Price Transparency Buzzkill?
The last couple Industry Perspectives have been somewhat introspective, so I thought I’d share some views on an external topic which is top-of-mind for a lot of our distribution partners. As has been mentioned previously, ClaimDOC’s volume of work allows us to look at things from both a wide-angle and telephoto lens based on our experience and execution.
This month, I want to focus on price transparency. As most of you know by now, hospital price transparency is the government mandate for hospitals to be transparent with their prices for healthcare services including those negotiated with health plans. Now, of course, health plans have a similar disclosure requirement, so there is even more publicly available data to theoretically help consumers and health plans drive down the cost of care.
These well-intended laws are based on the idea that more transparency will benefit patients because “sunshine is a good disinfectant,” and more consumer awareness and competition will help the end user. The dream of course is for these data to be useful for health plans and consumers. While I agree with the premise, in reality, it’s much more complex than that for a variety of reasons.
For one thing, compliance with the law has been slow and uneven so the data is incomplete and even when posted, it’s inconsistent. While most hospitals are finally getting around to posting the information, compliance was remarkably slow initially due to provider confusion, inadequate penalties, lack of enforcement, and so on. The slow compliance will likely not be the same for health plans (expect enforcement to be quicker and tougher), but these data will come with other problems, not the least of which will be the shear size of the data files and the lack of consistency with which they are built.
Another complexity likely hindering the effectiveness of the transparency data is just that…the complexity of the data. Sure, everyone understands doing comparison shopping when you are purchasing something as expensive as healthcare. But once you dig into some of these complex reimbursement agreements and consider all the contingencies that might come with a complicated surgical procedure, the comparison of sticker prices gets convoluted very quickly. This is part of why the sizes of the health plan data submissions are so large, making them unwieldy to even experience data analysts.
A third complexity goes to the intended goal of the program. There are antitrust experts who fear the law may have the exact opposite effect and cause an increase in healthcare prices. We all think the current high prices are ceilings, but remember, these data are public, and competing providers are likely to use them to go back to health plans demanding the same higher rates negotiated by their competitors. This means the health plan pays more, and the stated prices turn into floors with costs going up from there. Not long ago, hospitals and health insurers were expressly prohibited from sharing these data due to fears of antitrust violations (anyone remember messenger model physician/ hospital organizations?).
Along similar lines, many experts believe that the publicly available data will result in further market concentration with the large health plans because providers will fear retaliation from large insurance carriers when providers negotiate with health plans with a smaller market share. The obvious result is fewer health plan options and greater market concentration with a large insurance carrier creating a monopoly. We all know the only winner there will be the monopoly, resulting in higher fees and premiums charged to employers despite lower reimbursement to providers.
Don’t get me wrong, overall I think price transparency is a good thing. I’ll say it again. It’s a good thing. Accurate information, used correctly, is bound to improve the decision-making and therefore the healthcare system. While I believe the consumer uses are fairly limited so far largely due to problems listed above in the complexities of the data, the business applications have gained more traction.
To that end, a long list of data companies have emerged, promising to help operationalize the data for businesses and consumers alike. We at ClaimDOC have partnered with one of the early leaders in the field to leverage the data to help our clients. With their help, we’ve had some early successes incorporating the data into our program by identifying provider partners and improving our negotiation strategy by incorporating the provider’s other negotiated rates. In fact, in a number of cases, we’ve successfully worked to incorporate a cash pay strategy that drove real value for the health plans. All of these successes are rooted in better-informed negotiations. Similarly, I do expect the consumer-based uses to improve over time, so there will be continued attention to the never-ending (but exceedingly difficult) quest toward consumerism in healthcare.
So ClaimDOC will continue honing our data analysis skills and partnerships, and you can count on us to find innovative ways to use the price transparency data to leverage results for our clients and members. But, we will always be mindful not to oversimplify these complex issues and short-circuit our client’s drive toward quality care, affordable prices, and a great member experience.
Which brings me to another hot topic that many “experts” often oversimplify… the use (and misuse) of healthcare quality metrics. This will be the topic of next month’s Industry Perspectives, but (spoiler alert) I see a lot of parallels to this price transparency discussion.