As value-based efforts lag, push for price regulation gains momentum
Skip to main content
MDHC_Logotype_white
Subscribe
  • My Account
  • Login
  • Subscribe
  • News
    • This Week's News
    • COVID-19
    • Providers
    • Insurance
    • Government
    • Finance
    • Technology
    • Safety & Quality
    • People
    • Regional News
    • Digital Edition
    • CMS will raise Medicare Advantage plan payments by 4.08% in 2022
      Federal regulators ask insurers for claims data
      Cone Health CEO, CFO to depart amid pending Sentara merger
      Intermountain, Trinity, Memorial Hermann behind $300M private equity fund
    • Biden unveils $1.9T plan to stem virus and steady economy
      Nursing home staff COVID-19 vaccination: A work in progress
      California hospitals prepare ethical protocol to prioritize lifesaving care
      Expanded vaccine rollout in U.S. spawns a new set of problems
    • The Check Up: Trenda Ray
      The Check Up: Trenda Ray of the University of Arkansas for Medical Sciences
      Trenda Ray
      Q&A: Arkansas nursing leader looking for creative staffing solutions as COVID cases surge
      Cook Lydia 4x6_i.jpg
      Northeast Ohio health systems increase community benefit values in 2019
      Vaccine rollout hits snag as health workers balk at shots
    • CMS approves rule forcing insurers to ease prior authorization
      COVID-19 still a big uncertainty for insurers in 2021
      Health insurers' outlook boosted after Dems' Georgia win
      humana_i.jpg
      Humana supports Ohio not-for-profits with $500,000
    • CMS will raise Medicare Advantage plan payments by 4.08% in 2022
      CMS approves rule forcing insurers to ease prior authorization
      Verma: CMS tried to 'infuse' free-market competition across healthcare during Trump era
    • Intermountain, Trinity, Memorial Hermann behind $300M private equity fund
      Operation Warp Speed to bump up McKesson's stock price
      Reporter's notebook: J.P. Morgan's 2021 health conference
      Hospitals, nursing homes get more time to file cost reports
    • 5 things to know about Google's $2.1B Fitbit acquisition
      Providence bets on machine-learning, consolidating data centers
      Mental health treatment was most common telehealth service during COVID
      Broad, Verily take Terra bioinformatics platform to Microsoft Azure cloud
    • Chance of COVID-19 triage care looms over Arizona hospitals
      U.S. ramps up vaccinations to get doses to more Americans
      367146427.jpg
      Should businesses mandate that staff get the COVID vaccine?
      Smartphone
      'No mobile phone' phobia on the rise
    • Cone Health CEO, CFO to depart amid pending Sentara merger
      Tower Health's finance chief resigning after years of steep losses
      AHRQ director Gopal Khanna resigns in response to Capitol riot
      Brigham president stepping down after Moderna controversy
    • Midwest
    • Northeast
    • South
    • West
  • Insights
    • ACA 10 Years After
    • Best Practices
    • InDepth Special Reports
    • Innovations
    • The Affordable Care Act after 10 years
    • New care model helps primary-care practices treat obesity
      doctor with patient
      COVID-19 treatment protocol developed in the field helps patients recover
      Rachel Wyatt
      Project to curb pressure injuries in hospitals shows promise
      Yale New Haven's COVID-19 nurse-staffing model has long-term benefits
    • Modern Healthcare InDepth: Breaking the bias that impedes better healthcare
      Videos: Healthcare industry executives describe their encounters with racism
      Michellene Davis
      Healthcare leadership lacks the racial diversity needed to reduce health disparities
      Dr. James Hildreth
      How medical education can help fight racism
      Quotes from rebadged employees
      Outsourcing IT, revenue cycle takes toll on internal culture
    • A woman with a wearable sensor talking to her provider.
      Wearable sensors help diagnose heart rhythm problems in West Virginia
      self service station
      COVID-19 pushes patient expectations toward self-service
      Targeting high-risk cancer patients with genetics
      A nurse holds up a phone with a message to a family member saying surgery has started.
      Texting, tablets help hospitals keep family updated on patient care
  • Transformation
    • Patients
    • Operations
    • Care Delivery
    • Payment
    • Highmark Health inks six-year cloud, tech deal with Google
      Study: 1 in 5 patients report discrimination when getting healthcare
      HHS proposes changing HIPAA privacy rules
      Android health records app launches at 230 health systems
    • California hospitals prepare ethical protocol to prioritize lifesaving care
      Amazon, JPMorgan Chase, Berkshire Hathaway disband Haven
      Digital pathways poised to reshape healthcare continuum in 2021
      Healthcare was the hardest hit by supply shortages across all U.S. industries
    • A woman with a wearable sensor talking to her provider.
      Wearable sensors help diagnose heart rhythm problems in West Virginia
      New care model helps primary-care practices treat obesity
      How hospitals are building on COVID-19 telehealth momentum
      Researchers: Hospital price variation exacerbates health inequities
    • MedPAC votes to boost hospital payments, freeze or cut other providers
      Most Next Gen ACOs achieved bonuses in 2019
      Congress recalibrates Medicare Physician Fee Schedule after lobbying
      CMS approves rule to encourage value-based drug pricing
  • Data/Lists
    • Rankings/Lists
    • Interactive Databases
    • Data Points
    • Health Systems Financials
      Executive Compensation
      Physician Compensation
  • Op-Ed
    • Bold Moves
    • Breaking Bias
    • Commentaries
    • Letters
    • Vital Signs Blog
    • From the Editor
    • Wellstar CEO calls adapting for the pandemic her bold move
      Howard P. Kern
      Recognizing the value of telehealth in its infancy
      Dr. Stephen Markovich
      A bold move helped take him from family doctor to OhioHealth CEO
      Dr. Bruce Siegel
      Why taking a hospital not-for-profit was Dr. Bruce Siegel’s boldest move
    • Barry Ostrowsky
      Ending racism is a journey taken together; the starting point must be now
      Laura Lee Hall and Gary Puckrein
      Increased flu vaccination has never been more important for communities of color
      John Daniels Jr.
      Health equity: Making the journey from buzzword to reality
      Mark C. Clement and David Cook
      We all need to 'do something' to fight inequities and get healthcare right, for every patient, every time
    • Healing healthcare: some ideas for triage by the new Congress, administration
      Dr. Sachin H. Jain
      Medicare for All? The better route to universal coverage would be Medicare Advantage for All
      Connectivity: a social determinant of health that can exacerbate all the others
      Taking my shot at building trust
    • Letters: Eliminating bias in healthcare needs to be ‘deliberate and organic’
      Letters: Maybe dropping out of ACOs is a good thing for patients
      Letters: White House and Congress share blame for lack of national COVID strategy
      Letters: VA making strides to improve state veterans home inspections
    • Sponsored Content Provided By Optum
      How blockchain could ease frustration with the payment process
      Sponsored Content Provided By Optum
      Three steps to better data-sharing for payer and provider CIOs
      Sponsored Content Provided By Optum
      Reduce total cost of care: 6 reasons why providers and payers should tackle the challenge together
      Sponsored Content Provided By Optum
      Why CIOs went from back-office operators to mission-critical innovators
  • Awards
    • Award Programs
    • Nominate
    • Previous Award Programs
    • Other Award Programs
    • Best Places to Work in Healthcare Logo for Navigation
      Nominations Open - Best Places to Work in Healthcare
      Nominations Open - Health Care Hall of Fame
      Nominations Open - 50 Most Influential Clinical Executives
    • 100 Most Influential People
    • 50 Most Influential Clinical Executives
    • Best Places to Work in Healthcare
    • Health Care Hall of Fame
    • Healthcare Marketing Impact Awards
    • Top 25 Emerging Leaders
    • Top 25 Innovators
    • Top 25 Minority Leaders
    • Top 25 Women Leaders
    • Excellence in Nursing Awards
    • Design Awards
    • Top 25 COOs in Healthcare
    • 100 Top Hospitals
    • ACHE Awards
  • Events
    • Conferences
    • Galas
    • Webinars
    • COVID-19 Event Tracker
    • Leadership Symposium
    • Healthcare Transformation Summit
    • Women Leaders in Healthcare Conference
    • Workplace of the Future Conference
    • Strategic Marketing Conference
    • Social Determinants of Health Symposium
    • Best Places to Work Awards Gala
    • Health Care Hall of Fame Gala
    • Top 25 Minority Leaders Gala (2022)
    • Top 25 Women Leaders Gala
  • Listen
    • Podcast - Next Up
    • Podcast - Beyond the Byline
    • Sponsored Podcast - Healthcare Insider
    • Video Series - The Check Up
    • Sponsored Video Series - One on One
    • Carter Dredge
      Next Up Podcast: Ready, set, innovate! Innovation and disruption in healthcare
      Next Up Podcast: COVID-19, social determinants highlight health inequities — what next?
      Ceci Connolly
      Next Up Podcast: How to navigate the murky post-election waters
      Next Up Podcast: Saving Rural Health
    • An older man wearing a mask receiving a vaccine.
      Beyond the Byline: Verifying information on the chaotic COVID-19 vaccine rollout
      doctor burnout
      Beyond the Byline: How healthcare supply chain struggles contribute to employee burnout
      Beyond the Byline: Covering race and diversity in the healthcare industry
      Beyond the Byline: How telehealth utilization has impacted investor-owned company earnings
    • Leading intention promote diversity and inclusion
      Introducing Healthcare Insider Podcast
    • The Check Up: Trenda Ray
      The Check Up: Trenda Ray of the University of Arkansas for Medical Sciences
      The Check Up: Dr. Kenneth Davis
      The Check Up: Dr. Kenneth Davis of Mount Sinai Health System
      The Check Up: Dr. Thomas McGinn
      The Check Up: Dr. Thomas McGinn of CommonSpirit Health
      The Check Up: Mark Ganz
      The Check Up: Mark Ganz of Cambia Health Solutions
    • Video: Ivana Naeymi Rad of Intelligent Medical Objects
  • MORE +
    • Advertise
    • Media Kit
    • Newsletters
    • Jobs
    • People on the Move
    • Reprints & Licensing
MENU
Breadcrumb
  1. Home
  2. Providers
February 23, 2019 12:00 AM

As value-based efforts lag, push for price regulation gains momentum

Harris Meyer
  • Tweet
  • Share
  • Share
  • Email
  • More
    Print

    For many years, the battle cry of healthcare cost warriors was, “Eliminate all those wasteful services.”

    More recently that evolved to, “Pay providers based on value rather than volume.” But there were always those who insisted the real problem was, “It's the high prices, stupid.”

    Now policymakers and experts who favor attacking price increases have gained momentum, with both congressional Democrats and the Trump administration pushing price-setting proposals. Their arguments are buttressed by growing research showing that rising prices for hospital and physician services and drugs are a major driver of increasing healthcare spending.

    “We pay more for our healthcare in the U.S. because we pay our providers more,” said Christopher Koller, president of the Milbank Memorial Fund and a former Rhode Island health insurance commissioner. “We have to put the whole system on a diet and let them figure out how to live with it.”

    Such proposals face powerful opposition, however, from industry groups, which have balked even at making their prices more transparent to the public.

    Last week, the CMS Office of the Actuary reported that nearly half the projected 5.5% average annual growth in healthcare spending over the next decade will be due to price increases, while just a third of the spending growth will result from greater utilization and intensity of services as the huge baby boomer generation ages.

    That 5.5% healthcare spending growth will outpace overall economic growth, resulting in healthcare making up 19.4% of the nation's gross domestic product by 2027, up from 17.9% in 2017.

    Other analysts say, however, that a better way to reduce prices is through policies that boost competition among providers, insurers and drugmakers, such as stronger antitrust enforcement and drug patent reform. Echoing healthcare industry groups, they warn that price regulation threatens quality of care and patient access.

    “Not long ago we were being told there was a massive amount of unnecessary care being provided,” said James Capretta, a conservative health policy analyst at the American Enterprise Institute. “The argument now is, 'Who cares as long as the price is low?' I would caution against one or the other. It's pretty obviously both high prices and unnecessary care.”

    But such warnings are not curbing growing enthusiasm for approaches like Medicare or Medicaid for all, public plan options, all-payer systems, global budgeting, regulating what insurers pay providers, government-negotiated drug prices, and pegging drug prices to lower prices in other countries.

    These proposals would directly target how and how much public and private insurers pay providers and manufacturers, rather than relying solely on market competition.

    Advocates argue that rate controls are needed as providers, insurers and manufacturers become larger and larger. “We can't make the market work better in consolidated markets,” Koller said.

    According to the CMS, annual price inflation for healthcare goods and services is expected to average 2.5% over the next decade, compared with 1.1% from 2014 to 2017. That includes a 2.8% average annual hike for outpatient prescription drugs, 2.6% for hospitals and 1.8% for physicians.

    Prices will rise at least partly because of the weakening of restraining factors such as patient cost-sharing, selective contracting by insurers, and improvements in productivity in physicians' offices, the CMS report said.

    “It's still the prices, stupid,” said Gerard Anderson, a health policy professor at Johns Hopkins University who co-authored a famous 2003 Health Affairs article making that argument.

    Adding fuel to the push for rate-setting are studies showing sharply rising hospital charges, particularly in consolidated markets. A Health Affairs study published in February found that from 2007 to 2014, hospital prices paid by employer health plans for inpatient care grew 42%, while physician prices grew by only 18%. Other research shows that some large hospital systems command prices exceeding 300% of Medicare rates.

    The Health Affairs authors concluded that policymakers should consider stronger antitrust enforcement and hospital rate-setting, while private payers and physicians should more actively steer patients to the most efficient hospitals through reference pricing and other value-based models.

    Hospitals counter that their prices go up for reasons beyond their control. Prices are directly related to the cost of caring for patients with complex conditions and are driven by wage increases and a tighter labor market, said Aaron Wesolowski, the American Hospital Association's vice president of policy research. Escalating drug prices and shortages also boost costs, he added.

    Other research has found that physician prices are also an important factor in increasing healthcare spending. A new study by the USC-Brookings Schaeffer Initiative for Health Policy found the median out-of-network charge paid by private insurers to anesthesiologists and emergency physicians is nearly five times the Medicare rate, while insurers paid cardiologists and orthopedic surgeons about 2.5 times as much.

    Some experts say value-based payment, consumer incentives to select cost-effective providers, and other market-based models need more time to bite into prices and wasteful services. “I don't think it's because value-based purchasing doesn't work, but rather that we just haven't done very much of it,” said Katherine Baicker, a health policy professor at the University of Chicago.

    But those who favor regulating prices are impatient with the slow progress, particularly on the private payer side. Democratic proposals on Medicare for All and public plan options would pay providers at Medicare prices, which are significantly lower than private insurers rates. Other proposals, such as a voluntary Medicaid buy-in bill in New Mexico, would pay even lower prices.

    “The cost trend will make it easier to fund a Medicare for All or public option plan, because the price differential between what Medicare and the private sector pay allows you to save money by paying Medicare rates,” Anderson said.

    Still, he and other experts say projected spending growth over the next decade—which is sharply less than the 7.3% average annual growth from 1990 to 2007—may not be sufficiently alarming to spur politically thorny policy changes.

    That sentiment is echoed in the reaction of price-regulation opponents, who argue that various public and private efforts over the past decade seem to be moderating cost trends.

    The projected growth rate “is still higher than overall economic growth, and that's troubling because it's not sustainable,” said Steve Wojcik, vice president of public policy at the National Business Group on Health, which represents large employers. “But we are nowhere near the kind of growth we had from 1990 to 2007.”

    His group opposes having the government negotiate or set prices out of fear that will push providers and manufacturers to charge private payers higher rates—even though research generally has not found that lower Medicare and Medicaid payments produce a cost shift.

    While a politically gridlocked Congress may not be able to pass any rate-setting policies over the next two years, Democrats are promising ambitious action on medical and pharmaceutical prices if they gain control of the federal government in the 2020 elections.

    There is the potential, however, for Congress to pass a bipartisan proposal this year to cap out-of-network physician charges at a percentage of Medicare rates. That's making provider groups nervous.

    Meanwhile, experts see greater potential for action in the states. In New Mexico and other Democratic-led states, bills are advancing to establish public plans or voluntary Medicaid buy-in programs, which would pay providers Medicare or Medicaid-type rates for a larger population of patients. Vermont is implementing an all-payer system like Maryland's.

    State regulators increasingly are considering setting price caps as part of green-lighting hospital mergers, as Massachusetts recently did in approving the tie-up between Beth Israel Deaconess Medical Center and Lahey Health.

    Rhode Island and Maryland remain the only states that regulate the prices private insurers pay hospitals, though other states like Colorado are eyeing that approach.

    Beyond that, many states and private-sector groups want to increase the amount of price and quality information available to purchasers and consumers through all-claims databases.

    That effort suffered an important recent setback, however, when UnitedHealthcare and Humana decided to pull out of a payment data-sharing arrangement with the Health Care Cost Institute that has produced important research about prices.

    Even experts open to price controls say they must be used with caution. “Now we're doing too little to reduce prices, and we have to room to run,” said Matthew Fiedler, an economist at the Brookings Institution's Center for Health Policy. “But inadequate prices can threaten access to care, and there are limits to how far you want to go.”

    Correction: An earlier version of this story omitted Maryland as a state that regulates the prices private insurers pay.

    Letter
    to the
    Editor

    Send us a letter

    Have an opinion about this story? Click here to submit a Letter to the Editor, and we may publish it in print.

    Recommended for You
    The Check Up: Trenda Ray of the University of Arkansas for Medical Sciences
    The Check Up: Trenda Ray of the University of Arkansas for Medical Sciences
    Q&A: Arkansas nursing leader looking for creative staffing solutions as COVID cases surge
    Q&A: Arkansas nursing leader looking for creative staffing solutions as COVID cases surge
    Sponsored Content
    Get Free Newsletters

    Sign up for free enewsletters and alerts to receive breaking news and in-depth coverage of healthcare events and trends, as they happen, right to your inbox.

    Subscribe Today

    The weekly magazine, websites, research and databases provide a powerful and all-encompassing industry presence. We help you make informed business decisions and lead your organizations to success.

    Subscribe
    Connect with Us
    • LinkedIn
    • Twitter
    • Facebook
    • RSS
    • Instagram

    Stay Connected

    Join the conversation with Modern Healthcare through our social media pages

    MDHC_Logotype_white
    Contact Us

    (877) 812-1581

    Email us

     

    Resources
    • Contact Us
    • Advertise with Us
    • Ad Choices Ad Choices
    • Sitemap
    Editorial Dept
    • Submission Guidelines
    • Code of Ethics
    • Awards
    • About Us
    Legal
    • Terms and Conditions
    • Privacy Policy
    • Privacy Request
    Modern Healthcare
    Copyright © 1996-2021. Crain Communications, Inc. All Rights Reserved.
    • News
      • This Week's News
      • COVID-19
      • Providers
      • Insurance
      • Government
      • Finance
      • Technology
      • Safety & Quality
      • People
      • Regional News
        • Midwest
        • Northeast
        • South
        • West
      • Digital Edition
    • Insights
      • ACA 10 Years After
      • Best Practices
      • InDepth Special Reports
      • Innovations
    • Transformation
      • Patients
      • Operations
      • Care Delivery
      • Payment
    • Data/Lists
      • Rankings/Lists
      • Interactive Databases
      • Data Points
    • Op-Ed
      • Bold Moves
      • Breaking Bias
      • Commentaries
      • Letters
      • Vital Signs Blog
      • From the Editor
    • Awards
      • Award Programs
        • 100 Most Influential People
        • 50 Most Influential Clinical Executives
        • Best Places to Work in Healthcare
        • Health Care Hall of Fame
        • Healthcare Marketing Impact Awards
        • Top 25 Emerging Leaders
        • Top 25 Innovators
        • Top 25 Minority Leaders
        • Top 25 Women Leaders
      • Nominate
      • Previous Award Programs
        • Excellence in Nursing Awards
        • Design Awards
        • Top 25 COOs in Healthcare
      • Other Award Programs
        • 100 Top Hospitals
        • ACHE Awards
    • Events
      • Conferences
        • Leadership Symposium
        • Healthcare Transformation Summit
        • Women Leaders in Healthcare Conference
        • Workplace of the Future Conference
        • Strategic Marketing Conference
        • Social Determinants of Health Symposium
      • Galas
        • Best Places to Work Awards Gala
        • Health Care Hall of Fame Gala
        • Top 25 Minority Leaders Gala (2022)
        • Top 25 Women Leaders Gala
      • Webinars
      • COVID-19 Event Tracker
    • Listen
      • Podcast - Next Up
      • Podcast - Beyond the Byline
      • Sponsored Podcast - Healthcare Insider
      • Video Series - The Check Up
      • Sponsored Video Series - One on One
    • MORE +
      • Advertise
      • Media Kit
      • Newsletters
      • Jobs
      • People on the Move
      • Reprints & Licensing