiations?
Provider negotiations and contracts have generally been held as proprietary information. If you know X payer managed to negotiate a price down by $100 at X provider why would Y payer pay them more than that?
“We appreciate the administration’s executive order where it will meet consumer transparency needs. If implementing regulations take the wrong course, however, it may undercut the way insurers pay for hospital services resulting in higher spending. The Federal Trade Commission has said that spending would likely increase if hospital-insurer payment arrangements were published.”
He hopes that the focus would remain on the out-of-pocket costs that would be accrued by the consumer, not start a bidding war between payers and providers.
Similarly, Larry Leavitt, senior vice president for health reform at the Kaiser Family Foundation released this tweet:
“I’m skeptical that disclosure of healthcare prices will drive prices down, and could even increase prices once hospitals and doctors know what their competitors down the street are getting paid.”
At this point, everything is very much up in the air as both payers and providers are swiftly condemning the practice of revealing negotiated pricing.
Four major hospital groups, including the American Hospital Association and the Federation of American Hospitals were quoted as saying,
“Instead of helping patients know their out-of-pocket costs, this rule will introduce widespread confusion, accelerate anticompetitive behavior among health insurers, and stymie innovations in value-based care delivery,” they wrote. “
Price transparency is going to happen in the future as we can see from the major push to make healthcare more affordable and more accessible. But to what extent providers and payers will be required to be transparent, and how this will be implemented remains to be seen. Already, there have been challenges to the Executive Order.
The Future of Price Transparency
While the future may be in price transparency, it remains to be determined what the scope will be. At the beginning of December, four of the top healthcare associations and three hospitals filed a lawsuit today against the Department of Health and Human Services (HHS) over the finalized hospital price transparency mandate that requires disclosure of payer-specific negotiated rates.
The lawsuit claims that the requirement violates the First Amendment by mandating “speech in a manner that fails to directly advance a substantial government interest, let alone in a narrowly tailored way.” It also claims that HHS does not have the legal authority to force hospitals to disclose anything other than standard charges.
The plaintiffs in the case, including the Federation of American Hospitals (FAH), American Hospital Association (AHA), Association of American Medical Colleges (AAMC), Children’s Hospital Association (CHA), and three individual hospitals, requested an injunction preventing HHS from enforcing the required mandate set to begin January 1, 2020.
At the current moment, hospitals are the only ones that are required to provide price transparency for their patients. However, as more and more states develop their own rules around price transparency we could see more facilities like behavior health and addiction treatment facilities being affected.
Just like value-based care, price transparency seems to be the next wave of the future in the healthcare industry. It never hurts to start talking to your teams now to have a plan in place for the future.
BHAP Can Help
Until all of the lawsuits are settled, we will have to wait to see the outcome of the future of price transparency. You will want to remain compliant with all mandates until otherwise notified.
BHAP provides up-to-date, state-specific summaries on regulations that concern your health center.
Members also get discounted rates for any of their consulting needs.
For membership details, see here.
*This is not legal advice