Two major policy developments emerged from this week’s release by the Centers for Medicare & Medicaid Services (CMS) of the FY22 proposed rule governing payment for hospital outpatient services and ambulatory surgical centers.
First, CMS proposes todramatically increase the financial penalties assessed to hospitals that fail to adequately reveal prices for their services, a requirement first put in place by the Trump administration. According to a report by the consumer group Patient Rights Advocate, only 5.6 percent of a random sample of 500 hospitals were in full compliance with the transparency requirement six months after the regulation came into effect, with many instead choosing to pay the $300 per hospital per day penalty associated with noncompliance. The new CMS regulation proposes to scale the assessed penalties in accordance with hospital size, with larger hospitals liable for up to $2M in annual penalties, a substantial increase from the earlier $109,500 maximum annual fine. In a press release, the agency said it “takes seriously concerns it has heard from consumers that hospitals are not making clear, accessible pricing information available online, as they have been required to do since January 1, 2021.” In a statement, the AHA stated that it was “deeply concerned” about the proposal, “particularly in light of substantial uncertainty in the interpretation of the rules.” The penalty hike is a clear signal that the Biden administration plans to put teeth behind its new push for more competition in healthcare, which was a major focus of the President’s recent executive order. We’d expect to see most hospitals and health systems quickly move to comply with the transparency rule, given the size of potential penalties.
More heartening to hospitals was CMS’ proposal to roll back changes the Trump administration made, aimed at shifting certain surgical procedures into lower cost, ambulatory settings. The agency proposed halting the elimination of the Inpatient Only (IPO) list, which specifies surgeries CMS will only pay for if they are performed in an inpatient hospital. Citing patient safety concerns, CMS noted that the phased elimination of the IPO list, which began this year, was undertaken without evaluating whether individual procedures could be safely moved to an outpatient setting. Nearly 300 musculoskeletal procedures have already been eliminated from the list, and will now be added back to the list for 2022, keeping the rest of the list intact while CMS undertakes a formal process to review each procedure. Longer term, we’d anticipate that CMS will look to continue the elimination of inpatient-only restrictions on surgeries, as well as pursuing other policies (such as site-neutral payment) that level the playing field between hospitals and lower-cost outpatient providers.
For now, hospitals will enjoy a little more breathing room to plan for the financial consequences of that inevitable shift.
On Thursday, the Biden administration issued the first of what is expected to be a series of new regulations aimed at implementing the No Surprises Act, passed by Congress last year and signed into law by President Trump, which bans so-called “surprise billing” by out-of-network providers involved in a patient’s in-network hospital visit.
The interim final rule, which takes effect in 2022, prohibits surprise billing of patients covered by employer-sponsored and individual marketplace plans, requiring providers to give advance warning if out-of-network physicians will be part of a patient’s care, limiting the amount of patient cost-sharing for bills issued by those providers, and prohibiting balance billing of patients for fees in excess of in-network reimbursement amounts.
The rule also establishes a process for determining allowable rates for out-of-network care, involving comparison to prevailing statewide rates or the involvement of a neutral arbitrator, but falls short of specifying a baseline price for arbitrators to use in determining allowable charges. That methodology, along with other details, will be part of future rulemaking, which will be issued later this year.
Of note, the rule does not include a ban on surprise billing forground ambulance services, which were excluded by Congress in the law’s final passage—even though more than half of all ambulance trips result in an out-of-network bill. Expect intense lobbying by industry interests to continue as the details of future rulemaking are worked out, as has been the case since before the law was passed.
While burdensome for patients,surprise billing has become a lucrative business model for some large, investor-owned specialist groups, who will surely look to minimize the law’s impact on their profits.
A California hospital was properly dismissed from a lawsuit alleging it violated state consumer protection laws by failing to disclose emergency room visit fees before treatment, a state appellate court ruled June 29.
Joshua Yebba filed the lawsuit against AHMC Anaheim (Calif.) Regional Medical Center, alleging the hospital violated California’s Unfair Competition Law and Consumer Legal Remedies Act when it did not disclose a separate fee for an emergency room visit before treating him. Mr. Yebba claimed he would have gone to a different ER if he knew about the fee. He sued on behalf of himself and others who allegedly were charged the separate ER fee without knowing about it.
The lawsuit centered on whether the hospital had a duty to disclose the ER fee to patients before treating them and whether the hospital violated the consumer protection laws by not disclosing them.
The hospital argued that it fulfilled any duty to disclose the fee because it has a written or electronic copy of its chargemaster available. However, Mr. Yebba contended that Anaheim Regional had a duty to tell him personally while checking in or to at least post a sign about the fees in the ER.
A lower court dismissed the case against the hospital on the grounds that Anaheim Regional had no duty to disclose the separate ER fee to Mr. Yebba before treating him and that the allegations didn’t violate the consumer protection acts.
The California Court of Appeals 4th District affirmed the dismissal, saying that California lawmakers have determined what pricing information hospitals must disclose to patients and when, and a court decision increasing the requirements “upsets the legislative balance between the consumers’ right to information and the hospitals’ burden of providing it.”
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.
Small businesses are struggling to cover the high costs of healthcare for their employees after a year of COVID-19, according to a new poll sponsored by the Small Business Majority and patient advocacy group Families USA.
More than one in three small businesses owners said it’s a challenge getting coverage for themselves and their workers. That pain is particularly acute among Black, Asian American and Latino businesses, which have fewer resources than their White counterparts, SBMfound.
As a result, small businesses want policymakers to expand coverage access and lower medical costs, beyond the temporary fixes included in the sweeping $1.9 trillion American Rescue Plan passed by Congress earlier this month.
Providing health insurance can be pricey for small employers, a challenge that’s been exacerbated by the pandemic and its subsequent economic downturn.
Accessing health insurance has been a major barrier over the course of COVID-19, the national survey of 500 businesses with 100 employees or fewer in November found. The poll, conducted by Lake Research Partners for SBM and Families USA, found many such businesses have had to slash benefits during the pandemic. Among small business owners that have reduced insurance benefits, 36% have trimmed their employer contribution for medical premiums and 56% switched to a plan with a lower premium.
Additionally, one in five small business owners say they plan to change or lower coverage in the next few months, while only about a quarter have been able to maintain coverage for temporarily furloughed employees.
The situation is bleaker for minority-owned small businesses. Overall, 34% say accessing health insurance has been a top barrier during COVID-19, but that figure rises to 50%, 44% and 43% for Black, Asian American and Latino business respondents, SBM, which represents some 80,000 small businesses nationwide, said.
That’s in line with past SBM polling finding non-white entrepreneurs are more likely to face temporary or permanent closure in the next few months than their white counterparts, and are also more likely to struggle with rent, mortgage or debt repayments.
Washington did allocate a significant amount of financial aid for small businesses last year, and the ARP includes numerous provisions including increased subsidies for health insurance premiums for two years, and extended COBRA coverage for laid off employees through September.
But respondents to this latest polling urged for more long-term support.
The most popular policy proposal was bringing down the cost of prescription drugs, with 90% of businesses saying they supported the measure and 54% saying they were in strong support. Protecting coverage for people with pre-existing conditions was also popular, with 87% of small business owners in total support and 51% strongly supporting.
Three-fourths of small business owners strongly support a public health insurance option, while 73% support expanding Medicaid eligibility in all states and 66% support letting people buy into Medicare starting at age 55.
A survey of large to mid-size employers from the National Alliance of Healthcare Purchaser Coalitions published Wednesday found at least three-fourths of employers support drug price regulation, surprise billing regulation, hospital price transparency and hospital rate regulation.
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.
With nearly 30% of workers now having a high deductible health plan and a typical family being responsible for on average the first $8,000 of costs, consumers are increasingly weighing care versus cost. Historically, with a small copay, you would conveniently take care of an ailment without shopping around, but with the average person now bearing the brunt of the initial costs, wouldn’t you want to know how much a service costs and what other providers are charging before you “buy” the service?
CMS believes“consumers should be able to know, long before they open a medical bill, roughly how much a hospital will charge for items and services it provides.” Cue the hospital price transparency rule that just went into effect January 1, 2021. Hospitals are now required to post their standard charges, including the rates they negotiate with insurers, and the discounted price a hospital is willing to accept directly from a patient if paid in cash. As a consumer, the intent is to make it “easier to shop and compare prices across hospitals and estimate the cost of care before going to the hospital.”
There are a few different angles to analyze here:
Are hospitals following the rules?
Each hospital must post online a comprehensive machine readable file with all items and services, including gross charges, actual negotiated prices with insurers, and the cash price for patients who are uninsured. Additionally, hospitals must post the costs for 300 common “shoppable” services in a “consumer-friendly format.” Some hospitals and health systems have done a good job at posting these prices in a digestible format, like the Cleveland Clinic or Sutter Health, but others have posted complicated spreadsheets, relied on online cost estimator tools, or simply not posted them at all. An analysis from consulting firm ADVI of the top 20 largest hospitals in the U.S. found that not all of them appeared to completely comply with this mandate. In some instances, data was not able to be downloaded in a useable format, others did not post the DRG or service codes, and the variability in the terms/categories used simply created difficulty in comparing pricing information across hospitals. CMS has stated that a failure to comply with the rules could result in a fine of up to $300 per day. As with most new rules, there are growing pains, and hospitals will likely get better at this over time, assuming the data is being used for its original intent.
Is this helpful to consumers?
Consumers will able to see the variation in prices for the exact same service or procedure between hospitals and get an estimate of what they will be charged before getting the care. But how likely is the average person to go to their hospital’s website, look at a price, and change their decision about where to get care? In addition, awareness of these price transparency tools is still low among consumers. Frankly, it is competitors and insurers that have been first in line to review the data. Looking through a number of hospital websites, and even certain state agency sites that have done a good job at summarizing the costs, like Florida Health Price Finder, the price transparency tools are helpful, but appear to be much more suited for relatively standardized services that can be scheduled in advance, like a knee replacement. It’s highly unlikely you will be telling your ambulance driver what hospital to go to based on cost while in cardiac arrest…Plus, it’s all still confusing – even physicians have shared their bewilderment, when trying to decipher and compare pricing. Conceptually, price transparency should be beneficial to consumers, but it will take time; and it will need to involve not just the hospitals posting rates, but the outpatient care facilities as well. Knowing what you will pay before you decide to go to a physician’s office or a clinic or an urgent care or an ED will hopefully help drive consumers to make more educated decisions in the future.
Will this ultimately drive down costs?
I sure hope so. Revealing actual negotiated prices between hospitals and insurers should push the more expensive hospitals in the area to reduce prices, especially if consumers start using the other hospitals, instead. However, it could also have an inverse effect, with lower cost hospitals insisting on a payment increase from insurers; thereby driving up costs. In the end, as has historically been the case, the market power of certain providers will likely dictate the direction of costs in a given region. That is, until both price AND quality become fully transparent and the consumer is armed with the tools to shop for the best care at the lowest cost – consumerism here we come.
Hospitals are now required to disclose the prices they secretly negotiate with insurers.
But many are dragging their feet on the new regulations, which were passed under President Donald Trump and could very well stay in place under President Biden.
The rules went into place Jan. 1, but hospital compliance is spotty.
“Hospitals are playing a hide-and-seek game,” said Ge Bai, an expert on health-care pricing at Johns Hopkins Bloomberg School of Public Health.“Even with this regulation, most of them are not being fully transparent.”
Hospitals lost a bruising court battle last year to stop the rules, which require them to publish a list of prices for goods and services. The point is to bring more transparency to prices for medical goods and services — information that has long been inaccessible to consumers. The new rules were a centerpiece of Trump’s promise to inject more price transparency in the health-care system and curb surprise billing.
But Nisha Kurani, a policy analyst at the Kaiser Family Foundation who is tracking hospital responses to the new rule, said she’s seen the full gamut.
MedStar in Washington posted its prices in an Excel sheet on its website, but other hospitals only posted price estimates, uploaded files in difficult to use formats, or promised to release information only after someone inputs their insurance, Kurani said.
A Gothamist investigation found that only one of five major New York hospitals posted a list of their negotiated services to their website, and even then, not for all procedures. The fine for not complying with the new rules — $300 a day — is a drop in the bucket for many hospitals.
The rules probably aren’t going away anytime soon.
The Biden administration hasn’t taken any public position on the rules — and right now, officials are focused on reversing dozens of other Trump administration regulations they believe are damaging to health insurance and costs in the United States.
Revising the hospital transparency rules — if that’s even something the new administration wants to do — would likely be far down on the priority list, despite heavy lobbying by the hospital industry to suspend enforcement of the new rule.
Plus, price transparency is broadly popular among the public and was one of the planks of a joint health policy plan developed by a task force Biden formed with Sen. Bernie Sanders (I-Vt.) after the 2020 primary elections.
The American Hospital Association says staff who would help with compliance are stretched thin.
Molly Smith, the association’s group vice president for public policy, said many of the staff members who would normally be tasked with compiling and formatting the price data are the same people being asked to help set up patient registries and vaccine tracking systems in response to the pandemic.
“We’ve got a lot of hospitals that are at or beyond capacity,” Smith said.
A lawyer for the hospital association said that it is considering petitioning its legal case to the Supreme Court. Meanwhile, the lobbying group has been pushing the Biden administration to suspend enforcement of the new rule.
Consumer advocates like the transparency rules designed to protect patients and drive down health-care costs.
“In the past there was absolutely no power for the consumer. It was like highway robbery being committed every day by the health-care system,” said Cynthia Fisher, head of the nonprofit Patient Rights Advocate, which pushes for price transparency.
But now, Fisher says, “it’s the American consumer who is going to drive down the cost of care.”
But the effect might be modest.
Experts in health-care economics hotly debate whether the price transparency rules will, in fact, drive down costs. Even those who support the changes say the effect might be incremental.
“I don’t think it’s going to be an earthquake in terms of pricing, but it’s a first step in the right direction,” said Bai.
There are several reasons the new price transparency rule may not have a massive effect on hospital prices. Perhaps the biggest, and one often cited by the hospital lobby, is that most Americans are not going to pay the negotiated price for a procedure. Instead, they are likely to pay co-pays or coinsurance that amount to a fraction of this price.
This isn’t always true, of course. Those with high-deductible plans may pay the negotiated rate, and for those without insurance paying out of pocket, it can be helpful to get a peek behind the sticker price. But even for these patients, it may be challenging to extract useful information from unwieldy spreadsheets full of obscure billing codes.
Bai said that she is hopeful that third parties may make some of the pricing information easier for consumers to use. And some self-insured employers may start identifying cheaper providers and incentivizing patients to use them. The rules also require hospitals to provide cost-sharing estimates for commonly used procedures in an easily navigable format.
Still, price competition works only if there are players to compete.
The market for health care has become increasingly consolidated as hospitals merge and buy up physician practices. If a hospital is the only health-care provider in town, then there’s not a whole lot patients can do about high prices, even if they think they’re unfair.
“I don’t think transparency will fundamentally change the power balance between the payer and the hospital in many markets,” Bai said.
Beyond the initiatives directly tied to COVID relief, President Biden’s healthcare agenda includes a broader bolstering of the protections and coverage mechanisms in the Affordable Care Act (ACA), as well as the rollback of several of the previous administration’s regulatory changes. We’ve outlined that agenda in the graphic below, as well as highlighting key members of the Biden healthcare team.
While much will depend on how the COVID pandemic continues to unfold, and how successful Biden is at striking bipartisan compromises with a closely divided Congress, we’re watching closely for the answers to several key questions:
(1) how aggressive can and will the new administration be in unwinding Trump-era reforms, particularly regarding Medicaid work requirements;
(2) what will be the thrust of Biden’s antitrust policyin the healthcare space;
(3) how hard will Biden be willing to push for expanded subsidies for individuals purchasing insurance on the ACA exchanges;
(4) how will the Biden team build on the transparency measures implemented by the Trump administration; and
(5) how will the new administration use payment reforms and other regulations to address racial and other disparities in healthcare?
All of that preceded by one burning question that has us holding our breath: who will Biden pick to run the all-important Centers for Medicare and Medicaid Services?