Price Transparency: Reshaping Healthcare
2022 marks the merging of 3 major price transparency policies in healthcare – hospital price transparency, payer price transparency and the No Surprises Act. The combination of these policies has the potential to reshape the industry’s approach to setting prices. Before we talk about how these policies could impact contracting and pricing strategies, let’s first take a closer look at each policy as it stands today.
Hospital Transparency Rule
Since January 1, 2021, the Hospital Transparency Rule has required hospitals to publish standard charges for all items and services in a comprehensive machine-readable file and a consumer-friendly online format. Failure to comply at its inception was a penalty of $300/day. Effective January 1st, 2022, the penalty jumped to $5,500/day, which will incentivize more hospitals and health systems to comply.
Transparency in Coverage Rule
Phasing in from July 2022 to January 2024, the Transparency in Coverage (TiC) rule requires payers to publish structured, organization-specific payment rates for providers and prescription drugs as well as a personalized out-of-pocket estimation tool for 500 shoppable services.
No Surprises Act
Taking effect in 2022, the No Surprises Act (NSA) requires private health plans to cover surprise, out-of-network claims and apply in-network cost sharing. This prohibits doctors, hospitals and other covered providers from billing patients more than in-network cost sharing amounts for surprise medical bills. The NSA also establishes a new provider-payer arbitration process for out-of-network rates removing consumers from payment disagreements between their providers and insurance companies. Possibly delayed until 2023, the NSA will also require providers and health plans to help patients access healthcare pricing information as well as provide patients with good-faith estimates in advance of scheduled care.
So, what should industry leaders be thinking about and preparing for to ensure they are ready for a new era of “information liberation” in healthcare?
Advisory Board highlights 4 key takeaways that will help industry leaders as we push towards true price transparency.
- Market Movement
Much of the focus on price transparency thus far has been on the consumer. However, there are key provisions of the price transparency and surprise billing rules that provide little value for consumers but instead impact the wholesale market. The requirement for hospitals and payers to publish machine-readable files and disclose negotiated rates isn’t a win for consumers. The drive behind this is to allow those making decisions for large groups of people (e.g., payers, brokers) to see these files and learn new ways to save money.
There are several ways this could play out. Here are a few scenarios to watch for:
- A race to the bottom, in which providers with above-average rates must defend those rates or see them pushed down to be more in line with competitors.
- A race to the top, in which the average rate for a market shifts up in line with the higher rates.
- The status quo, in which providers who operate in noncompetitive markets don’t have to go through that benchmarking process.
- Contract Negotiations
Expect to see provider-payer contract negotiations affected by the No Surprises Act’s new independent dispute resolution process. It gives stakeholders more information about competitor’s rates which will play a role in determining reasonable expectations for out-of-network rates and negotiations. Brand name and market share will still be major factors in contract negotiations, but the new policy changes have the potential to shift the balance of power.
- Quality Control
The price transparency rules raise the question of what role quality will play in contract negotiations moving forward. With easily accessible pricing information, there is a concern that the push for lower costs will outweigh the importance of quality in healthcare. It’s hard to examine cost differences between providers without considering quality measures, leaving consumers lacking the necessary tools to make an informed decision about their healthcare. The hope would be for tools that allow consumers to compare pricing data and equivalent quality data when shopping for their healthcare needs.
- Evaluate Your Preparedness & Exposure
With the increased penalty for hospital price transparency non-compliance effective this year, hospitals and health systems need to reevaluate their financial risk. Additionally, they will need to verify how their out-of-network claims will be affected by the No Surprises Act’s ban on balance billing. There is also risk to their reputation as the media has been very influential in the healthcare space, specifically coverage about hospitals embedding code in their website to hide pricing data from Google and other search engines. It’s important to have ongoing conversations about risk exposure beyond the financial side.
2022 might be the year we start making a dent in healthcare spending as American leaders are finally taking actions to improve healthcare in the U.S. Only time will tell whether these initiatives are successful but know that it’s going to be a long ride. Ensuring your facility understands and respects the price transparency guidelines in place today will help prepare you for the next phase in the price transparency journey.