HHS Secretary Alex Azar has thrown down a passionate—and personal—challenge to healthcare providers and drugmakers, demanding they tell patients what a service or product will cost before they receive it.
Azar demands price transparency, but how will he achieve it?
"Especially if we want to move to a system where we put patients more in charge of their own healthcare dollars, providers and insurers have to become more transparent about their pricing," he told the Federation of American Hospitals on March 5. "There is no more powerful force than an informed consumer."
"And if that doesn't happen, we have plenty of levers to pull that would help drive this change," he warned.
Increasing price transparency was part of a "four shifts" agenda Azar laid out for transforming U.S. healthcare into a more competitive, value-based system that costs less. But he faces a hard slog to make prices and out-of-pocket costs public, particularly since many providers and pharmaceutical companies have resisted even while saying they support the concept. They argue it's the job of health plans to tell their members how much they will owe.
In addition, experts say the cost-reduction potential of greater price transparency is limited because only a small percentage of total U.S. healthcare spending is on services for which patients truly can comparison shop.
The HHS secretary offered no details on how his agency will promote this goal. Healthcare industry leaders were left to guess how he would tackle this complex issue, which policymakers and stakeholders have been struggling with for years and on which progress has been slow.
"It was just an outline and clearly wasn't even in a formative stage," said Chip Kahn, CEO of the Federation of American Hospitals. "We'll have to see what he decides to come up with."
The CMS did not respond to questions about when and how it planned to move forward on Azar's price transparency goal.
Still, transparency advocates were encouraged by Azar's clear commitment to the issue, illustrated by his personal tale of how hard it was for him to find out the price of a stress echocardiogram.
"I certainly believe that the HHS secretary putting energy behind the movement toward greater transparency will make a difference," said Suzanne Delbanco, executive director of Catalyst for Payment Reform, whose 2017 report card on price transparency initiatives gave 43 states a failing grade.
Some question, however, whether the federal government is the appropriate player to drive price transparency, rather than letting states and the private sector take the lead. "It's hard to come up with a federal solution that applies to 50 states when healthcare looks so different everywhere," said Joe Fifer, CEO of the Healthcare Financial Management Association, which has published price transparency guidelines.
Nevertheless, Delbanco and other experts said there are steps HHS could take to advance price transparency, such as making it easier for states and private organizations to incorporate Medicare payment information into transparency tools for consumers. That data could help consumers compare individual hospitals' and physicians' average total cost for treating patients with particular conditions such as diabetes.
Or, as a condition of Medicare participation, HHS could require hospitals to disclose costs upfront and take steps to protect patients from surprise bills from out-of-network providers. In addition, the CMS could publish cost and outcome results for individual providers' bundles of care for services such as total joint replacements. It also could require health plans on the Affordable Care Act exchanges to give members pre-service estimates of out-of-pocket costs.
But the experts questioned Azar's heavy emphasis on price transparency as a way to bring down healthcare costs. For one thing, the Health Care Cost Institute found that less than 7% of total U.S. healthcare spending was for "shoppable" services, meaning those that can be scheduled in a market with some competition.
"It's a necessary but not sufficient component," said Niall Brennan, president of the Health Care Cost Institute, which offers a consumer-focused website with price information for nearly 300 healthcare services. "Consumers are the weakest actors in the healthcare ecosystem. Every actor needs to work together to reduce costs."
In his speech, Azar described his frustrating experience in Indiana a few years ago trying to price-shop for an echocardiogram stress test when he had a high-deductible health plan. Initially he was told the list price at a hospital was $5,500, then he was told his insurer's negotiated price was $3,500. Finally, after considerable difficulty, he found out it would cost him just $550 at a physician's office.
"Now, there I was, the former deputy secretary of Health and Human Services, and that is the kind of effort it took to find out how much I would owe for a procedure. … That is simply wrong.
"I believe you ought to have the right to know what a healthcare service will cost—and what it will really cost—before you get that service. … We'll work with you to make it happen—and lay out more powerful incentives if it doesn't."
But Azar will face opposition from providers and drugmakers, who have raised administrative concerns about transparency efforts.
For instance, the Ohio Hospital Association won a court injunction blocking implementation of a 2015 state law requiring providers to give patients a "good faith" estimate before treatment of how much non-emergency services would cost out of pocket. That law remains on hold while providers are supporting more limited transparency requirements.
The ACA already requires hospitals to publish a list of their standard charges for items and services, including Medicare DRG charges. But neither the Obama administration nor the Trump administration has made any move to implement that provision. Critics say it wouldn't be helpful to patients because charges represent inflated retail rates that almost no one actually pays.
The CMS did not respond to a question about whether it would propose a rule to implement the ACA charge-disclosure provision.
Price and quality transparency tools introduced by states and private insurers have faced lots of growing pains. Only a few of the tools provide comprehensive information on quality, price, patient experience, network providers and benefit design, according to Catalyst for Payment Reform. Maine, Maryland, New Hampshire and Oregon offer the best consumer websites, featuring all-payer claims data on individual hospitals and physicians, the group found.
Among the hurdles, third-party vendors typically lack access to real-time data, and insurers generally don't want to share their proprietary data. Plus, the U.S. Supreme Court ruled in 2016 that self-insured employers can't be required to turn over their claims data for state cost-transparency databases.
As a result, most states currently do not publish the actual amounts providers receive from payers for individual services.
But some providers are working on offering patients pre-service estimates of their out-of-pocket costs, even though there's evidence that only a small percentage of patients use price-shopping tools. Geisinger Health has an online estimator that Geisinger Health Plan members can use to calculate their costs for 300 of the most common services. The calculator doesn't work for patients in other health plans.
"The idea of sharing our pricing structure with patients makes perfect sense," said Karen Murphy, Geisinger's chief innovation officer. "But will price transparency in and of itself completely bend the cost curve? Probably not."
Despite such industry caveats, Azar last week sounded determined to push ahead. "This administration and this president are not interested in incremental steps," he said. "In fact, the only option is to charge forward—and for HHS to take bolder action, and for providers and payers to join with us."
An edited version of this story can also be found in Modern Healthcare's March 26 print edition.
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