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The More You Know, the More You Save: How Transparency in Health Care Can Help Empower Patients and Plans

On December 5, 2019

By: Kevin Brady, Esq.

On November 15, 2019, the Department of Health and Human Services, along with the Department of the Treasury, and the Department of Labor, issued proposed rules related to "Transparency in Coverage." These proposed rules come fresh off the heels of the executive order issued by President Trump in June of this year calling for increased transparency in the cost of health care, and the cost of coverage.

As made clear by the title of the proposed rules, the goal of the executive order, and the resulting proposed rules, is to make the cost of health care transparent for patients. Generally speaking, the proposed rules will require group health plans to make certain disclosures to plan members about the possible cost-sharing liability for the member, accumulated amounts (amounts paid by the member toward deductibles and out of pocket max), negotiated rates (payments by the plan to in-network providers for certain services) among other required disclosures.

The proposed rules impose disclosure requirements on group health plans and hopefully, these disclosures will help to avail the potential costs of coverage to its plan members. In practice, these required disclosures should empower self-funded group health plans. Self-funded plans are organized to pay for the health care expenses of their employees; they’re not organized to profit off of the employee premiums and therefore should benefit from increased transparency when it comes to pricing. While the long-term impact of the proposed rules cannot yet be determined, it is possible that network discounts may become more meaningful and group health plans may have more flexibility in terms of steering their plan members to more cost-effective providers. Regardless of the direct impact on group health plans, plan members will be empowered as a result of the rules.

Transparency in health care pricing is long overdue. Imagine going to a new restaurant and ordering an apple pie (an apple pie a day keeps the doctor away… do I have that right?), you don’t see the price on the menu but hey, how expensive can it be right? So you get the pie, you eat the whole thing and the next thing you know, the bill comes. You’re shocked to see that its $100.00. Would you have ordered the pie if you knew the cost? Or would you have gone to the diner across the street that sells an apple pie – that may taste even better - for a fraction of the cost? Without transparency in health care pricing, patients incur claims (eat pies) without regard to the overall (billed charges) or individual (cost of the service after cost-sharing) costs of that service. This is untenable.

In almost every other area of our lives as consumers, we are provided with the cost of a product or service before we purchase or use it; we then have the ability to utilize widely available, and easily accessible, data (thanks google) to compare those prices with other potential vendors or business and eventually ensure that the cost is reasonable, and in-line with our expectations before we make the purchase. This same access to information should be available to consumers of healthcare as well.

It is our hope that the proposed rules for transparency will not only avail the cost of health care to patients, but that a shift in the mindset of those patients to be more responsible consumers will result as well. This shift should not only benefit the patients themselves, but ultimately should help to curb the costs for their health plans as well.  Eventually, as the cost of health care becomes more widely available (and just as importantly, digestible) for patients, the days of uninformed and frankly uninterested plan participants may be coming to an end. A great example of the power of information, and specifically, looking at health care through the lens of a consumer can be found right here at Phia.

Here, plan participants are encouraged to be informed consumers when it comes to health care. Transparency (between the Plan and its members) about the costs of coverage, and how active participation by members will ultimately benefit each covered individual, has helped the Phia Group avoid some of the major financial setbacks that commonly befall group health plans who do not otherwise encourage informed decision-making when it comes to health care.

Year after year, our personal costs (premiums and cost-sharing) remain incredibly low, while our benefit offerings continue to improve. This would not be possible if we (the members) did not approach health care as consumers. By encouraging participants to be informed- when it comes to the treatment options, proactive- when considering providers and their associated costs, diligent- when reviewing personal medical bills for errors and erroneous charges, and engaged- when it comes to our overall health, Phia has been able to effectively contain health care costs despite the lack of total transparency.

While the long-term impact of the proposed rules is yet to be seen, any change to the current system that increases transparency and encourages individuals to be responsible consumers of health care should help curb the rising costs in our health care system and the way in which we all participate in it.

New Transparency Rules Released, But Will They Last?

On December 2, 2019

By: Brady Bizarro, Esq.

On Friday, November 15th, the Trump administration released two long-expected rules: one final rule on hospital price transparency and one proposed rule on “transparency in coverage.” The final rule on hospital pricing is set to go into effect on January 1, 2021. The proposed rule is currently in the notice and comment period in which the Centers for Medicare and Medicaid Services (“CMS”) is accepting comments from interested parties. Both rules are meant to deliver on a promise made by the administration; that consumers would receive “A+ healthcare transparency.” For a variety of reasons, however, the long-term fate of these rules is in question.

Currently, hospitals must post their “list prices” online, but those prices do not represent what consumers are likely to pay for services. The administration wants to force hospitals to publish negotiated rates; meaning, the rates that payers actually pay providers for services. It had hoped to implement its hospital pricing rule sooner, but hospitals and provider organizations insisted that they would need more time to prepare to implement the rule. The rule requires hospitals to publish their standard charges online in a machine-readable format. Specifically, hospitals must come up with at least 300 “shoppable” services, and they must disclose the rates they negotiate with payers. This last point is the source of much controversy and of a legal battle. Hospitals claims that forcing them to publish their secretive negotiated rates will increase prices and that the federal government has no authority to compel them to make this disclosure.

Under the “transparency in coverage” proposed rule, all health plans (including employer-sponsored plans) would be required to disclose price and cost-sharing information to plan participants ahead of time. CMS will require that most insurers, including self-funded employers, provide instant, online access to plan participants detailing their estimated out-of-pocket costs. In other words, insurers would have to provide an explanation of benefits (“EOB”) upfront. According  to CMS, this will incentivize patients to shop around for the best deal before they receive treatment for non-emergency medical services. Currently, the government is soliciting ideas about how to best deliver this information to consumers (i.e. through an app) and how to include quality metrics in the data.

The inevitable legal challenges to the final rule on hospital price transparency could sink the administration’s reform efforts. Recall that back in July, a federal judge blocked the Trump administration from requiring pharmaceutical companies to disclose drug prices in television ads. The legal arguments in that case are applicable here. Big Pharma successfully argued that the administration lacked the regulatory power to compel these companies to disclose prices and that the rule violated the companies’ First Amendment rights to free speech. Hospital systems are gearing up for a fight involving these same arguments. Armed with a federal court decision on a similar rule, the prospect of victory for the administration is relatively bleak. If this rule is blocked, it will further signal the need for congressional action in reigning in healthcare costs.

CMS Requires Hospitals to Post Standard Charges Online

On August 9, 2018

By: Patrick Ouellette, Esq.

Price transparency has never really been synonymous with health care. In fact, Kelly Dempsey wrote just more than a year ago about how a lack of clear and timely information on hospital billing practices continues to contribute to skyrocketing care costs, and the industry is currently no closer to a resolution. The Centers for Medicare & Medicaid Services (CMS) recently announced that it is attempting to address the issue by revising the pricing disclosure rules currently in place to ensure data is accessible to patients in a consumable format.

CMS responded to cross-industry stakeholders’ calls for greater price transparency by requiring that hospitals post their standard charges in a readable format online. This is not a complete revelation in the sense that hospitals have been required by law to establish and make public a list of their standard charges and individuals had the option to formally request their data in order to gain access. However, effective January 1, 2019, CMS updated its guidelines to specifically require hospitals to make public a list of their standard charges via the Internet in a machine-readable format, and to update this information at least annually, or more often as appropriate.

CMS issued the mandate through its Inpatient Prospective Payment System (IPPS) and the Long-Term Care Hospital (LTCH) Prospective Payment System (PPS) Final Rule:

While CMS previously required hospitals to make publicly available a list of their standard charges or their policies for allowing the public to view this list upon request, CMS has updated its guidelines to specifically require hospitals to post this information on the Internet in a machine-readable format. The agency is considering future actions based on the public feedback it received on ways hospitals can display price information that would be most useful to stakeholders and how to create patient-friendly interfaces that allow consumers to more easily access relevant healthcare data and compare providers.

It remains to be seen (1) how much pushback there will be from providers; and (2) whether having the information provided will be complete enough to ensure better care decisions on the part of individuals. Moreover, this new rule does not change the fact that hospitals may still bill patients based on their respective internal chargemaster rates. However, this news still represents a positive step forward toward transparent pricing, and thus greater competition, in health care.