Hospital Prices to Go Online, But Will Numbers Tell Story?

The idea of Americans scrolling through hospital websites to find the best deal on a mammogram or tonsillectomy sounds good to almost everybody.

But the devil is in the details, and when federal plans emerged to force hospitals and insurers to reveal their negotiated rates for all kinds of medical services, the pitchforks came out.

President Donald Trump has declared medical pricing transparency a federal priority. But the unprecedented plan to require listing negotiated prices jolted the insurance industry and hospitals, who are fighting the White House proposals as misleading and misguided.

The federal Centers for Medicare & Medicaid Services accepted public comments through last week on the new rules, which would mandate “consumer-friendly” lists and payer-specific negotiated charges for services starting Jan. 1.

The new policies, going further than 2019 regulations requiring hospitals to post their “list” prices, also call for searchable formats to reveal prices and billing codes for some 300 “shoppable” procedures and services. Those might typically include imaging and lab tests, outpatient visits or operations that can be scheduled well in advance.

The White House says putting price lists on hospital websites will spur competition and cut costs. The regulations would make all hospitals “post all of their payers’ specific negotiated rates, which are the prices actually paid by insurers,” CMS Administrator Seema Verma said in a late June conference call with reporters.

Apples to Apples?

U.S. Health & Human Services Secretary Alex Azar called the pricing requirement “the most significant step any president has ever taken to deliver transparency and put patients in control of their care.”

The listings, Verma added, will let patients “do an apples-to-apples comparison on the price of a procedure across hospitals.”

But that’s exactly what the price lists won’t do, health care and insurance executives argue. Patient advocates are in the middle, generally supporting attempts at price transparency but conceding that America’s byzantine health care payment system defies simple solutions.

“We believe transparency is a key element in allowing patients and their doctors to make shared decisions about treatment,” said Christine Wilson of the National Patient Advocate Foundation in Washington, D.C.

“We also hear, however, that patients and physicians have a very hard time processing posted information or relating to their actual out-of-pocket costs,” she said in an email to Arkansas Business.

Why do hospitals oppose the new transparency rules?

“First of all, this won’t really assist a patient in determining what the price will actually be,” said Bo Ryall, president and CEO of the Arkansas Hospital Association. “Patients are concerned with their deductibles and out-of-pocket costs particular to them. So just posting a price on the internet is not going to help.” Too many individual variables wreck the apples-to-apples analogy, he said.

Craig Wilson, director of health policy at the Arkansas Center for Health Improvement, the state’s health policy think tank, said the negotiated rates alone may not be very meaningful to consumers. “The new requirement that would go into effect in 2020 involves negotiated rates with different insurers, but each consumer is likely to be in a different place in terms of their deductibles or other insurance parameters.”

He said hospital charges make up only one part of the bill, and that hospitals “won’t have an eye into” non-hospital charges. “It doesn’t give an accurate picture for an individual insured as to how much exactly they’re going to owe to the hospital, and it doesn’t give the whole picture of costs beyond hospital charges.” Shopping around for medical bargains can be impractical, he noted. “When you need medical services, most often you need them right then and there. “Sometimes you’re unconscious and headed for the hospital in an ambulance.”

Price comparisons might be useful in some cases, Wilson said, arguing that price alone isn’t the best way to shop for health care. “Often people equate higher cost with better quality, and we know that’s not the case. There needs to be a quality component to any price listings.”

Wilson said some have argued that public disclosure of the negotiated rates is anti-competitive and could drive hospital costs up. “What hospitals will tell you is that if that information is released, all the insurers will say the very opposite: If that information is released, all the hospitals are going to race to the top.”

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Ryall said the 2020 pricing transparency initiative could be seen as interference with private business, and pointed to an American Hospital Association position that the rules overstep executive authority. “These payer-specific prices are negotiated rates that commercial insurers and hospitals have come together on,” he said. “This would change the way that hospitals and payers negotiate.”

Cost of Compliance

Ryall also said the federal government’s estimate that hospitals will pay an average of about $1,000 to meet the 2020 rules is unrealistic. “With all these payers, we’d have to go into all these contracts and try to determine exactly what’s being paid, and then we’d have to put that up online. That effort is just going to cost a lot more than $1,000.”

Matt Eyles, president and CEO of America’s Health Insurance plans, told reporters in late June that insured consumers can already comparison-shop for doctors. About 90% of covered patients, he added, have access to systems that can estimate their out-of-pocket costs.

“We share the administration’s commitment to ... better information,” he said. “However, multiple experts, including the Federal Trade Commission, agree that disclosing privately negotiated rates will make it harder to bargain for lower rates, creating a floor, not a ceiling, for prices that hospitals would accept.”

The University of Arkansas for Medical Sciences says it supports transparency, but not the pending 2020 rules. “There are details in the proposed rules that may not accomplish what is intended,” said Amanda George, vice chancellor for finance and CFO of the hospital and medical school. “We are hopeful CMS will consider the comments it receives from providers and will revise the rules so that a better solution is obtained.” Other Little Rock hospitals held similar positions, or chose to let the hospital association speak for them.

Ryall said health insurers would be more logical keepers of an online price clearinghouse. “Finding some way to convene the payers and a format where patients could search for copays and deductibles would be a better plan,” he said. “This proposal means hospitals have to research that information, which we’re not privy to in a lot of cases. It’s the insurer that has all that information.”

Ryall said the Arkansas Hospital Association planned to submit its comments to the government at the end of last week, “noting our objections and noting that there are other ways to get at the information they want, ways that would be far better than just posting charges and prices.”