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Almost One-Third of Hospitals Not Compliant
with Price Transparency Requirements

According to Guidehouse, a consulting services firm, 30 percent of hospitals analyzed across 27 states are not compliant with either of the two price transparency rules required by the Centers for Medicare & Medicaid Services (CMS).

The price transparency rules became effective January 1, and U.S. hospitals are required to disclose their pricing with payers two different ways:

  1. Comprehensive machine-readable file – This consists of a single file that contains five types of standard charges for all the items and services provided by the hospital. Acceptable formats include .XML, .JSON, and .CSV formats. The five standard charges include:
    1. Gross charges
    2. Payer-specific negotiated charges
    3. Discounted cash price
    4. De-identified minimum negotiated rates
    5. De-identified maximum negotiated rates
  1. Consumer-friendly shoppable services file – This consists of a set of at least 300 shoppable services, which includes 70 CMS-specified services and 230 hospital-selected services. Hospitals can opt to use a patient price estimator tool to fulfill this requirement.

What Guidehouse Found

More than 1,000 hospitals were recently analyzed across 27 states by Guidehouse. Overall, about 70 percent of the hospitals were compliant with at least one of the two files, while the other 30 percent of providers were not compliant with either. According to Guidehouse, non-compliant hospitals have expressed “they either have significant resource constraints to meet these requirements (COVID-19 or otherwise) or have a lack of understanding of the ruling.”

Guidehouse analysis also found that:

  • 60 percent of hospitals that were analyzed were compliant with the consumer-friendly shoppable services file, while 40 percent were not.
  • 48 percent of hospitals were compliant with the machine-readable file, while 52 percent were not.
  • Larger hospitals and health systems were most likely to be compliant and were often using existing tools to comply with the shoppable services portion of the law.
  • The machine-readable files that do exist are inconsistent in terms of format and content, which often requires significant data transformation and enhancements necessary to make the data usable to consumers and researchers.

By the way, non-compliant hospitals would be penalized $300 per day and face withholding of Medicare payments if they are not in compliance with the CMS.

Des Moines Hospitals – MercyOne and UnityPoint Health

As mentioned in my January blog, two Des Moines hospitals – MercyOne and UnityPoint Health – did not comply with the machine-readable file requirements, and, according to a more recent review, non-compliance continues. However, both hospitals do offer a personalized cost-estimator online tool. To what extent these tools comply with the CMS requirements is unknown at this writing.

I did attempt to perform a personalized cost-estimation on the MercyOne website, but when I was prompted to select a Blue Cross plan in a drop-down box, I could not find an option similar to my plan – Wellmark (BC/BS) PPO – the largest health plan offered within Iowa. Other BC/BS plans were offered as alternatives, but none would fit my requirements – a confusing process.

As for UnityPoint Health, I provided my Wellmark identification and group number, but was booted out of the cost-estimator page and suggested that I call a phone number for further assistance. Both Mercy One and UnityPoint, in my estimation, are successfuly making it difficult for the public to gain access to their coveted negotiated prices with commerical payers. But this is no different than what is happening around the country.

Why Does this Matter?

Most Iowans are covered by employer-based health coverage, and 150 million Americans have coverage through employers. Because of this, employers are forced to find new ways to ensure they are receiving the best prices for their employees’ health coverage. Currently, the gold standard of hospital prices is what Medicare pays hospitals. It is extremely difficult, however, for employers to learn how much they (or their selected insurance companies) are paying hospitals when compared to Medicare reimbursement prices.

In the past, employers were assured by insurers that hospital prices were ‘discounted’ by a handsome amount. But this approach can be rather disingenuous. Negotiated ‘discounts’ off grossly-elevated chargemaster prices do not help employers keep costs affordable. Instead, employers now see the need to negotiate prices UP from the publicly-known Medicare prices, rather than DOWN from the irrelevant chargemaster prices that nobody pays.

Summary

In short, the compliance with price transparency requirements appear to be comparable to a ‘cat and mouse’ game between some hospitals and the enforcement efforts of CMS. Yes, healthcare pricing is both complicated and secretive, but this is by design. It is quite apparent that hospitals have little desire to reveal their negotiated prices with the public. This subject matter will continue to evolve over time and will be included in future blogs as more information becomes available.

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Transparency Does Not End with Providers and Insurers – Benefits Brokers Are Next

On a sunny October day in 2004, I was expecting a phone call from a Wall Street Journal reporter who wanted to discuss the latest practices of insurance brokers steering their clients to higher-commissioned products. At the time, I was operating my employee-benefits consulting organization, assisting Iowa employers by obtaining and servicing their employee benefit plans. For the record, since October 2011, I no longer practice as a benefits consultant.

During 2004, New York State Attorney General Eliot Spitzer filed a civil lawsuit against insurance broker Marsh & McLennan, alleging it rigged bids and steered business to insurers who paid enticing commissions, even if the product and insurance company were not in the client’s best interest. It was a scandal that rocked the industry that I was part of at that time.

How this New York reporter became aware of my organization was somewhat of a mystery to me. She did mention that our website was ‘dripping’ with language that suggested “complete independence” from “outside influence” and that “we act in our clients’ best interest – always.” From her perspective, I presumed, maybe we were indirectly referring to activities in our industry that bordered being nefarious. She wanted to learn more.

Our firm, when possible, avoided such contracts with insurance vendors because our desire was to be paid directly by our clients. 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.

Cash and gifts quietly given to insurance brokers and consultants by vendors – in exchange for business – may create a conflict-of-interest that adversely impacts the ‘independent’ guidance employer clients expect to receive from their advisors. During that time, voluntary reporting of commissions and bonuses were seldom being practiced by others – both locally and nationally.

Unfortunately, the WSJ interview never happened as an unexpected priority required my immediate attention at the time.

Fast forward to now.

The $900 Million Stimulus Bill – Includes Broker Transparency Provision

Buried deep in the 5,593-page $900 million stimulus package that was signed into law on December 27 is a little-known provision that impacts the aforementioned conflict-of-interest issues. For brokers, consultants and employers, this provision can be found on page 4475, Section 202 BB of the stimulus package. I learned of this provision from a ProPublica article (January 6), aptly titled: “Lavish Bonus? Luxury Trip? Health Benefits Brokers Will Have to Disclose What They Receive from the Insurance Industry.” The title says it all.

Author Marshall Allen, whom I have corresponded with in the past, has written quite a bit about this subject. In fact, his 2019 article prompted senators to propose legislation that requires disclosure of such perks and payments. This legislation was never enacted until now.

Brokers – and Employers – Take Note

The provision requires brokers and consultants to share with their employer clients (in writing) the various forms of direct or indirect compensation they receive from vendors associated with the health plan purchased by the employer. Further, the disclosures must take place at the time the employer enters into the agreement with the broker/consultant – or when the plan is renewed. This requirement also includes brokers who sell individual health insurance coverage.

Additionally, any service provider acting as a consultant who reasonably expects to receive direct or indirect compensation relating to the development of the following services must also comply:

  • Plan design
  • Insurance or insurance product selection (including vision and dental)
  • Record-keeping
  • Medical management
  • Benefits selection
  • Stop-loss insurance
  • Pharmacy benefit management services
  • Wellness design and management services
  • Transparency tools
  • Group purchasing organization agreements and services
  • Participation in and services from preferred vendor panels
  • Disease management
  • Compliance services
  • Employee assistance programs
  • Third party administration services

The disclosure section of this stimulus package applies to a producer or entity expecting to receive more than $1,000 in direct or indirect compensation for selling or administering to ‘employer-sponsored health plans’ and ‘enrollees in plans on the individual market.’

Conclusion

The delivery and payment of healthcare is fraught with many incentives and disincentives that drive appalling behaviors, causing costs to soar. As a benefits consultant, I was a big proponent of disclosing any renumerations we received to each affected client. Philosophically, this behavior is similar to expecting hospitals, physicians and insurance companies to reveal the negotiated prices of medical services.

Brokers and consultants owe it to their clients to be open with how they are being compensated by various sources to assure the client is being properly (and ethically) served at all times. This behavior cements trust and can promote a strong bond between the buyer and seller.

It is simply the right thing to do.

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Another One Bites the Dust – Haven Ends Healthcare Quest

The medical industrial complex has claimed yet another innocent victim. But this is not just any victim.

Three years ago, an independent company, Haven Health, was formed by three powerhouse forces in the business world: Amazon, JPMorgan Chase and Berkshire Hathaway. Meant to transform healthcare, Haven was a very unique collaboration that put the healthcare industry on notice that a new sheriff would be in town to help clean up a messy and unruly industry dominated by legacy players.

The likes of Jeff Bezos (Amazon), Jamie Dimon (JPMorgan Chase) and Warren Buffett (Berkshire Hathaway) were serving as the newly-assembled sheriff that would instill both fear and respect by industry inhabitants.  When this marriage was announced in 2018, I wrote a blog about the likelihood of having three disruptive ‘outsiders’ force long overdue changes to healthcare practices. I ended this blog with one stark sentence: “Only time will tell.”

Time is Now Here

It appears the healthcare industry is more complex (and unforgiving) than even the sheriff had believed. This most recent development reminds me of what President Trump naively claimed while attempting to repeal and replace Obamacare in 2017: “Nobody knew that healthcare could be so complicated…”

On Monday of this week, Haven announced that it will end its mission of exploring healthcare solutions, such as “piloting new ways to make primary care easier to access, insurance benefits simpler to understand and easier to use, and prescription drugs more affordable.” According to the Wall Street Journal (subscription required), any collaboration between these companies will become less formal in the future.

In addition to impacting their own respective workforces, the collaboration also intended to influence and disrupt the payment and delivery models currently in place. Reading between the lines, however, when their appointed chief executive, Dr. Atul Gawande, stepped down from his role in May of 2020, perhaps the proverbial ‘flywheel’ lost any inertia it may have gained.

Lesson Learned

Going forward, it will take more than three highly-respected leaders and their innovative organizations to mildly disrupt a system that desperately needs disruption, but has largely resisted meaningful changes. Many have tried to reform this massive industry, but up to this point, there has been very limited success.

In healthcare, bold changes may only come after America experiences an unimaginable crisis beyond anything we’ve ever encountered before.  But then again, only time will tell.

–Update on Hospital Price Transparency Requirement

My Tuesday blog on the new hospital price transparency mandate revealed that two major Des Moines hospitals have not posted the required pricing information despite a national mandate to do so – beginning January 1. The penalty for noncompliance is, quite frankly, small potatoes for at least larger hospitals – just $300 a day. To learn more, the CMS issued a FAQ on December 23.

According to POLITICO Pulse just one-third of the top 20 hospitals have posted visible price lists as of New Year’s Day. Politico reports, of those hospitals that have posted, the information is often vague or hard-to-decifer. More to come in future blogs on this subject.

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