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Compliance Update on Hospital Price Transparency
10 Largest Iowa Hospitals

For the past year, I have written about the Hospital Price Transparency rule that requires hospitals to make clear, accessible pricing information available online. The rule went into effect on January 1, 2021.  Under this rule, each hospital operating in the U.S. is required to provide online pricing information about the items and services they provide in two ways:

  1. In a display of shoppable services (for 300 common services) in a consumer-friendly format.
  2. As a comprehensive machine-readable file with prices for all items and services for each separate health insurance company.

Providing this information is presumed to make it easier for consumers to shop and compare prices across hospitals and estimate the cost of care before going to the hospital.

When this law was implemented on January 1, 2021, the financial penalty for hospitals not complying, regardless of hospital size, was up to $300 a day ($109,500 annually). Many U.S. hospitals, however, have not complied with this federal rule, and instead have opted to keep their secret pricing arrangements to themselves. As of late December 2021, no hospitals have been penalized by the Centers for Medicare & Medicaid Services (CMS), which enforces the rules. The CMS has issued about 335 warnings for violations, in addition to providing hospitals information and technical assistance to increase compliance.

New Penalties Apply January 1, 2022

According to a December 30 Wall Street Journal article, over 1,000 hospitals have fully complied with this rule – which represents only about 17 percent of all U.S. hospitals.

Because of this poor compliance record, the CMS issued new rules last fall that increases the penalty for larger hospitals that have 30+ beds. Beginning January 1, 2022, the rule requires these hospitals to pay a $10 per bed per day penalty, not to exceed a maximum daily dollar amount of $5,500. The maximum annual total penalty amount would be $2,007,500 per large hospital. Smaller hospitals (with a bed count of 30 or fewer) will remain at $300 penalty per day.

What About the 10 Largest Iowa Hospitals?

For each medical procedure or service, hospitals are required to post five prices: the gross charges; the discounted prices for cash payment; the prices negotiated by hospitals with each insurer; and the minimum and maximum negotiated prices they have agreed to charge patients.

Looking at the 10 largest Iowa hospitals (by total inpatient discharges), it appears that most all provide consumer shoppable services on their websites, but only four of these hospitals also provide acceptable machine-readable information. The ten hospitals are listed below.

Hospitals in Des Moines

When assessing three Des Moines hospitals (Broadlawns, MercyOne and UnityPoint), as written in my January 2021 blog, only Broadlawns Medical Center appeared to be compliant with BOTH consumer shoppable services and machine-readable information during 2021. MercyOne and UnityPoint Health, however, were non-compliant with one or both requirements when the rule became effective last January 1, 2021.

As of the release of this blog (January 11, 2022), it appears that both MercyOne (Des Moines) and UnityPoint Health (Des Moines) appear to be compliant with regards to displaying ‘shoppable services.’ MercyOne has also attempted to comply with the machine-readable requirement, but there are a limited number of insurers found in their Excel file. For example, Wellmark offers a number of various plans in the Iowa marketplace (HMO, PPO, etc) that may have different negotiated rates, but MercyOne has clumped all of these under the broad heading, ‘Commercial/Wellmark.’ A consumer has no way to determine which Wellmark plan has been quoted on the MercyOne website. Because of this vagueness, I regard MercyOne Des Moines as only ‘partially’ compliant with the machine-readable requirement. By comparison, Broadlawns at least broke out the price differentials between Wellmark’s ‘PPO’ versus ‘HMO.’

UnityPoint is not yet compliant with displaying the comprehensive machine-readable file. UnityPoint does provide Excel and PDF files that only provide the ‘Charges’ for each medical procedure, but no other information and no mention of insurance companies. In fact, UnityPoint references the ‘Machine-readable Excel file’ for “charges in effect December 31, 2020 – which is outdated information.

Enforcement of Rules

It is unknown at this time when the CMS will enforce and apply the new 2022 penalties. Thus far, the only guidance from the CMS website states the following:

Beginning January 1, 2021, we’ll monitor and enforce these price transparency requirements. For hospitals that do not comply, we may issue a warning notice, request a corrective action plan, and impose a civil monetary penalty and publicize the penalty on a CMS website.

Hospitals have resisted publishing their negotiated prices for many reasons. One primary reason is they believe the price information is too complicated and that these disclosures would not be useful to patients. Clearly, the federal rules disagree with this assumption.

Conclusion

On the surface, it appears more work is needed by many Iowa hospitals, specifically as it relates to providing the machine-readable file. Will implementing a higher penalty in 2022 change the behaviors and practices of the larger hospitals in 2022? Time will tell – stay tuned.

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American Hospital Association Advertisement
A Closer Look

A November 15 advertisement in the Wall Street Journal caught my attention – and then my ire. Rick Pollack, President and CEO of the American Hospital Association (AHA), a national organization that represents nearly 5,000 hospitals and health care networks – penned a piece titled, “Fighting for Fair Health Insurance Policies for Patients and Clinicians.”

The advertisement began with the following statement: “Hospitals and health systems put the health and welfare of their patients first. But for some of the nation’s largest commercial health insurance companies, that increasingly is not always the case.”

Pollack continues by asserting health insurance companies have policies that compromise patient care, access to that care and safety. “These include frequent changes to coverage, limited provider networks, delays in authorizing treatment and failure to pay providers in a timely manner.” I must admit, there is some truth to these assertions. Defending insurance companies on many of these issues will not come from me.

Pollack provides a few examples of the atrocities committed by insurance companies, which “blindsides” patients and “puts their health at risk.” Equally abhorrent, are the “billions of dollars in added costs to the health care system,” which “contribute to clinician burnout.” Again, I will not push back on such allegations.

Finally, Pollack goes for the jugular by writing that unjustified behavior by insurance companies is allowed because “commercial health insurance markets are increasingly concentrated and nearly every market is dominated by a single larger commercial insurer.” Yep, this too has some validity.

My ‘Ire’

So why am I incensed by this AHA advertisement? Quite simply, it amounts to the pot calling the kettle black. Finger pointing deflects blame from where it also belongs. Medicine has become more of a profit-incentive business than a public good that cares for patients. The large majority of clinicians serving patients are doing so for the ‘right’ reasons. Unfortunately, the business side of medicine tears away at the sanctity of patient care, leaving doubt in the care we once trusted. 

The AHA and its members are far from faultless on many of the criticisms it throws at health insurers. In fact, the atrocities they commit are swept under the rug and largely left ignored. When transgressions do surface, carefully polished responses are crafted by the AHA and its minions. Below are just a few of the many transgressions committed by the AHA and its powerful members:

  • Leveraged Local Power – Local hospitals infiltrate and hypnotize our communities, business associations and the state legislature to help soften or silence negative pushback on their business behaviors and practices. They often remind us of the “economic impact” they provide to our local economies and the ‘free’ care provided to those without health insurance. This is true, but nonprofit hospitals are exempt from paying most federal and state taxes, which may outweigh the charity care they provide. Because of this economic presence, they feel entitled to be treated with reverence to promote their own business interests. Yet contrary to arguments made by the medical establishment that bloated healthcare equates to more local jobs and serves as a multiplier-effect for local economies, growing our medical industrial complex just does not fit the true narrative of having thriving economies. Consolidation of hospitals, we are often led to believe, will broaden access to care and increase efficiency. As a result, the public will benefit by having “lower costs and improved care.” Yet, many of these mergers serve as a ploy to leverage bargaining prowess with third-party payers to ensure favorable, and more profitable prices. Studies have shown that hospital consolidation is more about enhancing bargaining power and less about integration aimed at reducing costs and providing better, safer care.
  • Opaque Pricing – The hospital price-transparency rule, which took effect this past Jan. 1, required hospitals for the first time to disclose the confidential prices negotiated with health insurers. Despite hospital opposition to this rule, it was implemented to help boost competition and control rising U.S. healthcare spending. According to a Wall Street Journal article in March, hospitals used various methods, including so-called blocking codes, to make it harder for people to search for and download pricing data. The Centers for Medicare and Medicaid Services then recently released a final rule to raise penalties if hospitals do not comply. Not surprisingly, the AHA and other hospital trade groups pushed back. Hospitals around the country are notorious for charging exorbitant and variable prices to patients. Keeping prices opaque is a huge benefit to hospitals, but not to those who pay the bills. Let’s be honest, it’s about the bottom line – healthcare is in the money business.
  • Billing Complexity Equals Medical Debt – Opaqueness in pricing also carries through to how hospitals bill for their services. Hospitals behave as if they are entitled to our money – even if the billing is unfair and inaccurate. Fortunately, we have a new law enacted to protect patients against surprise medical bills, a practice that hospitals have allowed to happen for decades. Medical debt continues to pile up for patients, causing bankruptcy to those with and without health insurance coverage. 
  • Harm to Patients – We have known for years that fatalities due to preventable mistakes made in U.S. hospitals are enormous. In fact, if medical errors were tabulated similarly to other diseases, it is estimated that medical errors would be the third-leading cause of death in this country, behind only heart disease and cancer. It is egregious that death certificates do not list the preventable complications that contribute to the death of patients. The AHA and hospital trade groups whitewash preventable medical mistakes and patient harm as if they don’t happen. Instead, more resources are spent to initiate state laws that implement and enforce tort reforms that protect their backside. Apparently lobbying for such legislation is much easier than actually mitigating the harm they are needlessly causing.
  • Lobbying Power – The hospital and medical community lobbies state legislatures, Congress and federal agencies to influence decisions that benefit themselves, not the public. According to OpenSecrets.org, a nonpartisan, nonprofit, and independent organization that tracks money in U.S. politics,health’ was the top lobbying sector in 2020, spending over $629 million. Since 1998, this sector has dished out over $9.5 billion, edging out ‘Misc. Business’ ($9.4 billion) and Finance/Insurance/Real Estate ($9.36 billion).  ‘Health’ lobbyists represent the American Medical Association, American Hospital Association, pharmaceuticals, and so on. In the $4+ trillion healthcare industry, lobbying efforts can pay off handsomely. The ‘investments’ mentioned above are merely a drop in the bucket for the eventual returns that will come sometime later. 

Bottom Line

The business of medicine should be less about ‘private gain’ and more about ‘public good.’ The monetization of medicine has been designed for the benefit of those who stand to profit at the expense of those who are forced to blindly pay. To be fair, insurance companies are not without fault. However, I see this advertisement as yet another deflection from the real truth. We deserve greater transparency and accountability from those who provide our healthcare and the insurance companies that help pay for such care. Lastly, we must have honest and bold action from those we elect to protect the public’s interests. Unfortunately, patients are an afterthought in this perverse system that too often lacks appropriate accountability.

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New Law Requires Health Insurance Advisors to Disclose Commissions and Incentives to Clients

About 20 years ago, when I owned an employee benefits consulting firm, I accepted an invitation from a local benefits broker who wanted to discuss ‘business’ with me. The broker was very upset because one of his larger employer clients selected our organization to replace him. 

His former client believed that our transparent fee-based approach made good, ethical sense. The broker had received commissions and bonuses from insurance companies and vendors that were built into the premiums paid by this client, who had no idea of the amount being paid out. Conversely, we billed the client a monthly fee for our services and accepted no incentives from the vendors – a more transparent approach that would not complicate our allegiance to the client. 

As we finished our meeting, the broker’s final parting shot to me was simply: “No more taking over my clientele by using this approach.” My quick reply was equally frank: “It is up to our clients to determine how they wish to pay us, and they deserve to know how much we receive for our services.” 

It was a rather contentious meeting. The broker felt very threatened…as well he should.

Commissions and Perks from Insurance Vendors

Cash and gifts discreetly given to insurance brokers and consultants by insurance vendors – in exchange for business – can create a conflict-of-interest that adversely impacts the ‘independent’ guidance employer clients expect to receive from their advisors. Commissions create a perverse incentive for brokers and consultants – as insurance premiums increase, so too will the commission dollars that are paid out to the benefits advisor. As a consequence, keeping premiums as low as possible may not be in the best financial interest of the broker/consultant.

Throughout my years as a benefits consultant, I was frequently approached by insurance companies and other vendors to place their products in front of our employer clients. In return, we could receive commissions, volume bonuses, and other perks such as trips to top vacation resorts. Without question, commissions and other perks dwarfed a fee-based arrangement. During this time, there was no transparency rule that required brokers and consultants to report this information to their clients. How a broker or consultant was paid by the industry was truly a wild west arrangement that required little to no accountability to those who actually paid the bills – the employer clients.

Our firm avoided such contracts with insurance vendors because our desire was to be paid directly by our clients. This philosophy was quite simple: we worked for the employers who hired us, and not for the insurance vendors who enticed us. Unfortunately, for many of our smaller employer clients, insurers would not segregate commissions from the premiums they paid, so we accepted the commission but voluntarily shared with the client the amount we received on their behalf. 

For the record, I sold my consulting practice over 10 years ago. I was never comfortable with how the enticement of incentives in this industry could weaken ethical behaviors.

The Consolidated Appropriations Act of 2021

Given this backdrop, a new transparency regulation on compensation is about to take hold. Signed into law by President Trump on December 27, 2020, the Consolidated Appropriations Act, 2021, Public Law 116-260 (CAA) sets forth new compensation disclosure requirements that apply to brokers and consultants with respect to both fully-insured and self-insured group health plans subject to the Employee Retirement Income Security Act of 1974 (ERISA). The CAA also incorporates similar compensation disclosure requirements for individual market coverage via the Public Health Service Act. Disclosure requirements in the group health market apply to “Covered Service Providers” (e.g., brokers and consultants) whereas, in the individual market, they apply to health insurance issuers.

In short, if these advisors “reasonably expect” to receive $1,000 or more in “direct” compensation – and/or more than $250 in “indirect compensation” from the health plan or insurance carrier in connection with covered services to a group health plan, they must submit written disclosure to the client. Contracts entered into, renewed, or extended on or after December 27, 2021, must comply with these requirements.

These requirements generally apply to all types of health insurance plans, across all market segments – small group plans, large group plans, individual and family plans, self-funded plans, fully-funded (traditional) plans, flexible spending accounts (FSAs), health reimbursement arrangements (HRAs), etc.

Brokers must also keep their disclosures accurate and up-to-date and are required to update disclosures within 60 days after any changes in commission occur. It is the broker/ consultant’s responsibility to report all direct and indirect compensation to the employer.

Brokerage and consulting services subject to the new rules include:

  1. Brokerage services with respect to the selection of health insurance products (including vision and dental), recordkeeping, medical management, benefits administration, stop-loss insurance, pharmacy benefit management, wellness services, transparency tools and vendors, preferred vendor panels, disease management, compliance services, employee assistance programs (EAPs), third party administrators (TPAs); or
  2. Consulting services related to the development or implementation of plan design, insurance selection (including vision and dental), record-keeping, medical management, benefits administration, stop-loss insurance, pharmacy benefit management, wellness design and management, transparency tools, group purchasing organizations, preferred vendor panels, disease management, compliance, EAPs, and TPA services.

(There is a lack of clarity in terms of the scope of services and what plan service providers are subject to these requirements, particularly as it applies to the consulting category. Forthcoming regulations should hopefully provide additional guidance.)

Steps Employers Can Take

In 2021, ProPublica investigative journalist, Marshall Allen, wrote the book, “Never Pay The First Bill and Other Ways to Fight the Health Care System and Win.” The book included an Addendum that shares 13 questions that employers should ask their health insurance advisors to help determine how money from the industry might be influencing their advice to clients. These questions fit quite nicely with the upcoming regulations that will require compliance by brokers, consultants, and vendors.

  1. Do you or your company get paid any commissions from insurance companies or other vendors based on my organization’s health benefits? (Yes/No)
  2. Do you or your company get paid bonuses from health insurance companies or other vendors based on my organization’s health benefits? (Yes/No)
  3. Do you or your company receive any trips, meals, gifts, or other perks from health insurance companies or other vendors related to my organization’s health benefits? (Yes/No)
  4. Do you or your company get paid bonuses and/or commissions from health insurance companies or other vendors based on the loss ratio (or the profitability of the plan for the insurer) of my organization’s health benefits? (Yes/No)
  5. Do you or your company get paid bonuses and/or commissions from health insurance companies or other vendors based on the overall volume (including all business or new business) of employer-sponsored health plan members or groups? (Yes/No)
  6. Do you or your company get paid bonuses and/or commissions from health insurance companies or other vendors based on the retention of employer-sponsored health plan members or groups? (Yes/No)
  7. Do you or your company ever participate in “no shop” or “no market” offers on behalf of insurers or other vendors in which a bonus or commission is contingent on your not shopping an employer’s benefits to other insurers or vendors? (Yes/No)
  8. Do you or your company ever participate in vacations, trips, meals or other perks provided by insurance companies or other vendors, based on the volume or retention of employer-sponsored groups? (Yes/No)
  9. Do you and your company always disclose all bonus and commission money, and any other trips, meals, or perks to each employer group whose business might have qualified your company for the money or the perks? (Yes/No)
  10. Do you or your agency participate in fee-only payment agreements in which the only income you receive is coming directly from the employer who is purchasing the health benefits? (Yes/No)
  11. Do you or your agency participate in any payment arrangements in which the employer pays you directly for health benefits and your broker or agency takes a commission or a bonus from the insurance company or other vendor? (Yes/No)
  12. If you said yes to number 11: Do you always tell the employers who are paying you directly that an insurance company or other vendor is also paying you a bonus, commission, or other perk that’s based on that employer’s benefits? (Yes/No)
  13. If you do take direct payments from employers, what percentage of your benefit revenue is fee-based and what percentage is commission or bonus-based? Ethics experts say it creates a conflict of interest for brokers to claim to represent the interests of employers and then get paid by the health insurance industry. Will you please provide your perspective to explain why you represent employers who are purchasing health benefits but then also get paid by the health insurance companies?

Download these 13 questions an employer can ask health insurance advisors

Summary

The acquisition and management of health insurance is complicated, and because of this, employers are justifiably reliant on having trustworthy benefit advisors. The responses that come from the above questions should reveal the commitment advisors have to their clients. For those employers who are currently paying their advisors on a fee arrangement basis, having this discussion should be easy. However, also make sure these advisors are not receiving additional compensation and perks from your selected vendors. Double-dipping happens, and can weaken objectivity of the advisor.  

Under this new regulation, benefits brokers will be required to disclose a range of information previously kept fuzzy at best, hidden at worst. Both individual and employer clients will now have a full view of the true incentives that guide brokers’ decision-making — the good, the bad and the costly.

Employers, especially those with self-funded health plans, are considered to be plan fiduciaries. This means they must act prudently and in the best interest of participants and beneficiaries covered under the health plan. These regulations should be helpful when determining which advisors are most trustworthy.

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