As the US elections approach, there’s an issue that both the left and right of the US political spectrum agree on: price transparency in healthcare. Today, costs of procedures in the US can be huge, unpredictable and can vary according to location, but most voters want to know how much healthcare will cost before they get to the hospital, according to opinion polls.

Data from the Healthy Marketplace Index (HMI) found that, in 2020, the median price for a caesarean in San Francisco-Oakland-Hayward, CA, at US$20,721, was nearly 4.5 times that in Knoxville, TN ($4,556), for example; while a common blood test in Beaumont, TX, at $443, costs nearly 25 times more than the same test in Toledo, OH ($18). US healthcare prices have been called ‘as clear as mud to patients’ by government department the Centers for Medicare & Medicaid Services (CMS). That’s why the Trump administration said it would introduce new price transparency rules, following an Executive Order on Improving Price and Quality Transparency in American Healthcare.
 

For international patients seeking care in the US, the direct repercussions of the new ruling are not yet quite so obvious, but cost containment companies are keen to keep abreast of how the situation might unfold for payers and providers assisting patients in this market.

Insurers are required to publish their negotiated rates

Today, the Affordable Care Act (ACA), introduced by President Obama, already requires some price transparency; hospitals must publish chargemasters or lists of standard prices. But the new so-called ‘hospital transparency rule’ goes a few steps further. By January 2021, hospitals must list standard charges in a single file, in machine-readable format so that patients can use internet tools to compare prices. Secondly, hospitals must publish not only gross charges (non-discounted charges for each item), but payer-specific negotiated charges (charges hospitals negotiate with a third-party payer such as an insurer) and discounted cash prices (the charge that applies to an individual who pays cash, or cash equivalent, for a hospital item or service); in other words, the highest and lowest prices a hospital might accept.

Finally, hospital providers must also release pricing information for up to 300 so-called ‘shoppable services’ – non-urgent visits consumers can schedule in advance such as X-rays, outpatient visits, imaging and laboratory tests or bundled services like a caesarean. Insiders say most hospitals have an alternative option to publish out-of-pocket expenses for these 300 services instead, and most are doing so.

Another regulation, Transparency in Coverage, is similar to the hospital rule, but requires insurers instead to publish their negotiated rates. This rule is particularly interesting, because, in theory, patients will be able to compare the rates hospitals charge and the rates insurers pay.

Today, costs of procedures in the US can be huge, unpredictable and can vary according to location

New regulations to put added strain on healthcare providers after Covid-19

The hospital transparency rule, in particular, has sparked a battle in the US. “The pushback is intense, and the rule has been questioned by many different organisations,” said Gitte Bach, President and CEO of New Frontier Group, a claims management company based in California.
Stanford Children’s Health, a group of children’s hospitals that cares for children with the most acute conditions, said it recognises the importance of patients’ access to information. But senior management told Hospitals & Healthcare: “The new requirement to publicly disclose individually negotiated rates between commercial health insurers and hospitals is problematic.”

The worry is that parents will not understand that published lists are absolute costs of services and probably not the amount they are likely to pay (around 41 per cent of its patient population is funded by Medi-Cal (California’s Medicaid programme), California Children’s Services (CCS) or the Children’s Health Insurance Program (CHIP). “As stated by the CHA, we are concerned that these patient families may mistake the commercial rate disclosures for rates charged to families in their situation and avoid seeking essential care for their children,” said senior staff.

Hospitals are so opposed to the rule that several, 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, even petitioned a federal judge to grant preliminary and permanent injunctions against the requirement.

They say the rule not only contravenes the First Amendment, but that CMS has gone well beyond its remit in asking hospitals to reveal negotiated charges. They say prices negotiated with third-party payers are not the intended meaning of ‘standard charges’ transparency stated within in the ACA. They have also asked for a delay in implementing the rules, because resources have been stretched very thin as a result of Covid-19. The pandemic has seen many hospitals to the brink of collapse since they were forced to cancel lucrative elective surgeries.

A judge rejected the arguments in June 2020, and one commentator said that, ironically, the federal government is even using parts of the ACA to justify its rule, despite the fact that President Trump is in the process of trying to invalidate that same Act at the Supreme Court.

Hospitals might make the 300 shoppable items cheaper, for example, but hike prices in other services that cannot be shopped around for, such as emergency care

Insurers urged to keep an eye on the new transparency in coverage rule

Ariel Levin, Senior Associate Director for Policy at AHA, said it is almost impossible for hospitals to comply with the rules by reflecting prices for procedures in a single file. For example, a knee operation negotiated for one patient with one insurer may use a completely different device or primary care charge compared with a knee operation performed on another patient elsewhere. “All of those complications affect the final price for the patient and there are an infinite number of those possible variations for what that price could be,” she said. “A thousand-page contract cannot really be reduced into an Excel spreadsheet.”

Hospitals deny that revealing negotiated prices would expose the real costs of the most expensive healthcare system in the world. They argue that customers do not need to know the entire costs of procedures because they may have different levels of reimbursement depending on their health plans and are shielded from much of the cost. Complying with the rules is exorbitant too. “What consumers really need is an estimate of their out-of-pocket costs,” she added. “That’s something that could be done easily, with less burden on hospitals, and would be much clearer to patients.”

How international patients will be affected by the rulings is yet to be seen. But Levin warned international insurers to keep an eye on the possible effects of the new Transparency in Coverage rule.

Cost containment firms could reach better direct agreements with providers

The largest expected impact will be for third party administrators (TPAs) and insurance companies, according to Sheila Diaz, Business Development Director, Americas & Asia, at cost containment and assistance company GMMI. Historically, allowable rates to an insurance company have usually relied heavily on the volume managed by that payer to that specific provider, she said. “Large medical insurance groups, called Health Management Organisations, leverage their nationwide presence to enjoy aggressive rates with most medical providers,” she said. “The inclusion of transparency regarding their rates may provide an opportunity for smaller networks to leverage negotiations with the hospitals in order to obtain more competitive reimbursements.” In addition, TPAs are also likely to use this information when negotiating better rates for their clients, she said. Hospitals may respond to the rules by reducing the discounts traditionally afforded to networks as a result.  

Companies like GMMI might, in theory, be able to reach better direct agreements with providers. “We could better compare posted prices to the charges listed on actual claims,” she said. “There is a potential that the rule may positively impact destination medicine to the US, if providers choose to develop case rates that bundle all costs associated with the regulated services and can cater to the international patient.” Diaz stressed that the regulation only affects a limited number of services, so the true impact is yet to be determined.  

The value of claims management services to become more pronounced

John Spears, Vice-President of Business Development & Marketing at cost containment firm Global Excel, said some specialised procedures might become pricier, compared with standard ones, which may stabilise. “Providers may even bundle services for more interesting pricing options,” he said. He agrees that smaller hospitals may look to larger competitors, who typically charge higher amounts, as benchmarks for their own billing operations. “The emergence of new benefit and reimbursement models would mean our role as claims managers will be even greater than before, as we’ll be at the forefront of using technical knowledge to define that ‘value’ to our clients and their members.”

But, more telling will be discussions around the value that price transparency rules reveal. “Knowing that you’ve paid $Y for a service is one thing, but knowing that you actually paid $X over the true cost of providing that service is another more revealing piece of information,” said Spears. “Additionally, knowing the quality of care provided then gives you an idea of the value of what you’ve purchased.”

Tipping the scales towards more expensive emergency care

Hardly anyone expects the price transparency rules to work to the benefit of US patients. Research suggests few American patients bother to use price transparency tools that are already available. In addition, observers predict a skewing of healthcare prices. Hospitals might make the 300 shoppable items cheaper, for example, but hike prices in other services that cannot be shopped around for, such as emergency care. There’s also a fear that smaller, rural hospitals might go out of business altogether too. In terms of elective procedures, while there is a sense that international patients are more likely to shop around before they decide to travel for them (taking advantage of the transparency tools), experts say this will be limited. Realistically, the vast majority of international travellers won’t use the tools either, because their contact with the US health system tends to be limited to emergencies, said New Frontier Group’s Bach. “An emergent healthcare situation calls for immediate action and does not allow for a patient to do the homework and evaluate the transparent pricing,” she explained.

Many are adopting a ‘let’s wait and see how this all works out’ attitude at the moment

Even for those international patients living in the US or travelling for specific elective surgery, she suggests healthcare services are so complex that most patients will probably prefer to rely on their physician for referrals to specialists and medical services, rather than shopping on their own. “I think it is extremely difficult for the individual to feel comfortable in making a decision on such a difficult subject as a healthcare service,” she said.

Price is not the sole indicator of quality

Certainly, lack of quality information incorporated within the transparency rules means consumers can’t make the right decisions, said Bach. Worrying numbers of consumers assume high prices mean high quality, according to research, and are actually drawn to more expensive institutions.  “I am the firm believer that pricing information should be accompanied by quality, safety and health outcome data and should, in any and all cases, be discussed between clinicians and patient prior to making a firm decision,” she added.

GMMI’s Diaz agreed. Patients searching for, say a chemotherapy agent such as Rituxan, would have to wade through a sea of information on different dosages based on weight, medical diagnosis, and frequency of use to understand the financial implications of such a cancer treatment. “Most patients who are facing a catastrophic diagnosis are preoccupied with prognosis, family, and mortality, and would find the process of pricing their diagnosis and treatment overwhelming,” said Diaz, who is also a nurse. “In my experience, during these times, the patients seek to focus on their prognosis and not overall cost.”

But then, observers also suggest that Trump’s hospital price transparency rules are a distraction from the real reason prices are so high; rapid consolidation of the hospital sector that results in monopolies and higher prices. Enforcing anti-trust rules instead might be more effective in reducing prices said Adam Sacarny and Jamie Daw, Assistant Professors of Health Policy and Management at Columbia University Mailman School of Public Health.
International cost containment companies and insurers say they are watching the US closely and will liaise with hospitals to better understand how they plan to adapt to these requirements. As well as the forthcoming US elections, the future of the ACA is in the hands of the Supreme Court, and pharmaceutical pricing is being hammered out too. As Global Excel’s Spears puts it: “Many are adopting a ‘let’s wait and see how this all works out’ attitude at the moment – perhaps a pragmatic approach with everything going on between now and the end of the year.” ■