News | Price Transparency

Healthcare price transparency initiatives may fall flat due to systemic factors, expert says

News | Price Transparency

Healthcare price transparency initiatives may fall flat due to systemic factors, expert says

  • The ongoing federal effort to spur price transparency in healthcare is unlikely to have a profound impact on costs, an industry expert said.
  • A key issue with price transparency is the expectation that prospective patients will consistently think like consumers.
  • Employers could be the biggest beneficiaries when the full effects of price transparency are felt.
  • When transparency regulations for health plans start next year, the industry should prepare for “confusion” stemming from discrepancies between the prices posted by insurers and those posted by hospitals.

Niall Brennan, a leading expert on healthcare cost drivers, is among the skeptics who doubt the ongoing price transparency push can result in a more efficient system.

“I'm probably just cynical enough to add this to a long list of things that unfortunately won't address our cost problem,” said Brennan, president and CEO of the Health Care Cost Institute and formerly CMS’s chief data officer.

The structural factors that lead to high costs are too ingrained for hospital price information to make a big difference, Brennan said during a session at the 2021 Virtual Collocated Value-Based Payments Summit.

Especially in the commercial sector, he said, “a lot of [payers] are essentially price takers for a whole variety of reasons.”

Early stumbles in price transparency

An obvious drawback of the federal initiative on hospital price transparency has been the lack of compliance. Various studies since the regulations took effect Jan. 1 have reported nationwide compliance rates of well under 50%.

“If you’re only looking at 50% of the hospitals in your area, you don’t actually have true transparency,” Brennan said. “You need to be able to compare prices at every single hospital in order to be able to make an informed decision.”

CMS hopes a penalty hike based on bed counts can be a solution. For hospitals with 550 or more beds, the penalty for noncompliance would be $5,500 per day, according to the 2022 proposed rule for the Outpatient Prospective Payment System. In 2021, the penalty is $300 — less than the cost of compliance for many hospitals, Brennan said.

Another concern is the lack of standardization in posted data.

“Some [hospitals] have it in spreadsheets, some of them have designed their own look-up tools,” he said. “Some of them have very artfully hidden them in extremely deep recesses of their websites and specifically programmed those pages to not show up in search-engine indices.”

Fundamental obstacles to price transparency

The biggest impediments to establishing an efficient pricing system can’t be solved by spurring more hospitals to comply with transparency mandates, Brennan said. Rather, the issues stem from expecting consumers to navigate such a complex industry and shop for healthcare with a transactional mindset — especially in scenarios where they have an urgent medical need, for example, or face language barriers.

That’s why he thinks the biggest beneficiaries of improved transparency will be employers that can “leverage the information to demand better deals from their insurers and third-party administrators.” If employers don't find ways to utilize the information to their advantage, Brennan said, an enterprising start-up likely will leverage the data to construct lower-price, more efficient networks on behalf of employers.

“It’s not going to go away, but it’s also not going to be a magic bullet,” he said. “I'm not ready to completely discount the effects of price transparency, but I am ready to say if you think the needle is going to move purely on consumer responses to price transparency, I think you're going to be pretty disappointed.”

Dual transparency regulations could pose issues

On Jan. 1, 2022 — one year after the hospital price transparency rule took effect — insurers will be required to post their in-network provider rates for covered items and services, plus out-of-network allowed amounts and billed charges for certain items and services. CMS announced in August that it would delay enforcement of the rule until July 1, 2022.

With both sets of transparency regulations in place, conflicting information could abound.

“You’re going to potentially end up with different numbers for the same healthcare service,” Brennan said. “So Sibley will say that their negotiated rate with Aetna for an appendectomy is $8,000, and Aetna will say their negotiated rate for an appendectomy with Sibley is $10,000.

“Some of that pain is perhaps unavoidable because this is such new territory for everybody. But having two different prices for ostensibly the same service from two different sources is only going to lead to confusion in terms of how it could be fixed.”

One concern will be defining what to report — for example, single services or bundles of services. The industry should work to establish a consensus around standardized bundles of care, so that purchasers “know they’re comparing apples to apples,” Brennan said.

He added that the source of such information probably should be health plans as opposed to hospitals, since the task of synchronizing data from “thousands and thousands” of hospitals would be unwieldy.

About the Author

Nick Hut

is a senior editor with HFMA, Westchester, Ill. (nhut@hfma.org).

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