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HHS Proposes Drug Transparency Rules for TV Advertisements

By: Patrick Ouellette, Esq.

In a move geared toward making drug prices more visible to consumers, the Department of Health and Human Services (HHS) recently released a proposed regulation that would force drug companies to include prices in their television advertisements of prescription drugs and biological products. HHS focused the proposal on drugs in which payment is available through or under Medicare or Medicaid to include the Wholesale Acquisition Cost (WAC, or “list price”) of that drug or biological product.

There are some drug price components of WAC to note, as WAC is generally the manufacturer’s price for drugs before the supplier of the product offers any rebates, discounts, allowances or other price concessions. True pricing involves a number of other variables to determine what the final drug costs are to patients beyond the WAC, such as what their insurance covers or whether their deductible has been met. These proposed regulations are also limited only to drugs covered under Medicare or Medicaid. However, it will be instructive in the long-term to see whether the inclusion of pricing in advertisements will actually lower final drug payments for patients. Similar to CMS requiring (starting in 2019) hospitals to make public a list of their standard charges via the Internet in a machine-readable format, there are no assurances that patients armed with new information will reduce final costs.

If these regulations prove to be successful, it will be interesting to see whether HHS would extend them to drugs payable by private insurers. In particular, HHS regulations could affect pharmacy benefit manager (PBM) rebates in the self-funded health plan space:

Because the list price of a drug does not reflect manufacturer rebates paid to a PBM, insurer, health plan, or government program, obscuring these discounts can shift costs to consumers in commercial health plans and Medicare beneficiaries. Many incentives in the current system reward higher list prices, all participants in the chain of distribution, e.g., manufacturers, wholesalers, pharmacy benefit managers, and even private insurers, gain as the list price of any given drug increases. These financial gains come at the expense of increased costs to patients and public payors, such as Medicare and Medicaid, which ultimately fall on the backs of American taxpayers.

Furthermore, consumers who have not met their deductible or are subject to coinsurance, pay based on the pharmacy list price, which is not reduced by the substantial drug manufacturer rebates paid to PBMs and health plans. As a result, the growth in list prices, and the widening gap between list and net prices, markedly increases consumer out-of-pocket spending, particularly for high-cost drugs not subject to negotiation.

Though the proposed regulations only affect companies in which their drugs covered by public payers, Medicare and Medicaid, all payers across healthcare should keep track of this initiative. The Pharmaceutical Research and Manufacturers of America (PhRMA) has already argued that such rules would violate the First Amendment and not affect patient costs.


Communication Breakdown – More Lessons Learned from My Wife’s Battle Against Lymphoma

By: Ron Peck, Esq.

For those who did not tune into the “Empowering Plans” podcast, wherein I revealed why I’ve been absent from other recent Phia Group podcasts and webinars, please do check it out.  In that recording, I describe my wife’s diagnosis (the specific type of Non-Hodgkin’s Lymphoma she’s fighting), and early lessons learned through her diagnosis.  Key among them is the need for second (and even third opinions) to ensure the right diagnosis is ultimately achieved.  I implore plan sponsors to pay for – and advocate for – second (and third) opinions.  The funds expended on these opinions more than pay for themselves when we avoid unnecessary (and possibly dangerous) treatments for the wrong conditions.

The next lesson learned has been about and orbits around communication.  Communication is comprised of more than just what we say, but how we say it.  To effectively communicate, it’s necessary to put ourselves in the shoes of the ones with whom we’re communicating.  Empathy is the greatest Rosetta Stone.  With that in mind, my wife experienced a failure in communication not because the communicator was unclear, but rather, their focus, medium, and other elements missed the mark.

For instance, there were specific instructions she needed to follow to secure certain medications in accordance with rules set forth by the PBM.  Nothing was withheld, and the coverage is great – but only if the rules are obeyed.  The issue, however, was that the rules were communicated via US Mail (a/k/a “snail mail”).  I love my mail carrier as much as the next red blooded American, but – if we’re being empathetic – we need to accept that a cancer patient is likely falling behind on their mail, and are unlikely to rush to open a letter that doesn’t look like a bill.  To ensure the patient knows about the particulars of the program, we should notify them when the first dose is filled by notifying the pharmacist (so the message can be conveyed at the point of sale), and electronically (via phone call, text, e-mail, etc.). This is one silly little example of things we may not spot from the payer perspective, but as a patient, suddenly it’s clear.

Likewise, case management.  Again, the benefit plan attempts – in its estimation – to go above and beyond in its servicing of the patient, assigning a case manager to the patient’s case.  This person, the patient believes, is supposed to offer advice, act as a second set of eyes on proposed care, and generally look out for the patient’s best interest.  In our mind, that would include financial interests too, right?  Yet, when a conflict arose between the provider and plan representative, the case manager was quick to report to my wife – the patient – that the conflict was raging, claims would likely be denied, and she – the cancer patient – should encourage her oncologist (the person, the patient believes, that stands between her and certain death) to work with the plan.

Now, from the case manager’s perspective, they foresee the patient enduring financial hardship if the matter isn’t resolved, and they are trying to act preemptively to avoid it.  This is not a bad thing!  Yet, from the patient’s perspective, they are being dragged into matters of money – irrelevant and unimportant – compared to their own battle to survive.

Again, we need to step into the shoes of the patient and ask: “How would I feel if I received a call, threatening to deny my claims and saddle me with debt, unless I turn on my doctor and become their adversary on the plan’s behalf?”  We know this isn’t the purpose of the case manager’s efforts, but this is how the patient (and if we’re honest – even we) may interpret it during such a time of stress and grief.

Moreover, if the patient is enraged by this turn of events, they may take this “heads up” from the case manager to be a directive from the plan administrator – and suddenly the case manager is looking like a final, fiduciary decision maker.  I worry here, because we do not want this independent third party case manager to suddenly be a fiduciary, or impact the actual fiduciary, by “making decisions” on the plan’s behalf – without the plan’s authorization.

As my wife continues to battle cancer, my eyes continue to be opened as it relates to the patient perspective, and how they may interpret things we in the benefits industry often say without concern.  I look forward to continuing to share my observations with you.


In God We Trust; All Others Pay CASH…I wish…
I love calling a provider before medical services are rendered to settle on financial terms, and I love it when they have a reasonable cash price ready for me – but it’s all too rare to get a reasonable price easily.  Usually, I need to wade through concepts and terminology like “regular rates,” “commercial contracts,” and “networks,” and excuses like “I’ll see what I can do,” “our clients don’t process claims that way,” and plenty more. It never ends.

I want to pay a cash lump-sum for a service you’ve provided hundreds (or thousands) of times, and you really can’t tell me the price?

However, with the steady emergence of more consumers being responsible for paying for their medical care (in the form of higher OOP) and perhaps continued provider frustration, more providers are now offering cash discounts (thanks to transparency pioneers like Surgery Center of Oklahoma). Consider these other examples:

[This clinic] does not accept any third-party payment and makes no apologies for this. In order to keep costs down for the uninsured and the increasing number of patients who have high copays and deductibles, we choose to not assume the massive overhead involved in billing third-party payers. This has the added benefit of eliminating bureaucratic hassles and intrusions into the doctor-patient relationship, ensuring confidentiality of patient information and keeping our typical charges usually between the costs of an oil change and a brake job.1

* * *    

[This health system] offers cash pricing for selected services. Cash-pricing packages must be paid in advance of receiving services. Insurance will not be billed and claim forms will not be provided. If you would like information on cash packages, please call …2  

* * *

Does [this hospital] offer a discount if I self-pay for services? [This hospital] offers a 75 percent discount on eligible services to patients who pay out of pocket for medical services — whether it’s because you don’t have insurance, your insurance doesn’t cover the services, or you’d prefer not to bill through your insurance provider.3

Swedish Health Services may have seen the writing on the wall when they decided to lower their charges for certain outpatient services (bear in mind these are ordinary charges, not cash rates). On their old billing platform, an MRI of the brain was billed at $6,143; the new billing is $1,810 (70% less).

In many ways, cash rates are a type of network unto themselves. Providers are basically saying, “If you can pay cash at the time of service, these are the rates, and they are good. If you want us to bill an insurer, have the claim repriced, pended, denied, re-coded, covered, denied, covered, we will bill you our much maligned chargemaster rates, and the claim will be paid with our equally maligned network rates.”   

We are truly only at the beginning of this trend, and it is difficult to assess how many providers are now offering cash rates and how many are publicizing that fact; offering cash rates can be viewed as a form of direct-to-consumer contracting.

The American Academy of Private Physicians estimates there are about 6,000 physicians in the US who contract directly with their patients without an intermediary. That is roughly 1% of physicians, but this number has reportedly been growing at a rate of 25% per year for the last four years 4, and despite the fact that this is decimal dust compared to the market at large, the trend is likely to continue.

All things considered, we need more providers to step up and post their cash prices for consumers to consider.  The providers who pioneer in this area will be rewarded with business from a large market that is getting increasingly desperate for honesty and transparency.

1 Sean Parnell, “The Self-Pay Patient”, January 2014, pg. 28
2 https://www.uclahealth.org/pages/patients/patient-services/cash-pricing.aspx
3 https://www.elcaminohospital.org/patients-visitors-guide/billing/faq
4 Sara Rosenbaum, “Additional Requirement for Charitable Hospitals: Final Rules on Community Health Needs Assessments and Financial Assistance”, http://healthaffairs.org/blog/2015/01/23/additional-requirements-for-charitable-hospitals-final-rules-on-community-health-needs-assessments-and-financial-assistance/ (January 23, 2015)

Reverse Medical Tourism
By: Jen McCormick, Esq.

On the way home to Boston from a recent international family vacation, I had the pleasure of sitting next to a young gentleman.  He was very friendly and didn’t seem to mind a wiggly toddler so we started to chat.   He told me that he would be in Boston for a month with his father (who was also on the flight), because his father needed medical treatment.  He explained that the services his father needed were not available on the island, and his father’s health insurance would cover a small part of these services via ‘reverse medical tourism.’  The gentleman implied that the family would be covering the balance.  It shouldn’t have come as a surprise that US hospitals are likely enthusiastic to offer services to affluent international patients (maybe because they might pay the hospital at a higher rate than an insurance company).  

During the flight, the gentleman also wanted to know if he could ask me a few questions about where to go in Boston.  Of course I was ready and excited to tell him all the places to visit and see in Boston, but he instead pulled out a list of medical supplies that needed to be purchased (some for the trip and some to bring home).  The gentleman explained that he had been instructed to purchase these basic supplies to avoid having insurance pay for them and/or due to some of these items being difficult to locate (or too expensive) on the island.  

On a daily basis we work to ensure employers are aware of how they can stretch their budgets while still providing comprehensive benefits to their loyal employees.  One popular way is via international medical tourism.  My chat with this gentleman on my short flight home was a reminder that medical tourism works in a variety of ways - US patients are seeking services abroad to obtain services and care at more affordable rates, while at the same time the international patients are seeking services in the US because they can afford to self pay.


It’s Time for a Wake-Up Call!
By: Jen McCormick, Esq.

Healthcare has received so much attention over the past 10 years. Everyone has something to say about its current form, how comprehensive it should be, or who should be have a role in providing the coverage.   The most contentious piece of the conversation, however, is cost.  Healthcare can be expensive – particularly if you don’t pay attention.  Guess what – it’s time to pay attention… This mean you employers!

As an employer, do you take steps to encourage employees to make smart choices when it comes to healthcare? Are they encouraged to select generics? Are they told to read and understand the benefits available to them? Are they aware of the incentives the employer may offer for making an informed choice? These incentives don’t have to be limited to the plan document either!  Consider having a staff meeting to review all the great benefits the plan offers, maybe poll the staff and see if the employees want to offer a certain benefit (i.e. acupuncture), or even have a quiz which asks questions about the benefits and rewards the highest scoring employee.  

Whatever the method – it’s time to do something different and get employees engaged at the outset (prior to receiving healthcare benefits)!

Full Billed Charges: A Question of Geography
By: Jon Jablon, Esq.

It is increasingly common within the self-funded industry for medical providers to demand full billed charges for non-contracted claims. As we know, no one is actually required to pay full billed charges – but when push comes to shove, that tends to be the prevailing demand.

What about when the plan document limits payment at a percentage of Medicare? Say, 150%? The fiduciary has a duty to strictly abide by the terms of the plan document when making payments – and the definition of a non-contracted claim is that there is no contract to provide services at an agreed-upon price. Interestingly, though, and perhaps rendering it a misnomer, a non-contracted claim is still subject to two distinct contracts – an assignment of benefits, and the all-important plan document.

The plan document, of course, defines the Plan’s payment mechanisms and explains beneficiaries’ rights. When the plan document says that the Plan will pay $X, and the Plan does pay $X, the Plan has followed the terms of the plan document to a T. Or to an X, anyway. Let’s boil that down as simply as possible: X = X. What could be simpler than that?

Next, the assignment of benefits is an agreement between the patient and the provider. The patient says “I will transfer you all health plan benefits due to me ($X), and I promise that if $X does not compensate you fully, I will pay whatever balance you think makes sense.” In return, the medical provider promises to provide valuable medical services. We at The Phia Group have discussed the concept of assignments of benefits ad nauseum, and for good reason; this is the mechanism by which medical providers become beneficiaries of Plan benefits, and are due $X from the Plan.

Question: does an assignment of benefits give providers the right to receive full billed charges from the Plan, even though the Plan limits its benefits to an amount less than billed charges? There are a lot of moving parts in the self-funded industry, and this is yet another; the answer you may not have expected is maybe: it depends on the Plan’s geography.

Is the Plan domiciled in Fantasyland, home of laughable arguments, unexplainable oddities, and absurd logic? Then yes – billed charges will be due on every non-contracted claim, regardless of plan document language.

Or, is the Plan domiciled in Realityville, where general legal and market principles do exist, words have actual meaning, and hospitals and attorneys can be expected to be at least reasonably informed? If that’s where the Plan is, then no – of course an assignment of benefits doesn’t guarantee payment of full billed charges.

What are you, nuts?


The Rules of the Game are Still Changing
By: Kelly Dempsey, Esq.

It’s clear the rules of the Health Care Reform game we’ve been playing for the last seven years are going to be changing.  If you’ve been living under a rock and haven’t heard about the ongoing debates on Capitol Hill, you’ll be unaware of the fact that an ACA replacement bill is in the works.  There have been numerous articles recently on the impact the new bill would have on the amount of individuals in the United States that would lose coverage.  With the mainstream media focused on the full ACA replacement, you may have missed that another Executive Order associated with the ACA was issued.  

Before we get to what the Executive Order says, what is an Executive Order?  The power to issue Executive Orders is granted under Article II of the Constitution.  An Executive Order is directive from the President to certain identified federal agencies that the President oversees on how to direct their resources – in other words, the President is telling the agencies how to operate with the parameters of the applicable rules already in place.  These orders are published in the Federal Register, the same as the interim and final rules associated with the ACA.      

So what’s this new Executive Order you may have missed?  On May 4, 2017, the President issued an Executive Order related to the ACA’s contraceptive coverage mandate.  The Executive Order directs the agencies involved in issued ACA regulations (the Department of Labor, Health and Human Services (HHS), and the Internal Revenue Service) to re-examine and consider amending the ACA’s preventive service regulations “to address conscience-based objections” to the contraceptive coverage mandate.  HHS issued a statement in response welcoming the opportunity to re-examine the preventive services mandate to help safeguard deeply held religious beliefs.    

We’ve already seen multiple challenges, specifically to the contraceptive coverage portion of the preventive services mandate, heard in front of the various courts, including the Supreme Court of the United States.  As a result of these cases accommodations were made to “pardon” certain entities from complying with the contraceptive coverage piece of the preventive services mandates.  With this new Executive Order, it appears the rules of this game may change again, but it’s still unclear what will be changing.  As always, stay tuned…


Bite the Hand
By: Ron Peck, Esq.

In case you missed it, there is a movement afoot.  It’s found some real purchase in California, but you hear rumblings everywhere.  A call for a single payer system.  Medicare for all.  I’m going to avoid discussing the pros and cons of this idea, as it relates to patients, employers, and us – the folks tied into the benefit plan industry.  Instead, I’m going to focus on (*gasp*) the provider community.  I was researching this topic when I stumbled upon the Physicians for a National Health Program (“PNHP”) website.  Interesting stuff!  While there, I saw a massive “FAQ” page; (http://www.pnhp.org/facts/single-payer-faq).  Looking at the first few lines, I suddenly realized how far apart some people are from each other.  For instance, consider the following: “Question: Is national health insurance ‘socialized medicine’?  Answer: No. Socialized medicine is a system in which doctors and hospitals work for and draw salaries from the government. Doctors in the Veterans Administration and the Armed Services are paid this way. The health systems in Great Britain and Spain are other examples. But in most European countries, Canada, Australia and Japan they have socialized health insurance, not socialized medicine. The government pays for care that is delivered in the private (mostly not-for-profit) sector. This is similar to how Medicare works in this country. Doctors are in private practice and are paid on a fee-for-service basis from government funds. The government does not own or manage medical practices or hospitals.  The term socialized medicine is often used to conjure up images of government bureaucratic interference in medical care. That does not describe what happens in countries with national health insurance where doctors and patients often have more clinical freedom than in the U.S., where bureaucrats attempt to direct care.”

Stop.  Wait.  This seems to indicate that providers are free to charge whatever they want, and Medicare (blessed, generous Medicare) pays the bill.  Yet, whenever a private benefit plan offers to pay Medicare PLUS 20%, 40%, or even (sometimes) 200% of Medicare, they are laughed at by the hospital.  They are told that if the hospital accepted what Medicare pays (or even double what Medicare pays), from its privately insured patients, they’d go bankrupt!  Why?  Because Medicare has the size (steerage), clout, and statutory backing to set its own prices.  So, despite the aforementioned FAQ, Medicare DOES dictate what is paid, and DOES control what hospitals and doctors receive.  Imagine how much MORE power Medicare would have, to dictate what is and is not payable, if they WERE THE ONLY PAYER IN THE NATION!!!

This, then, is my point.  Support for a single payer / Medicare for all model is out there… and it is growing.  If this became a reality, forgetting all the other issues, as it relates to providers – hospitals wouldn’t be getting Medicare “plus” anything.  In fact, once Medicare (or whatever the single-payer called itself) literally holds ALL THE PURSE STRINGS I imagine the payable rates would drop BELOW the current Medicare payable rates.  Ouch!

So… doesn’t it benefit these hospitals to preserve private benefit delivery systems?  Shouldn’t they be scrambling to retreat from a single payer?  Given what balance billing hospitals say to me about “Medicare based payments,” I should think so.  Yet, every time a private plan or carrier is charged 1,000% or more of what Medicare pays, that payer is being pushed one step closer to financial ruin.  If that happens, and we are stuck with a single payer, I am convinced it will end badly for my friends in the health care delivery community.  Thus, every time a provider refuses to work with a private payer, to find common ground… it is a prime example of biting the hand that feeds you.  You may be able to squeeze a few more bucks out of the plan today, but mark my words, those dollars will cost you exponentially when the legs are kicked out from under our system and we’re stuck with a single payer.  Trust me.  It is a simple economic truth that when there is one, and only one customer – that customer controls the pricing.

The time has come to play along, for everyone’s sake.


Adam’s Key Takeaway from the 2017 MassAHU Benefest Conference
By: Adam Russo, Esq.

I spoke at the 2017 MassAHU Benefest Conference today in Westborough, MA, where I was lucky enough to see 9 of the CEOs for the various insurance carriers in our state.  I was pleasantly surprised to hear what they had to say.  They not only talked about transparency needs and the fact that pharmacy costs are out of control, many of them actually stated that we need to increase the incentives that we offer employees and members, in order to get them to care about the cost of care.  

This wasn’t just some vendor saying this, or a self-funded employer, these were actual carriers who said the word “empower”.  We do need to empower our plans and their employees to care about the actual cost of care, and the best way to do this is through real and valuable incentives – not just some small co-pay differential.  This is what The Phia Group has been preaching for years.  Words are a great start - so let’s hope for some action!

Transparency – It’s Not Just for Ghosts
By: Kelly Dempsey, Esq.

If you’re paying any attention to the news these days, you know that the healthcare industry as a whole has been facing some pretty large issues.  In addition to “repeal and replace,” we’re also faced with the skyrocketing cost of healthcare in the United States.  Both topics are focused on money – either loss of money by insurers who are now threatening to leave the Marketplace or the high costs of new drugs that have hit the market, that have the potential to cripple employer health plans.  While both of these are clearly issues that need attention, let’s look at something other than the turmoil in the Marketplace or shiny new things that are also fueling the fire.  

What about the costs of standard medical procedures?  When your doctor says you need a medical procedure and you actually think to ask “how much will this cost,” do you get a straight answer?  In some cases, you might. Maybe you’ll get a ballpark figure. But most of the time, the response will be wishy-washy because the procedure is unique to you and the providers cannot foresee complications that may change the projected cost.  

You may be thinking, “Ya, ya, ya.  I’ve heard this speech about price transparency before.”  In the past I had the same thought, but then I experienced the radical difference in charges for the same service and my view has been forever shifted.  I received the same procedure two years apart, at two different facilities, in two different states.  It’s been quite a while since these procedures happened, but I still think about it often.  

A few years ago (ok, maybe more than a few, but who’s counting), I had flu-like symptoms and also some sharp-shooting pains on both the left and right side of my abdominal area that I just couldn’t shake with extra rest and sleep.  My mom (a nurse) suggested that my issues may have been related to my gallbladder, so I took some over-the-counter medicine and my symptoms disappeared.  But a week later, I was back to where I started despite still taking the medication.  I reluctantly went to the doctor (in northeast Ohio), who said that there were many possibilities, but that it could be appendicitis.  My doctor told me that the last time she had seen someone with sensitivity to the abdominal region (i.e., sensitive to the touch), she didn’t send them for a CT scan, but the end result was appendicitis and emergency surgery was performed.  I didn’t have the classic symptoms of appendicitis, but a CT scan was ordered just to be sure.  I won’t bore you with the details, but the CT scan showed that it was appendicitis and I had a scheduled surgery to remove my appendix.  Weeks later the bills started rolling in, including a bill for the CT scan…$1,900.  I’d never had a CT scan before, so I had no idea what to expect, but $1,900 clearly wasn’t it (and I think this was after the PPO discount).    

Two years later, I found myself feeling under the weather.  I went to the doctor and an ultrasound was ordered.  Of course my appointment was on a Friday and it was a holiday weekend, so I had to wait to get the ultrasound, but I had a trip to Niagara Falls planned and I wasn’t cancelling it.  Unfortunately before I could have the ultrasound done, I woke up early on a Saturday morning with more sharp-shooting pains, but this time more in my side and back.  Being out of state, I didn’t know where else to go except to the emergency room at the hospital in Niagara Falls, New York.  The doctor who saw me took one look at me and said “kidney stone, but we’ll do a CT scan to confirm.”  A few hours later a kidney stone was my official diagnosis.  I spent six hours in the emergency room before I was discharged.  By this time I was working in the industry and dreaded the bills I knew I would be getting.  To my surprise, the bills weren’t nearly as large as I had anticipated.  Of course there were three: the hospital, the ER doctor, and the interpretation of the radiology report, totaling a little over $3,000.  This wasn’t nearly as high as I anticipated.  The hospital bill was itemized, and as I read through it, I stumbled upon the CT scan charge… “$234.”  I thought to myself, “ummmm, excuse me?  That can’t be the only fee for the CT scan.”  I decided that this couldn’t be accurate and waited for another radiology bill to arrive.  No additional bills ever arrived.  

I’m not a medical professional and I’m sure there were differences in the CT scans (maybe the type of machine, etc.), but how could I be charged $1,900 for a CT scan and two years later be charged $234 for a CT scan?  Considering the second procedure was in New York, and Niagara Falls is twice the population than my tiny suburban city outside of Cleveland, Ohio, I was sure the New York charges would be higher, but they weren’t.  The difference in charges for the same (or very similar procedure) is an issue that has stayed with me.  

In doing more research and looking at the figures, it’s amazing to see the variances in the cost-to-charge ratio (i.e., how much a provider charges compared to how much it actually costs them to do a procedure) from provider to provider.  The ACA’s price transparency provision really never got off the ground and other proposed bills haven’t had much success – it’s also unclear if the current administration is motivated to support price transparency.  As the self-funded industry looks at cost containment measures as a whole, medical tourism is growing in popularity, especially when there are high value providers that are willing to offer services at lower costs and be more transparent with pricing.  Medical tourism and other cost containment methods, as well as consumer education, can help employer health plans contain costs; however, there is a need to look at the bigger picture and strive for more price transparency to help stabilize and support our fragile healthcare industry.