Beyond hospital price transparency: Creating meaningful change in health care
Fixing health care must start by addressing the misaligned incentives that have created its complex pricing structure to begin with.
It’s now been more than a year since the CMS’s hospital price transparency rule went into effect, and the health care revolution has been… underwhelming. While the change is no doubt a step in the right direction for consumer-driven health care, price transparency is just one of many issues currently making health care access and use an uphill battle for many Americans.
Related: Health care consumerism and price transparency tools: Are your employees equipped?
Beyond simply knowing the price of a service, understanding how and where to access the care they need is a daunting task for many consumers, worsened by the misaligned incentives driving our current health care system.
Mark Nolan, COO of Hint Health, recently shared his thoughts on price transparency and other areas of health care that are in need of improvement–and how employers can help drive the push for change.
Where did the original hospital price transparency rule fall short?
The original hospital price transparency rule was put in place with good intentions, but there was little expectation that the policy was going to have much of an initial impact. Hospitals had little to no regulatory or economic incentive to comply. And even if they wanted to, the complexity by which they develop their (often fantastical) prices would be a significant hurdle. Price transparency should be a fundamental cornerstone of any market-based health care system, and should be displayed in a simple way for consumers to understand. However, hospitals simply are not doing this, and don’t want to.
In fact, more than half of hospitals are still not compliant with the federal rule that went into effect on January 1, 2021 even with a year to prepare. And, despite the federal government issuing more than 300 warnings and the threat of daily fines for noncompliance, hospitals appear to be more willing to face these monetary penalties than to provide consumers with the information they need to make informed decisions about their care. The government seems hesitant to increase enforcement penalties, maybe with an eye towards the Covid-related pressure hospitals are pointing to. In short, there’s been no impact for patients, employers, or other stakeholders seeking change.
How can we better incentivize providers to go beyond the minimum required by legislation?
Ideally, it would be driven by more competition. That increases a buyer’s (aka patient’s) leverage, and so their ability to require price transparency and better prices as elements of choosing from whom to purchase services. However, as a reflection of the many complicated dynamics in health care, in this situation hospitals often have little local competition for many services and patients generally complete the purchase of hospital services using third parties, their insurance network, which have their own distorted incentives.
Until those dynamics change in a significant way, growing patient concerns will continue to put pressure on the government to provide a regulatory incentive. Regulators should begin enforcing this rule with penalties that actually encourage hospitals to comply and then follow through with publishing the names of those falling behind on the Hospital Price Transparency section of the CMS website.
But even with those incentives and penalties around hospital price transparency, for truly meaningful change, policymakers must seek solutions that move our health care system away from a fee-for-service system that is largely responsible for today’s health care crisis. Only that will lead to a long-lasting impact.
What actions are needed to drive meaningful change for patients? Where should we be focusing?
Primary care providers–rather than hospital systems–may be a better place to start. While the hospital price transparency rules are unlikely to create any meaningful change, there are emerging business models increasingly being adopted by physician practices that are already addressing many of the same challenges policymakers were attempting to solve through the original rule.
For instance, direct primary care (DPC) is rapidly becoming a popular option for primary care physicians to help patients remove the often unnecessary role of insurance and its related perverse financial incentives through a monthly fee paid directly by patients, or their employer sponsor, in exchange for a predetermined list of services. This represents a big shift away from the fee-for-service system to one that provides complete transparency for patients that offers no guessing games, no copayments, no insurance claims submitted, and no third-party billing of any kind.
Hospital price transparency is still needed to enable both the patient and their trusted primary care provider to make fully informed decisions on where to obtain hospital care. But while the hospital price transparency rule was a step in the right direction, policymakers should also focus on how they can incentivize providers to embrace true value-based business models that allow physicians to work for their patients rather than the health care system. And we can’t rely on policy alone; some of this must be driven at the community-level by physicians themselves, alongside the employers looking to create better health care options for their members.
How can employers incorporate direct primary care models into their health benefits?
We know that the vast majority of consumers (83%) would be interested in joining a DPC plan if it was offered by their current or future employer, but there’s a greater need for employer and employee education to drive awareness of the benefits.
Employers may not be aware, but they also have the potential for significant ROI under DPC. Primary care is a key leverage point in managing better health outcomes and reducing cost. In one instance, an advanced primary care model saved an employer 11% per employee per month, while another employer experienced annual savings of $913 per member compared to their existing PPO Choice plan (not including additional savings from improved recruitment and retention, and decreased absenteeism).
Additionally, while there’s a DPC practice in every state across the country now, brokers and employers don’t have the time (or in many cases, even the ability) to research providers. However, there are new networks being launched that aggregate DPC providers into one contracting entity to support employers as they search within their communities for better health care options.
How can we get large health care systems on board with these changes?
They will need to be convinced that how they currently operate is untenable, and so it requires they be first-movers to new models versus fighting for the current one. However, true change likely won’t come from the larger health systems, but rather will be ignited through the alliance of community physicians, patients, and employers who are increasingly seeking ways to escape the way in which they’re forced to practice, experience, and pay for medicine today. Employers, brokers, and third-party administrators can help accelerate this movement by providing employees with access to direct primary care plans and sharing the benefits of this business model.
However, while this physician-led movement is already underway and gaining significant momentum, policymakers have the ability to specifically address the root causes of the challenges facing our country’s health care system: ultimately eliminating perverse financial incentives and encouraging providers to achieve the quadruple aim of better outcomes, lower costs, and a better experience for both patients and physicians alike.
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