U.S. hits hospitals with a million reasons to heed price-disclosure rule

atlantanorthside-300x155Federal officials will fine two Georgia hospitals, both in the same health system, a total of more than $1 million for failing to post online legally required pricing information. Patient advocates and the former administration hoped this incremental disclosure would help check ever-rising health care costs and give consumers important data to make better choices about which institutions they chose for treatment.

But hospitals nationwide, including the penalized Northside Hospital Atlanta (shown above) and Northside Hospital Cherokee, have flouted the transparency regulation that took force in January 2021. The Centers for Medicare and Medicaid Services (CMS) has wagged a warning finger at institutions, issuing cautions to hundreds of institutions, with hundreds deciding to fall in line. Still, as the Washington Post reported:

“Out of more than 5,200 hospitals, just about 6% had both an accessible file and a shoppable display that adhered to the regulations. That’s according to a research piece published [June 6] in [the Journal of the American Medical Association, which] analyzed compliance six- to nine-months after the rules went into effect. Other reports found a similar pattern. In February, a report by patient advocates determined that a total of 14% of the 1,000 hospitals the group reviewed were in line with the requirements.”

The newspaper reported that hospitals, which have seen potential penalties for bigger institutions increase from just over $100,000 to more than $2 million under tougher CMS enforcement, are required under a Trump-era regulation to provide the public with two key elements, largely replacing the hard-to-read and harder to interpret “chargemasters” that once were part of institutional disclosure:

“It mandated hospitals disclose five types of charges in an accessible file, including the secret rates they negotiate with insurers. It also required they display standard charge information for 300 services that can be scheduled in advance — such as joint replacements and physical therapy — in a consumer-friendly way.”

The story of the price transparency rule, however, fast became one of institutional resistance — by hospitals, their groups, and their industry associations. The disclosure rule has not, researchers and journalists have found, churned up information that will be of quick, convenient use for patient-consumers.

Instead, in brief, those who have scrutinized the information published, thus far, have confirmed that hospitals all but seem to spitball their charges akin to how the corner mechanic decides what his customers will pay. Hospitals will charge what they can because they can. As the Peterson-KFF Health System Tracker reported in April 2021:

“Many studies show that prices for health services in the U.S. vary significantly nationally, across private and public insurance markets, and even within cities. The newly available price data published by hospitals also illustrate how much prices for the same service vary within a hospital … Depending on who is paying, the price for the same health service in the same hospital varies widely.”

These researchers also made this painful point about the hoped-for transparency of published hospital charges:

“An important goal of price transparency in health care is to reduce the cost of care by increasing price competition. The rule aims to improve competition in two ways: one, by giving patients the option of shopping for lower-priced care, and two, by revealing to health plans and hospitals the rates their competitors have set for the same services. The data provided by hospitals, where they comply with the rule, may allow for comparisons of prices within a given hospital. For example, using this data, health plans can identify the prices paid by other payers and potentially use that information to negotiate lower rates.

“However, among the few hospitals in this analysis that do provide payer-negotiated rates, the markets in which the payer operates is not always clear. And, due to a lack of standardization, comparing prices across hospitals is problematic … consumers, payers, employers, researchers, and others attempting to compare prices for services across hospitals should use caution. Price estimates do not always allow for an apples-to-apples comparisonWe found that the price of a service from one provider might not be comparable to the price of the same service from another provider, even when presented by billing code.”

The researchers noted that the data also can change quickly, as hospitals renegotiate deals or hike their prices, the researchers warned.

Another way to examine hospital costs

But, separately, researchers at the RAND Corporation think tank have been building key information about prices “based on information from more than 4,000 hospitals in 49 states and Washington D.C. from 2018 to 2020,” the Santa Monica, Calif., experts have reported:

“The RAND study includes associated spending from 4,000 hospitals in 49 states from 2018 to 2020—about 25% more hospitals than in the previous version of the analysis. (Maryland was excluded because it long has had a system in place where the privately insured and Medicare recipients pay the same price.) The analysis includes facility and professional claims for inpatient and outpatient services provided by both Medicare-certified short-stay hospitals and other facility types. For the first time, the analysis also includes more than 4,000 ambulatory surgical centers, which are free-standing facilities that perform outpatient surgical services … Researchers analyzed health care claims obtained from self-insured employers, 11 state all-payer claims databases, and records from health insurance plans that chose to participate. For each private claim, researchers repriced the service using Medicare’s grouping and pricing formulas. Each claim was benchmarked to what would be paid by Medicare — the federal insurance plan for Americans aged 65 and older — as a way to assess variation in health care costs nationally.”

RAND experts explained why they use Medicare as a baseline. Though hospitals gripe loud and long about payments under the federal coverage for older patients, it provides a known and reasonable reimbursement to hospitals for patient care. If insurers and others pay as much or even much more than Medicare does, shouldn’t that provide hospitals a fair return and potential profit? The experts found this:

“Private insurers paid 222% of Medicare prices in 2018 and 235% in 2019. In 2020, relative prices for hospital facility–only services averaged 224%, while associated professional services such as physician fees averaged 163% of what Medicare would have paid for the same services. The 224% total for 2020 is a reduction from the 247% figure reported for 2018 in RAND’s previous study. This reduction is the result of a substantial increase in the volume of claims in the analysis from states with prices below the previous average price.”

RAND says employers, insurers, and others can use its comparative data as they seek to respond to ever-rising health care costs, with researchers reporting that:

“Spending on hospital services accounts for 37% of total personal health care spending in 2019, and hospital price increases are key drivers of growth in per capita spending among the privately insured.”

In my practice, I see not only the harms that patients suffer while seeking medical services, but also their struggles to access and afford safe, efficient, and excellent health care. This has become an ordeal due to the skyrocketing complexity, uncertainty, and cost of treatments and prescription medications, too many of which turn out to be dangerous and bankrupting drugs.

As the nation struggles with the coronavirus pandemic and a return to normality, patient advocates have zeroed in on hospitals and their huge costs to determine ways to appropriately rein in U.S. health care’s ever-rising toll on our personal finances. Studies have shown that hospitals account for $1 trillion of the more than $3 trillion Americans spend annually on health care — the highest such sums paid by any nation in the world, with U.S. patients getting some of the worst outcomes among their peers in advanced nations.

We can’t, however, even begin to rationally discuss hospital prices without transparency about what they are exactly and how they are determined. The current disclosure rule, all parties agree, has abundant flaws. It needs fixing. Hospitals also should not just ignore it. We have much work to do to ensure that hospital charges are affordable, fair, and reasonable for the sake of the institutions’ most important customers — us, their patients.

Patrick Malone & Associates, P.C. listed in Best Lawyers Rated by Super Lawyers Patrick A. Malone
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