In recent years, there has been a push for more transparency in health care around the prices patients pay to receive care. In June, a judge from the U.S. District Court for the District of Columbia rejected a lawsuit filed by a coalition of hospital groups arguing a 2019 CMS rule requiring hospitals to publish the prices they negotiate with insurers is "unlawful."
In this episode of Radio Advisory, host Rachel (Rae) Woods sits down with Advisory Board's finance expert Robin Brand to discuss that ruling and talk about why hospital leaders are opposed to price transparency, how they can begin to think about price transparency, and why a focus on patient financial experience is so important.
Read a lightly edited excerpt below, and download the episode to hear the full conversation.
Rachel Woods: Even though in theory transparency is thought of as a good thing for patient advocates, what we're talking about is just how complex and difficult it actually is to offer an accurate price estimate to patients. Is that really the crux of why hospital leaders were so opposed to this type of transparency, or was it more than that?
Robin Brand: It's much more than that. To be more of a cynical researcher, publishing these prices and allowing them to be scrutinized essentially means that insurance companies have leverage. They know exactly what United Healthcare is paying if you're Blue Cross Blue Shield. There's going to be pressure for prices to come down. Any time there's full price transparency in any type of market, we typically see prices go down.
Of course, there are exceptions to that, and that's what the American Hospital Association (AHA) and others were trying to argue in the court case. The judge didn't have it though, he kind of pushed back on them saying, yes there may be some instances of Dutch mining companies decades ago releasing price information and seeing prices go up, but it's a pretty rare happening.
Editor's note: Daily Briefing is published by Advisory Board, a division of Optum, which is a wholly owned subsidiary of UnitedHealth Group. UnitedHealth Group separately owns UnitedHealthcare.
Woods: Why is prices going down such a bad thing for hospitals?
Brand: Health care economics or health system economics relies upon a cross-subsidy. Most people in health care understand this—I don't know how many people in the general public understand this—but hospitals need private insurers to pay over what the cost of delivering care is to cross subsidize the losses on Medicare and Medicaid cases, which don't reimburse for full cost.
So, seeing any kind of downward pressure on those negotiated rates is really scary to health systems, considering the fact that their operating on pretty slim margins already. Add in a global pandemic and canceled elective procedures, and this is a pretty scary economic proposition for them.
Woods: And of course now we know what the outcome of that court ruling was. The court rejected the lawsuit brought forth by hospitals. I know you've been tracking this pretty closely, were you surprised at all by that ruling?
Brand: I'm not sure honestly. I'm really torn by it because I've spent my career really on the "side" of health systems, and so I really do feel for them and what they're dealing with now. At the same time, I'm a free market advocate, I believe in giving consumers price information. I do think it's ridiculous that there are patients out there that are expected to lay out the cost of a car or a large household appliance and they can't get information about what it's actually going to cost?
So I'm pretty torn on it, but I guess I was surprised given the fact that this has been this sacred secret that's been held by the industry for so long.
Woods: What do you see happening next?
Brand: It seems as though the AHA is taking a two-pronged approach. One, this is going to be appealed, they'll definitely move forward with that. Two, they've also asked the administration for a delay. So, not going into place in January of 2021, but pushing that out further, which I think is fair given everything that's happening and given everything that health systems are facing right now.
Woods: So, what you're saying is that because hospital leaders have so much to lose, the fight isn't necessarily going to stop.
Brand: I would think not.
Woods: And I kind of agree with feeling torn in this situation. On the one hand, I totally understand the pushback from hospital leaders, but I have to believe that every challenge also creates an opportunity, at least for some folks. So I'm curious, is there an upside for hospital leaders here?
Brand: I absolutely think so. First, there's the idea of "doing the right thing," which is providing price information to consumers. But our research has also shown that when consumers actually know what they're going to owe, they're able to actually budget for it, they're able to actually plan for it and patient collections actually do tend to go up in those cases.
So there's an opportunity for health systems is to actually respond in a positive way to this mandate and really get right the patient financial experience that we've been pushing in our research.
Woods: And I'm guessing that right now is potentially even more of an opportunity to get this right. You've mentioned the effects of the pandemic on elective procedures. We've had a couple conversations on the podcast about what the pandemic has done to volumes, which are not coming back to pre-pandemic levels this year.
I'm just wondering if there are any organizations that are taking price transparency as an offensive approach to say, "How can I make sure that patients are coming in for that elective procedure?" Maybe giving more of their obligation like you're saying, and taking more of an offensive approach right now?
Brand: I don't know about right now, I would assume that there probably are, but we know that there are a lot of organizations that have taken that offensive position prior to the pandemic, that have been pretty aggressive in terms of doing what's right for the patient—not only in terms of price transparency but making sure that the patient is getting an accurate estimate prior to care, according to not only their insurance plan and benefits structure, but also what they already received this year and what they owe on their obligation.
They also have been pairing patients with a financial counselor or their financial assistance infrastructure, whether that be some type of payment plan, discounts, that type of thing. So there are health systems out there that have pushed this and have done fairly well.
I would say that if nothing's been done on the price transparency front, you're well behind as a health system, and I think those are the folks that are really situated to be hurt pretty badly if this does go forward as mandated January 2021.