A recent CMS analysis of its Hospital Readmissions Reduction Program (HRRP) found that 2,500 hospitals will face HRRP penalty reductions and around 18% of hospitals will face penalties of at least 1% of their Medicare reimbursements for fiscal year (FY) 2022, Modern Healthcare reports.
Historically, hospitals received a penalty if their observed readmissions for any one of these conditions exceeded a national standard. However, in response to criticism, CMS in 2019 scrapped the national standard comparison standard. It now compares hospitals’ performance with that of other hospitals serving a similar population of low-income patients.
Under the current methodology, CMS has categorized all participating hospitals into quintiles according to the proportion of dual-eligible patients (patients eligible for Medicare and Medicaid) each hospital serves. Now, each hospital is compared with the median readmissions performance of its cohort, and hospitals with higher-than-cohort-median performance are penalized.
The program does not apply to veterans hospitals, children’s hospitals, psychiatric hospitals, or hospitals in Maryland, which has a federal waiver for how it distributes Medicare funding. In addition, hospitals are not evaluated under the program if they do not treat enough cases of the conditions evaluated.
Fewer hospitals are facing high HRRP penalties
In a recent analysis, CMS looked at HRRP data from July 2017 to December 2019. It found that 2,500 hospitals will face HRRP penalty reductions for FY 2022, and around 18% of hospitals will be penalized more than 1% of their reimbursements, down from 20% from July 2016 through June 2019. The financial value of readmissions reduction
The analysis also found that 80% of hospitals with the highest proportion of Medicare-Medicaid dual-eligible patients will pay penalties, while nearly 72% of hospitals with the lowest proportion of dual-eligible patients will receive penalties.
This likely will be the last set of readmissions data unaffected by the Covid-19 pandemic. Under ordinary circumstances, CMS reviews three years of data in calculating HRRP penalties, so the agency ordinarily would have considered data from July 2017 to June 2020 in calculating the fiscal year 2022 penalties. However, CMS elected to stop its analysis in December 2019 to exclude data gathered during the Covid-19 pandemic.
CMS has not yet said how it will handle readmissions data from the pandemic, Modern Healthcare reports.
Akin Demehin, director of policy for the American Hospital Association (AHA), said the drop in hospitals paying high HRRP penalties is a success.
“America’s hospitals and health systems have made substantial progress in reducing unnecessary readmissions, which has improved quality and enhanced care coordination,” Demehin said.
Demehin also praised CMS for excluding data from the Covid-19 pandemic from its analysis.
“We are pleased that CMS heard our concerns and excluded data from the first six months of 2020 to account for the pandemic when calculating performance,” he said. “We will continue to ask CMS to use its discretion to exclude pandemic-affected data in calculating performance in its hospital quality and value programs going forward.”
Demehin also added that CMS should expand its peer-grouping of hospitals by incorporating other social risk factors beyond a hospital’s control.
“Peer grouping provides relief to many hospitals serving the poorest and most vulnerable communities,” he said. “Congress gave CMS the ability to refine its social risk factor adjustment approach over time, and because the research and science on this issue continues to evolve, the AHA has encouraged CMS to consider ongoing refinements.” (Gillespie, Modern Healthcare, 10/1)
The US Supreme Court recently announced that it will hear an ongoing debate over cuts to 340B drug payments to Medicare hospitals.
The case will be heard during the Supreme Court’s upcoming term, which starts in October. A decision is expected sometime next year.
The case was brought on by the American Hospital Association (AHA) and other national hospital groups seeking to overturn HHS’ decision to reduce Medicare reimbursement to hospitals in the 340B Drug Pricing Program by nearly 30 percent.
HHS had finalized the cuts in the 2018 Outpatient Prospective Payment System (OPPS) rule. The federal department said in a fact sheet that the cuts address the “recent trends of increasing drug prices, for which some of the cost burden falls to Medicare beneficiaries.”
Hospital groups led by the AHA challenged the cuts, arguing that reduced drug payments would harm access to care since the 340B Drug Pricing Program includes safety-net hospitals. An appeals court did not agree with their arguments in August 2020, ruling in favor of HHS.
“We are pleased that the U.S. Supreme Court has agreed to hear the compelling arguments in our case on payments cuts to the 340B drug pricing program that are adversely impacting care to patients,” Melinda Hatton, the AHA’s general counsel, said publicly on Friday.
“We are hopeful that the Court will reject the appellate court decision deferring to the government’s interpretation of the law that clearly imperils the important services that the 340B program helps allow eligible hospitals and health systems to provide to vulnerable communities, many of which would otherwise be unavailable,” Hatton continued.
Other hospital groups also cheered the Supreme Court’s decision to hear the 340B drug payment case.
“We are pleased that the Supreme Court has agreed to review the appellate court decision, which we believe was legally flawed,” Maureen Testoni, CEO of 340B Health, said on the group’s website.* “We are hopeful that the justices will reverse the lower court decision that upheld these damaging cuts to many 340B hospitals treating patients with low incomes. In the meantime, we continue to urge the Biden administration to change this harmful policy by abandoning the payment cuts for 2022 and beyond.”
The other plaintiff, Association of American Medical Colleges (AAMC), also said it is looking forward to the consideration of the case.
“The current reimbursement rates reduce the 340B drug discounts granted to safety-net providers, many of which are teaching hospitals,”explained David J. Skorton, MD, AAMC president and CEO. “These hospitals use the current savings to deliver critical health care services to low-income and vulnerable patients, which includes providing free or substantially discounted drugs to low-income patients, establishing neighborhood clinics, and improving access to specialized care previously unavailable in some areas. A reversal of the cuts will ensure that low-income, rural, and other underserved patients and communities are able to access the vital services they need.”
Neither HHS nor CMS provided a public statement regarding the Supreme Court’s decision to hear the 340B drug payment case.
The United States Supreme Court should keep in place a lower court ruling that bars hospitals from receiving higher Medicare reimbursements for outpatient services compared to other providers, according to a brief HHS filed late last week.
The 33-page brief filed with the high court is in response to a petition by the American Hospital Association and the Association of American Medical Colleges to hear the case. The Court of Appeals for the District of Columbia ruled last July that HHS had the right to cut payments to hospital-owned facilities in order to achieve site neutrality, reversing the judgment of a district court.
Hospitals and HHS have been wrangling about the issue since the federal agency moved to cut payments to hospital-owned outpatient sites in 2019. The Supreme Court will have the final say, whether it decides to hear the case or not.
Site-neutral payments have been a hot button issue in the healthcare world for the better part of a decade, after many larger hospital systems began buying up physician practices. Hospitals are reimbursed by Medicare for evaluation and management services at a higher rate than standalone physician groups.
They began collecting those higher fees at the outpatient sites they acquired or opened. From 2012 to 2015, E&M encounters per Medicare enrollee grew at outpatient sites by 22%, versus a 1% drop at physician practices, HHS noted in its brief.
That strategy not only drove up costs to the Medicare program but also put more pressure on individual medical practices to merge with one another to better compete with hospital-owned practices, or be bought out. HHS attempted to remedy the issue by moving toward a site-neutral payment scheme beginning in 2019. Acute care providers, led by AHA and AAMC, sued to stop the change. They appealed to the Supreme Court last summer.
The brief filed by HHS attorneys with the high court asked that its new site-neutral payment policy be retained. The department argued that it did not act beyond the powers delegated to it by Congress, and that body would remedy such a disturbing financial trend on its own if it needed to.
The likelihood the high court will hear the case is low. Attorneys note that the Supreme Court only agrees to hear no more than 5% of cases brought to it for review that involve a federal agency. Moreover, they are even less likely to act if there is no conflict on the issue between the appeals court — which HHS noted in its brief.
If the Supreme Court declines to hear the case, the appellate court ruling would stand and the site neutral payment rule would remain on the books.
The Centers for Medicare & Medicaid Services (CMS) released its 2022 Inpatient Prospective Payment System (IPPS) proposed rule this week. Overall, the rule brings good news for hospitals: Medicare reimbursement rates are slated to increase by 2.8 percent,resulting in a $2.5B payment boost to the industry.
In another win, hospitals will no longer be required to disclose their contract terms with Medicare Advantage (MA) insurers. Hospitals had previously been mandated by the 2021 rule to report median, payer-specific, negotiated charges for MA insurers on their Medicare cost reports. Medicare’s goal was to use this data to create a new, market-based, inpatient reimbursement methodology—an effort which has also been tabled, at least for now.
Led by the American Hospital Association, hospitals have been embroiled in lengthy legal challenges over a variety of CMS price transparency requirements, maintaining they are neither beneficial for consumers, nor helpful in lowering healthcare costs.
It’s too early to tell whether this step back from price transparency, which was a key goal of the Trump administration, signals anything about the Biden administration’s priorities; it’s possible CMS may just be slowing down the effort in the wake of the pandemic.
Other highlights of the proposed rule includefunding 1,000 more residency slots over the next five years, and extending payments for COVID-19 treatments to the end of 2022, as CMS expects COVID patients will need care beyond the duration of public health emergency. The agency also proposed several changes to its readmissions and other value-based purchasing programs, to ensure hospitals aren’t penalized by COVID-related impacts on quality measures.
Comments on the proposed rule are due by June 28th.
Optum, a subsidiary of UnitedHealth, provides data analytics and infrastructure, a pharmacy benefit manager called OptumRx, a bank providing patient loans called Optum Bank, and more.
It’s not often that the American Hospital Association—known for fun lobbying tricks like hiring consultants to create studies showing the benefits of hospital mergers—directly goes after another consolidation in the industry.
But when the AHA caught wind of UnitedHealth Group subsidiary Optum’s plans, announced in January 2021, to acquire data analytics firm Change Healthcare, they offered up some fiery language in a letter to the Justice Department. “The acquisition … will concentrate an immense volume of competitively sensitive data in the hands of the most powerful health insurance company in the United States, with substantial clinical provider and health insurance assets, and ultimately removes a neutral intermediary.”
If permitted to go through, Optum’s acquisition of Change would fundamentally alter both the health data landscape and the balance of power in American health care. UnitedHealth, the largest health care corporation in the U.S., would have access to all of its competitors’ business secrets. It would be able to self-preference its own doctors. It would be able to discriminate, racially and geographically, against different groups seeking insurance. None of this will improve public health; all of it will improve the profits of Optum and its corporate parent.
Despite the high stakes, Optum has been successful in keeping this acquisition out of the public eye.Part of this PR success is because few health care players want to openly oppose an entity as large and powerful as UnitedHealth. But perhaps an even larger part is that few fully understand what this acquisition will mean for doctors, patients, and the health care system at large.
If regulators allow the acquisition to take place, Optum will suddenly have access to some of the most secret data in health care.
UnitedHealth is the largest health care entity in the U.S., using several metrics. United Healthcare (the insurance arm) is the largest health insurer in the United States, with over 70 million members, 6,500 hospitals, and 1.4 million physicians and other providers. Optum, a separate subsidiary, provides data analytics and infrastructure, a pharmacy benefit manager called OptumRx, a bank providing patient loans called Optum Bank, and more. Through Optum, UnitedHealth also controls more than 50,000 affiliated physicians, the largest collection of physicians in the country.
While UnitedHealth as a whole has earned a reputation for throwing its weight around the industry, Optum has emerged in recent years as UnitedHealth’s aggressive acquisition arm. Acquisitions of entities as varied as DaVita’s dialysis physicians, MedExpress urgent care, and Advisory Board Company’s consultants have already changed the health care landscape. As Optum gobbles up competitors, customers, and suppliers, it has turned into UnitedHealth’s cash cow, bringing in more than 50 percent of the entity’s annual revenue.
On a recent podcast, Chas Roades and Dr. Lisa Bielamowicz of Gist Healthcare described Optum in a way that sounds eerily similar to a single-payer health care system. “If you think about what Optum is assembling, they are pulling together now the nation’s largest employers of docs, owners of one of the country’s largest ambulatory surgery center chains, the nation’s largest operator of urgent care clinics,” said Bielamowicz. With 98 million customers in 2020, OptumHealth, just one branch of Optum’s services, had eyes on roughly 30 percent of the U.S. population. Optum is, Roades noted, “increasingly the thing that ate American health care.”
Optum has not been shy about its desire to eventually assemble all aspects of a single-payer system under its own roof. “The reason it’s been so hard to make health care and the health-care system work better in the United States is because it’s rare to have patients, providers—especially doctors—payers, and data, all brought together under an organization,” OptumHealth CEO Wyatt Decker told Bloomberg. “That’s the rare combination that we offer. That’s truly a differentiator in the marketplace.” The CEO of UnitedHealth, Andrew Witty, has also expressed the corporation’s goal of “wir[ing] together” all of UnitedHealth’s assets.
Controlling Change Healthcare would get UnitedHealth one step closer to creating their private single-payer system. That’s why UnitedHealth is offering up $13 billion, a 41 percent premium on the public valuation of Change. But here’s why that premium may be worth every penny.
Change Healthcare is Optum’s leading competitor in pre-payment claims integrity; functionally, a middleman service that allows insurers to process provider claims (the receipts from each patient visit) and address any mistakes. To clarify what that looks like in practice, imagine a patient goes to an in-network doctor for an appointment. The doctor performs necessary procedures and uses standardized codes to denote each when filing a claim for reimbursement from the patient’s insurance coverage. The insurer then hires a reviewing service—this is where Change comes in—to check these codes for accuracy. If errors are found in the coded claims, such as accidental duplications or more deliberate up-coding (when a doctor intentionally makes a patient seem sicker than they are), Change will flag them, saving the insurer money.
The most obvious potential outcome of the merger is that the flow of data will allow Optum/UnitedHealth to preference their own entities and physicians above others.
To accurately review the coded claims, Change’s technicians have access to all of their clients’ coverage information, provider claims data, and the negotiated rates that each insurer pays.
Change also provides other services, including handling the actual payments from insurers to physicians, reimbursing for services rendered. In this role, Change has access to all of the data that flows between physicians and insurers and between pharmacies and insurers—both of which give insurers leverage when negotiating contracts. Insurers often send additional suggestions to Change as well; essentially their commercial secrets on how the insurer is uniquely saving money. Acquiring Change could allow Optum to see all of this.
Change’s scale (and its independence from payers) has been a selling point; just in the last few months of 2020, the corporation signed multiple contracts with the largest payers in the country.
Optum is not an independent entity; as mentioned above, it’s owned by the largest insurer in the U.S. So, when insurers are choosing between the only two claims editors that can perform at scale and in real time, there is a clear incentive to use Change, the independent reviewer, over Optum, a direct competitor.
If regulators allow the acquisition to take place, Optum will suddenly have access to some of the most secret data in health care. In other words, if the acquisition proceeds and Change is owned by UnitedHealth, the largest health care corporation in the U.S. will own the ability to peek into the book of business for every insurer in the country.
Although UnitedHealth and Optum claim to be separate entities with firewalls that safeguard against anti-competitive information sharing, the porosity of the firewall is an open question. As the AHA pointed out in their letter to the DOJ, “[UnitedHealth] has never demonstrated that the firewalls are sufficiently robust to prevent sensitive and strategic information sharing.”
In some cases, this “firewall” would mean asking Optum employees to forget their work for UnitedHealth’s competitors when they turn to work on implementing changes for UnitedHealth. It is unlikely to work. And that is almost certainly Optum’s intention.
The most obvious potential outcome of the merger is that the flow of data will allow Optum/UnitedHealth to preference their own entities and physicians above others. This means that doctors (and someday, perhaps, hospitals) owned by the corporation will get better rates, funded by increased premiums on patients. Optum drugs might seem cheaper, Optum care better covered. Meanwhile, health care costs will continue to rise as UnitedHealth fuels executive salaries and stock buybacks.
UnitedHealth has already been accused of self-preferencing. A large group of anesthesiologists filed suit in two states last week, accusing the company of using perks to steer surgeons into using service providers within its networks.
Even if UnitedHealth doesn’t purposely use data to discriminate, the corporation has been unable to correct for racially biased data in the past.
Beyond this obvious risk, the data alterations caused by the Change acquisition could worsen existing discrimination and medical racism. Prior to the acquisition, Change launched a geo-demographic analytics unit. Now, UnitedHealth will have access to that data, even as it sells insurance to different demographic categories and geographic areas.
Even if UnitedHealth doesn’t purposely use data to discriminate, the corporation has been unable to correct for racially biased data in the past, and there’s no reason to expect it to do so in the future. A study published in 2019 found that Optum used a racially biased algorithm that could have led to undertreating Black patients. This is a problem for all algorithms. As data scientist Cathy O’Neil told 52 Insights, “if you have a historically biased data set and you trained a new algorithm to use that data set, it would just pick up the patterns.” But Optum’s size and centrality in American health care would give any racially biased algorithms an outsized impact. And antitrust lawyer Maurice Stucke noted in an interview that using racially biased data could be financially lucrative. “With this data, you can get people to buy things they wouldn’t otherwise purchase at the highest price they are willing to pay … when there are often fewer options in their community, the poor are often charged a higher price.”
The fragmentation of American health care has kept Big Data from being fully harnessed as it is in other industries, like online commerce. But Optum’s acquisition of Change heralds the end of that status quo and the emergence of a new “Big Tech” of health care. With the Change data, Optum/UnitedHealth will own the data, providers, and the network through which people receive care. It’s not a stretch to see an analogy to Amazon, and how that corporation uses data from its platform to undercut third parties while keeping all its consumers in a panopticon of data.
The next step is up to the Department of Justice, which has jurisdiction over the acquisition (through an informal agreement, the DOJ monitors health insurance and other industries, while the FTC handles hospital mergers, pharmaceuticals, and more). The longer the review takes, the more likely it is that the public starts to realize that, as Dartmouth health policy professor Dr. Elliott Fisher said, “the harms are likely to outweigh the benefits.”
There are signs that the DOJ knows that to approve this acquisition is to approve a new era of vertical integration. In a document filed on March 24, Change informed the SEC that the DOJ had requested more information and extended its initial 30-day review period. But the stakes are high. If the acquisition is approved, we face a future in which UnitedHealth/Optum is undoubtedly “the thing that ate American health care.”
Hospitals enrolled in the 340B drug discount program may no longer be eligible after the pandemic shifted their payer mix, according to a Wednesday letter the American Hospital Association sent to HHS Secretary Xavier Becerra.
Depleted patient volumes and canceled elective surgeries lowered the proportion of hospital patients who are Medicaid and Medicare SSI patients in 2020, according to AHA. When hospitals file their Medicare cost reports reflecting those changes, they may no longer meet the criteria for the program and lose access.
AHA wants HHS to waive certain eligibility requirements for hospitals in the program to allow them continued access during the public health emergency, according to the letter.
Throughout the pandemic HHS has issued a number of regulatory flexibilities to help providers, and the hospital lobby is asking it to do so again by waiving the current eligibility requirements for the 340B drug discount program before providers experiencing a temporary shift in payer mix are kicked out.
The program requires drug companies to give discounts on outpatient drugs to providers serving a large share of low-income patients, particularly those in rural areas.
The discounts can range from 25% to 50% of the cost of the drugs, according to HRSA, which operates the program.
But many of those patients did not seek care last year, hampering hospitals’ finances and altering the mix of payers.
Hospitals currently qualify for the program based on their volume of inpatient Medicaid and Medicare SSI patients, reported through their most recently filed Medicare cost reports.
“Losing access to 340B discounted drugs and program savings could jeopardize the ability of these hospitals to provide critical services for their communities, which would be particularly catastrophic at a time when they remain on the front lines of the ongoing pandemic,” AHA said in its letter.
This latest issue comes after several years of clashes over the 340B program.
Last year, a federal appeals court sided against the hospital lobby, ruling that HHS’ significant rate cut for some 340B drugs could remain in place. HHS made the reimbursement cut arguing that the hospitals already received steep discounts for the drugs and could be incentivized to overuse them.
At the time, AHA said it was weighing its options over whether to appeal to the Supreme Court.
To head off other issues, HRSA finalized a rule late last year that created a dispute resolution process for when hospitals believed they were overcharged for 340B drugs. The drug manufacturers have a similar mechanism to raise concerns about whether hospitals received duplicate discounts.
The payment gap was $63,000 for primary care doctors, $178,000 for medical specialists and $150,000 for surgeons.
Doctors who work for hospital outpatient facilities get much higher payments for their services from Medicare than doctors who practice independently, according to a new study.
The research, based on Medicare claims data from 2010-2016,found that the program’s payments for doctors’ work were, on average, $114,000 higher per doctor per year when billed by a hospital than when billed by a doctor’s independent practice.
Published in Health Services Research, results found that the amount Medicare would pay for outpatient care at doctors’ offices would have been 80% higher if the services had been billed by a hospital outpatient facility. In 2010, the average set of Medicare services independent doctors performed annually for patients was worth $141,000, but charging for the same group of services would have grossed $240,000 if a hospital outpatient facility billed for them.
The payment difference varied by specialty. The payment gap was $63,000 for primary care doctors, $178,000 for medical specialists and $150,000 for surgeons.
Moreover, the study found the differential grew over time. From 2010-2016, the average difference between hospital outpatient and private practice payments grew from 80% higher to 99% higher.
WHAT’S THE IMPACT?
The main reason for these large payment differences: facility fees. For each service a doctor performs, Medicare pays hospital outpatient facilities both a fee for the doctor’s work and a fee for the facility, whereas private practices receive only doctor fees.
Although the doctor fees are a bit lower in hospital outpatient locations, the facility fees more than make up for the difference, and the total payments to hospitals are reflected in higher doctor salaries and bonuses.
The Centers for Medicare and Medicaid Services has been trying to correct this imbalance for years with policies that would pay both sites the same amount. In 2015, the Bipartisan Budget Act authorized CMS to impose site-neutral payments but grandfathered existing hospital outpatient facilities. Later, CMS expanded the equal payments to other hospital outpatient facilities, but the American Hospital Association sued to overturn this regulation.
The groups filed for a petition for a rehearing, which was denied.
In February, the Supreme Court acknowledged the AHA’s request for judicial review. The government response was due by March 15, but on March 3, Norris Cochran, acting Secretary of Health and Human Service asked for an extension until April 14 to file the government’s response, according to court documents.
The significant difference between Medicare payments to hospital outpatient facilities and independent offices has encouraged hospitals and health systems to buy doctor practices, but the study noted that good research about this has been lacking up to now.
It found little evidence of a direct relationship linking the size of the pay gap between hospital outpatient facilities and independent offices, with hospitals buying doctor practices, in particular medical specialties. But it did find that doctors whose services had larger pay gaps were more likely to have a hospital buy their practice than doctors whose services had a smaller pay gap.
In an accompanying commentary, Dr. Michael Chernew of Harvard Medical School in Boston said the study had found that the ability of hospitals and employed doctors to earn more from Medicare had resulted in a greater amount of integration.
THE LARGER TREND
However, the authors pointed out that the Medicare payment difference is only one of many factors that have contributed to the huge increase in the share of doctors employed at hospitals over the past decade. For example, they found a higher probability of a doctor going to work for a hospital in highly concentrated hospital markets and rural areas.
Other studies, they said, have established that some health systems use integration with doctors’ offices as a bargaining chip with commercial health insurance plans. Also, some doctors may find that independent practice is less viable than it used to be for a variety of reasons.
It has also been suggested that many younger doctors prefer hospital employment to private practice because they crave economic security and work-life balance.
It’s been estimated that even the payments to hospitals vs. doctors could save CMS $11 billion over 10 years. But the paper illustrates that the payment disparities can also create broader market distortions because consolidation of hospitals and doctors’ offices has been shown to lead to higher prices overall.
Employers — including companies, state governments and universities — purchase health care on behalf of roughly 150 million Americans. The cost of that care has continued to climb for both businesses and their workers.
For many years, employers saw wasteful care as the primary driver of their rising costs. They made benefits changes like adding wellness programs and raising deductibles to reduce unnecessary care, but costs continued to rise. Now, driven by a combination of new research and changing market forces — especially hospital consolidation — more employers see prices as their primary problem.
By amassing and analyzing employers’ claims data in innovative ways, academics and researchers at organizations like the Health Care Cost Institute (HCCI) and RAND have helped illuminate for employers two key truths about the hospital-based health care they purchase:
1) PRICES VARY WIDELY FOR THE SAME SERVICES
Data show that providers charge private payers very different prices for the exact same services — even within the same geographic area.
For example, HCCI found the price of a C-section delivery in the San Francisco Bay Area varies between hospitals by as much as:$24,107
Data show that hospitals charge employers and private insurers, on average, roughly twice what they charge Medicare for the exact same services. A recent RAND study analyzed more than 3,000 hospitals’ prices and found the most expensive facility in the country charged employers:4.1xMedicare
Hospitals claim this price difference is necessary because public payers like Medicare do not pay enough. However, there is a wide gap between the amount hospitals lose on Medicare (around -9% for inpatient care) and the amount more they charge employers compared to Medicare (200% or more).
A small but growing group of companies, public employers (like state governments and universities) and unions is using new data and tactics to tackle these high prices. (Learn more about who’s leading this work, how and why by listening to our full podcast episode in the player above.)
Note that the employers leading this charge tend to be large and self-funded, meaning they shoulder the risk for the insurance they provide employees, giving them extra flexibility and motivation to purchase health care differently. The approaches they are taking include:
Some employers are implementing so-called tiered networks, where employees pay more if they want to continue seeing certain, more expensive providers. Others are trying to strongly steer employees to particular hospitals, sometimes know as centers of excellence, where employers have made special deals for particular services.
Purdue University, for example, covers travel and lodging and offers a $500 stipend to employees that get hip or knee replacements done at one Indiana hospital.
Negotiating New Deals
There is a movement among some employers to renegotiate hospital deals using Medicare rates as the baseline — since they are transparent and account for hospitals’ unique attributes like location and patient mix — as opposed to negotiating down from charges set by hospitals, which are seen by many as opaque and arbitrary. Other employers are pressuring their insurance carriers to renegotiate the contracts they have with hospitals.
In 2016, the Montana state employee health plan, led by Marilyn Bartlett, got all of the state’s hospitals to agree to a payment rate based on a multiple of Medicare. They saved more than $30 million in just three years. Bartlett is now advising other states trying to follow her playbook.
In 2020, several large Indiana employers urged insurance carrier Anthem to renegotiate their contract with Parkview Health, a hospital system RAND researchers identified as one of the most expensive in the country. After months of tense back-and-forth, the pair reached a five-year deal expected to save Anthem customers $700 million.
Legislating, Regulating, Litigating
Some employer coalitions are advocating for more intervention by policymakers to cap health care prices or at least make them more transparent. States like Colorado and Indiana have passed price transparency legislation, and new federal rules now require more hospital price transparency on a national level. Advocates expect strong industry opposition to stiffer measures, like price caps, which recently failed in the Montana legislature.
Other advocates are calling for more scrutiny by state and federal officials of hospital mergers and other anticompetitive practices. Some employers and unions have even resorted to suing hospitals like Sutter Health in California.
Employers face a few key barriers to purchasing health care in different and more efficient ways:
Hospitals tend to have much more market power than individual employers, and that power has grown in recent years, enabling them to raise prices. Even very large employers have geographically dispersed workforces, making it hard to exert much leverage over any given hospital. Some employers have tried forming purchasing coalitions to pool their buying power, but they face tricky organizational dynamics and laws that prohibit collusion.
Employers can attempt to lower prices by renegotiating contracts with hospitals or tailoring provider networks, but the work is complicated and rife with tradeoffs. Few employers are sophisticated enough, for example, to assess a provider’s quality or to structure hospital payments in new ways.Employers looking for insurers to help them have limited options, as that industry has also become highly consolidated.
Employers say they primarily provide benefits to recruit and retain happy and healthy employees. Many are reluctant to risk upsetting employees by cutting out expensive providers or redesigning benefits in other ways. A recent KFF survey found just 4% of employers had dropped a hospital in order to cut costs.
Employers play a unique role in the United States health care system, and in the lives of the 150 million Americans who get insurance through work. For years, critics have questioned the wisdom of an employer-based health care system, and massive job losses created by the pandemic have reinforced those doubts for many.
Assuming employers do continue to purchase insurance on behalf of millions of Americans, though, focusing on lowering the prices they pay is one promising path to lowering total costs. However, as noted above, hospitals have expressed concern over the financial pressures they may face under these new deals. Complex benefit design strategies, like narrow or tiered networks, also run the risk of harming employees, who may make suboptimal choices or experience cost surprises. Finally, these strategies do not necessarily address other drivers of high costs including drug prices and wasteful care.
About 36% of nonelderly adults and 29% of children in the U.S. have delayed or foregone care because of concerns of being exposed to COVID-19 or providers limiting services due to the pandemic, according to new reports from the Urban Institute and Robert Wood Johnson Foundation.
Of those who put off care, more than three-quarters had one or more chronic health conditions and one in three said the result of not getting treatment was worsening health or limiting their ability to work and perform regular daily activities, the research based on polling in September showed.
However, the types of care being delayed are fairly routine. Among those surveyed, 25% put off dental care, while 21% put off checkups and 16% put off screenings or medical tests.
The early days of the pandemic saw widespread halts in non-emergency care, with big hits to provider finances.
In recent months, health systems have emphasized the services can be provided in hospitals and doctors offices safely as long as certain protocols are followed, and at least some research has backed them up. Groups like the American Hospital Association have launched ad campaigns urging people to return for preventive and routine care as well as emergencies.
But patients are apparently still wary, according to the findings based on surveys of about 4,000 adults conducted in September.
The research shows another facet of the systemic inequities harshly spotlighted by the pandemic. People of color are more likely to put off care than other groups. While 34% of Whites said they put off care, that percentage rose to 40% among Blacks and 36% among Latinos.
Income also played a role, as 37% of those with household incomes at or below 250% of the poverty level put off care, compared to 25% of those with incomes above that threshold.
Putting off care has had an impact industrywide, as the normally robust healthcare sector lost 30,000 jobs in January. Molina Healthcare warned last week that utilization will remain depressed for the foreseeable future.
Younger Americans were also impacted, with nearly 30% of parents saying they delayed at least one type of care for their children, while 16% delayed multiple types of care. As with adults, dental care was the most common procedure that was put off, followed by checkups or other preventative healthcare screenings.
The researchers recommended improving communications among providers and patients.
“Patients must be reassured that providers’ safety precautions follow public health guidelines, and that these precautions effectively prevent transmission in offices, clinics, and hospitals,” they wrote. “More data showing healthcare settings are not common sources of transmission and better communication with the public to promote the importance of seeking needed and routine care are also needed.”
The groups said that Americans “deserve a stable healthcare market that provides access to high-quality care and affordable coverage for all.”
This week, a coalition of healthcare and employer groups called for achieving universal health coverage by expanding financial assistance to consumers, bolstering enrollment and outreach efforts, and taking additional steps to protect those who have lost or are at risk of losing employer-based coverage because of the economic downturn caused by the COVID-19 pandemic.
They have banded together to advocate for achieving universal coverage via expansion of the Affordable Care Act, which is supported by President Biden. Biden also intends to achieve universal coverage through a Medicare-like public option — a government-run health plan that would compete with private insurers.
WHAT’S THE IMPACT
Despite a lot of pre-election talk about universal healthcare coverage from elected officials and those vying for public office, achieving this has remained an elusive goal in the U.S. In a joint statement of principles, the groups said that Americans “deserve a stable healthcare market that provides access to high-quality care and affordable coverage for all.”
“Achieving universal coverage is particularly critical as we strive to contain the COVID-19 pandemic and work to address long-standing inequities in healthcare access and outcomes,” the groups wrote.
The organizations support a number of steps to make health coverage more accessible and affordable, including protecting Americans who have lost or are at risk of losing employer-provided health coverage from becoming uninsured.
They also want to make Affordable Care Act premium tax credits and cost-sharing reductions more generous, and expand eligibility for them, as well as establish an insurance affordability fund to support any unexpected high costs for caring for those with serious health conditions, or to otherwise lower premiums or cost-sharing for ACA marketplace enrollees.
Also on the group’s to-do list: Restoring federal funding for outreach and enrollment programs; automatically enrolling and renewing those eligible for Medicaid and premium-free ACA marketplace plans; and providing incentives for additional states to expand Medicaid in order to close the low-income coverage gap.
THE LARGER TREND
The concept of universal coverage is gaining traction among patients thanks in large part to the COVID-19 pandemic. In fact, A Morning Consult poll taken in the pandemic’s early days showed about 41% of Americans say they’re more likely to support universal healthcare proposals. Twenty-six percent of U.S. adults say they’re “much more likely” to support such policy initiatives, while 15% say they’re somewhat more likely.
As expected, Democrats were the most favorable to the idea, with 59% saying they were either much more likely or somewhat more likely to support a universal healthcare proposal. Just 21% of Republicans said the same. Independents were somewhere in the middle, with 34% warming up to the idea of blanket coverage.
More than 21% of Republicans said they were less likely to support universal care in the wake of the COVID-19 crisis. Seven percent of independents reported the same, while for Democrats the number was statistically insignificant.
During his campaign, President Joe Biden said he supported a public option for healthcare coverage. He also pledged to strengthen the Affordable Care Act. By executive order, Biden opened a new ACA enrollment period for those left uninsured. It begins February 15 and goes through May 15.