Background
In January 2021, The Hospital Price Transparency rule went into effect. With that, hospitals were required to offer price estimator tools and disclose certain pricing information on their websites, including charges and contracted “allowable” rates with insurers for certain services. Then in July 2022, The Transparency in Coverage rules went into effect. With that, insurance companies had to release data files, similar to the hospitals’ files. Both rulings were intended by CMS to help consumers understand the cost of a covered item or service before receiving care.
What’s happened since rules went into effect?
For many reasons, many hospitals did not immediately comply when the rule went into effect. However, by mid-2022, hospital compliance took a big jump, with 75% of hospitals posting some form of pricing data on their websites.
As for insurance companies, many of them complied immediately and continue to do so. However, they are releasing large, machine-readable files for all of their in-network providers (read: no patient or lay person can parse). Only developers can process these files to extract the data. Companies like Serif started to process this data to help make market pricing more accessible, creating a more efficient contracting process for payers and providers.
What might happen as rules play out?*
The data will allow for much more transparency into trends, but the specific trends and rate of change is anyone’s guess. Rafiq said, “We were really excited for the potential transformational impact of price transparency legislation. If data was out in the open, pricing could become more standardized, instantaneous, easier. Then you would see more of a performance-based contracting market. Where over time, if you’re a good provider, you can start to get better rates. And if you’re not performing in terms of clinical impact or patient satisfaction, then your rates would be much more standardized.”
More specifically, Rafiq’s got a handful of predictions.
- Price transparency will become the norm, but it will take a while for the data to become easy to process and work with.
- Compliance is not 100%, there’s a lot of variability in the data, there’s a ton of data, and the data is difficult to parse. All these things combine to create complexity. This means it’ll be some time before the data becomes more ubiquitous and the impact of price transparency is fully felt in the market.
- Price transparency won’t drop all pricing, only the high rates.
- The highest prices should fall; as consumers and insurance companies select lower cost providers, high-cost providers will be incentivized to drop their pricing and/or reduce reimbursements.
- A standard market median price may emerge over time, and then incentives to get better rates will be tied to outcomes.
- When consumers decline to pay the highest costs for services, and providers are incentivized to reduce rates, a lower standard market rate may emerge.
- Price transparency brings cost into view, which then will bring quality to the forefront, as consumers are able to evaluate both quality and cost of providers. That may not mean a reduction in quality, but it may shift market share from one provider to another.
- The providers who are able to demonstrate better clinical outcomes and performance will be the ultimate winners who can command reimbursements above market standards or successfully take on risk or performance-based contracts.
- Efficiency in contracting and network management may increase, but it starts with transparency.
- Ultimately, price transparency could shift the healthcare landscape in systemic ways, creating efficiencies in contracting. Negotiating a fee schedule is a cumbersome and lengthy process because each side doesn’t know what information the other side has. If both sides have the same information, there’s more efficiency and the process is streamlined.
- The streamlining of process on the payer side could allow insurers to focus on infrastructure and systems to evaluate outcomes and quality data, information they can then factor into contract structures.
Who may be impacted?*
- Patients: price transparency should lower the highest prices and reduce variance, giving patients more information at their fingertips to make an educated decision on where to receive care.
- Providers: large hospitals may lose market power, and their rates may reduce when payers are able to find new partners willing to take lower rates. In general, high-cost health systems that lack specific leverage will face risk. Large academic systems may not be impacted as much given unique offerings and thus more leverage with payer to maintain higher cost structures. Providers with the ability to effectively run lower cost structures will benefit. High cost providers without significant leverage may see higher levels of rate compression than others.
- Payers: large payers will not be immediately impacted, but they may see it as an opportunity to create low-cost networks. Newer payers will enter the market. The industry will see continued fragmentation, and this will be a catalyst for new entrants.
- ASCs: price transparency can be used to justify more bundles of care, as data will be available to combine facility, professional, and other episode costs more easily.
The End Goal
From a CMS perspective, the goal was increased visibility for consumers, so they might know the cost for services before receiving these services. For Serif, the goal is efficiency, for the sake of a more equitable healthcare environment. And for Compass, the goal is to increase visibility so more patients can receive the high-quality, low-cost care available at ASCs.
The broad impact of price transparency is yet to be seen, though it’s likely all stakeholders will be impacted by these rules.
* All predictions in this article are just that—predictions.
About Serif Health:
Serif Health is a digital health startup backed by leading VCs ingesting and extracting the newly available price transparency data to make healthcare more efficient and affordable. Serif Health is processing the machine-readable file (MRF) data from insurance companies to offer nationwide healthcare price intelligence data products and APIs to customers. Serif Health works with provider groups, health systems, health plans, and analytics firms across the U.S. to utilize the price transparency data to simplify contracting, improve network management, and develop new price intelligence products and research. To learn more about Serif Health and accessing the price transparency data, please contact Rafiq Ahmed (This email address is being protected from spambots. You need JavaScript enabled to view it.) or visit www.serifhealth.com.
About Compass Surgical Partners:
Compass Surgical Partners is an independent, full-service ASC management partner. Compass and its team members have a well-established success rate having developed over 250 ASCs with the proven CORE operating model over the past three decades. The Compass team has demonstrated and deep expertise in orthopedics, spine, cardiovascular procedures, and hospital joint ventures. Compass independence enables the team to fully align to partners' strategic priorities without conflicts. Its deep operational expertise and senior level team structure uniquely position Compass to deliver results based on well-established best practices and agile execution. To learn more about Compass’ partnership approach, please contact Jestine Nordstrom (This email address is being protected from spambots. You need JavaScript enabled to view it.).
