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Hospital Price Transparency Took Effect New Year’s Day
But, Where is it?

Happy 2021!!!

In this brand-new year, imagine that you have found your most desired showroom vehicle at a local dealership. After haggling with the salesperson (and the backroom manager), a process that is similar to playing ‘Let’s Make a Deal,’ you are handed the following purchase agreement that reads (in short):

This negotiated price is an estimate only and is not a quote or a guarantee of the amount that you will eventually owe…

Now wouldn’t that be a twist on the old way of doing things! But in healthcare, this is precisely the norm.

Recent Ruling on Hospital Transparency Pricing

On Tuesday, December 29, the U.S. Court of Appeals for the District of Columbia circuit rebuked the hospital industry’s legal attempt to banish new rules on price transparency from taking effect on New Year’s Day. I have written about the new rules frequently in the past. The price transparency rule, published in November 2019, was pushed by President Trump and HHS Secretary Alex Azar.

As it now stands, barring a President Biden ‘stay of execution’ order to relax these rules, hospitals must post their negotiated rates online beginning January 1, 2021. The online rates must be conveyed in a machine-readable format and also list their negotiated rates for at least 300 shoppable services in a consumer-friendly format – including 70 services picked by the Centers for Medicare and Medicaid Services (CMS).

Starting Jan. 1, 2022, health plans and insurance companies will have to provide a publicly available, updated data file on costs. By January 1, 2023, payers, such as commercial insurance companies and large, self-funded employer health plans will also need to comply with similar price transparency rules demanded of hospitals. This was discussed in my November blog, “Finalized Price Transparency Rules for Insurers.”

Not surprisingly, the American Hospital Association is disappointed by this latest decision and, according to their General Counsel, Melinda Hatton, “…are reviewing the decision carefully to determine (our) next steps.”

It’s Now 2021 – Have These Rates Been Posted?

On January 2, I’m sitting at my computer attempting to discern what actions a few Central Iowa hospitals have taken to comply with this new requirement to inform Iowan’s about specific ‘negotiated’ health prices, not just merely ‘estimated’ prices. Estimations, I might add, are simply playing a game of horseshoes and hand grenades, providing just enough information to check boxes to ‘inform’ an already confused public.

Below is a rather quick assessment of three Des Moines-area hospitals – in addition to the Iowa Hospital Association – and what they have listed on their websites as of January 2, 2021. Since that date, any changes made by the following organizations have not been reflected in my comments found below.

MercyOne – Des Moines

As I understand the requirements, MercyOne’s ‘Estimate Your Costs’ webpage does not conform with the new regulations on hospital price transparency. This webpage allows one to download a list of their ‘standard charges’ (in Excel format), but does not provide the ‘negotiated’ rates by payer. MercyOne cautions that this information is only a ‘partial estimate,’ as it does not include other fees beyond hospitals charges, such as “physician fees, charges for your emergency room physician, radiologist or anesthesiologist”.

Before an interested patient can gain access to “generate the most accurate estimate for your health care procedure,” one must click “Estimate Your Costs” and agree to the ‘Disclaimer’ before providing your name, DOB, type of desired medical procedure and your insurance vendor. I attempted to complete this exercise but was met with ‘an error’ both times.

Just as troubling to me is this disclaimer: “Benefits and eligibility are subject to change at any time. This estimate may contain private information that is protected by law. If you are not the patient, patient representative or guarantor, sharing, copying or using this information in any way is against the law.

Frankly, I thought this regulation was all about ‘transparency’ of negotiated medical prices. If I want to publish what MercyOne has negotiated with any particular payer, I should be able to do so. I will assume this site has not been adequately updated and, consequently, this language requires a revision.

UnityPoint Health – Des Moines

The Patient Charges and Costs webpage for UnityPoint Health appears to be helpful, but when looking more closely, it has not changed to reflect the new regulation. The UnityPoint site refers to the January 1, 2019 requirement that hospitals list their ‘standard charges’ of Diagnostic-Related Group (DRG) charges. This information should be deleted from the website as it no longer is compliant with the new regulations. UnityPoint Health cautions the patient to ‘first contact your insurance provider’ who may provide their own ‘estimates’ for out-of-pocket costs based on the insurance plan of the patient. But doing so will likely invite the patient to enter a new labyrinth of confusion that is full of disclaimers, etc.

UnityPoint’s ‘Financial Estimate‘ webpage requires completion and submission before releasing prices. I did so, but when it was submitted, I received the following message: “Thank you for your request.  We’re striving to provide an easier and more personal way for you to plan your health care. A UnityPoint Health financial representative will reach out to you within 2 business days to provide your estimate information.

This website is both confusing and non-compliant – based on my review date (January 2).

Iowa Hospital Association (IHA)

After a cursory review of the IHA website, there are no specific updates that provide revised information about this latest regulation.

Broadlawns Medical Center – Des Moines

With Broadlawns, we actually have a BINGO!

Two days before the required posting of negotiated rates, Broadlawns posted their ‘Pricing Directory’. Broadlawns provides this information in two formats: PDF file and CVS file. The 450-page PDF has the following disclaimer at the top of the first page:

This is an estimate only and is not a quote or a guarantee of the amount that you will owe or what the charges for services will be. The actual charges may be lower or higher than the estimates depending upon many factors – including actual services rendered, complications, your particular health care needs, and your actual insurance policy coverage.

The 450-page PDF includes 15 health insurance products offered by eight insurance companies: Aetna, CIGNA, Coventry, Health Partners, Medica, United Healthcare and Wellmark. Many shoppable services are broken down by professional (physician) and hospital services. You will find the procedure code, gross amount of the service, cash discount offered, negotiated rate with that particular insurer, and the minimum and maximum charge.

Out of sheer curiosity, I did a quick price comparison between Wellmark PPO and United Healthcare PPO for a few random procedures at Broadlawns (found below). Please note, this comparison does not suggest that these negotiated prices are the same at other hospitals. This information is only specific to Broadlawns Medical Center.In lieu of searching for the correct procedure code and shoppable services at Broadlawns, the patient can request a ‘Personalized Price Estimate’ from Broadlawns using the web-based Cost Estimator Request Form (or by calling a Broadlawns financial representative).

Conclusion

Because each patient encounter is so unique and may require various procedures, caveats by hospitals are certainly understandable when quoting specific procedure code prices. There are MANY hurdles to full-blown price transparency that cannot be categorically described in this particular blog. One obvious hiccup is – just how much the patient has remaining on his/her deductible and out-of-pocket maximum to determine their personal liability for the procedure(s). The patient will need to toggle between the health provider for specific prices and with their insurance vendor on whether the service is covered by their plan and, if so, how much the patient will be liable to pay. Transparency in medical prices help, but clarity on how to use this transparency will be problematic until a new world of simplicity evolves.

Many experts agree that price transparency in healthcare will eventually be a valuable thing to have, but this particular requirement is merely a first step toward a ‘Marie Kondo’ approach that will hopefully clean up a very messy industry when it comes to pricing. Kaiser Health News just published an article about the implications of having transparent medical pricing for consumers.

I envision that enterprising third parties will take this newly-released public data and morph it into usable consumer-centric information that can be easily accessed through a smart phone app for the patient. In addition, innovative clinician tools can help health providers perform real-time cost/value trade-offs with the patient while ordering procedures and diagnostic tests that impact the cost.

Simplifying a complex system will take patience, time and a general willingness to invoke needed change.

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The Plight of Rural Hospitals (Part 2)

As shared in last week’s post, hospitals, specifically critical access hospitals (CAHs), are having a difficult time surviving under the strain of various financial challenges. This week discusses how highly-stressed hospitals can possibly be identified to warrent additional attention.

Similar to our vehicle’s check engine light, we hope to be alerted with any major problem BEFORE something catastrophic happens. Sometimes, however, depending on the make, model and year of the vehicle, once the red or yellow light is flashing, the damage may have been done, leaving us shocked, frustrated and perhaps stranded in the middle of nowhere.

Similarly, we don’t want this to happen to our CAHs. If a financial stress light is not activated early enough, indicating that a particular rural hospital is in deep financial trouble, local officials and state policymakers are forced to react to something that could’ve been addressed earlier had the problem been closely monitored. It’s about being proactive and having the right tools to assess and manage over a period of time.

National Academy for State Health Policy

In early August, I received an email from the National Academy for State Health Policy (NASHP) that caught my attention. NASHP is a “nonpartisan forum of policymakers throughout state governments” whose mission is to convene state leaders on health policy issues to help “lead and implement innovative solutions to health policy challenges.”

The email’s headline was simple and direct: “Transparency Model Law Requires Hospitals to Report their Financial Health.” In order to address rising healthcare costs and/or assure financial stability for hospitals so they continue to provide access to care, NASHP’s approach is for state policymakers and the public to have “detailed hospital financial information to understand a hospital’s assets as well as its expenses and liabilities.” Hospitals encompass one-third of each dollar spent on healthcare.

After reviewing many policies and practices from other states, NASHP developed hospital transparency model legislation that would give states the authority to collect data needed from hospitals – including what data to be collected and which hospital documents to be used to obtain this information. It is also important to determine which state agency or office would be responsible for analyzing this data on an ongoing basis.

The model legislation also includes a reporting template for hospitals. (Click on the ‘Hospital Financial Transparency Report Template’ link to download an Excel spreadsheet template.) By having this template, the state agency would receive standardized financial information from all hospital and medical organizations that would be required to annually submit this information. Additionally, NASHP provides a Q&A on how states can use this Model Law and Template to increase hospital and health care system financial transparency. Finally, NASHP shares A Community Leader’s Guide to Hospital Finance, which provides an overview of key questions policymakers can ask to better understand hospital finances.

Current Iowa Hospital Financial Reporting vs. NASHP Model

The NASHP Model legislation and reporting template naturally created more questions about ‘if’ and ‘how’ Iowa hospitals currently report audited financial statements to the Iowa Department of Public Health (IDPH). As mentioned in my Part 1 post, Iowa Code Section 135.75 generally outlines basic annual reports that hospitals and health care facilities must file to the IDPH. From this requirement, other Codes also apply, including:

Are the data elements found in the Iowa reporting requirements adequate to address rising healthcare costs and/or hospital solvency metrics? NASHP provided me with a very brief side-by-side comparison of the Iowa Hospital Financial Reporting versus the NASHP Model. It is worthwhile to mention that the NASHP model is intended to give broad authority to a designated state agency that would implement a uniform reporting system via regulations. The specific data elements of the NASHP Model are outlined in the template rather than in the legislation. Iowa’s current law appears to prescribe a few specific reporting elements that the IDPH must incorporate in a uniform reporting system. However, there is no Iowa ‘template’ and IDPH has indicated that not every hospital participates, nor is the information collated when received by IDPH. Finally, IDPH is not adequately staffed to do much with the information collected from hospitals.

According to NASHP, a few key takeaways from the brief comparison include:

  • The NASHP Model is more comprehensive and breaks down each data element – such as all types of assets, liabilities, gross and net patient revenue by payer while Iowa’s law broadly indicates that hospitals must report assets, liabilities, income, and expenses.
  • NASHP recommends reporting on a system-level basis while Iowa invites hospitals and facilities to report per facility. NASHP’s systems approach is based on the fact that, because of increased consolidation, most hospitals and health systems are now part of larger systems, and data must be collected from each parent system.
  • NASHPs Model template automatically analyzes hospital-reported data and requires the state agency to produce annual reports while Iowa no longer has an annual reporting requirement.

In other words, the NASHP Model requests data that is immediately actionable and helps policymakers understand key metrics of a hospital system’s financial status. This is very important, because state agencies – the IDPH included – may not have the necessary resources (personnel and financial) to analyze and summarize this data appropriately. What one does with the collected data is often just as important as the type of data being collected.

The Iowa Hospital Association and American Hospital Association Annual Survey 

After the Part 1 post was published last week, Perry Meyer, executive vice president of the Iowa Hospital Association (IHA), brought to my attention that the IHA, in conjunction with the American Hospital Association (AHA), “works with ALL Iowa hospitals each year to collect the AHA Annual Survey of Hospitals.” Perry further mentioned, “This is a comprehensive survey that includes Iowa hospitals reporting their audited financial information. Each year when completed, IHA provides this data on all Iowa hospitals to the IPDH in lieu of IDPH conducting a separate licensure survey. This agreement between IHA and IDPH has been in place for 30+ years. The comprehensive survey data is public and IDPH should have the information.”

This information from Perry is greatly appreciated. The IHA has a good pulse on what is happening to its hospital members, and with this knowledge, serves as a lobbyist for their members in Iowa legislative sessions. IDPH acknowledged receipt of the AHA/IHA survey results. And the data, according to my IDPH contact, is used to “check the number of licensed beds of each hospital.” The limited use of this data is a bit underwhelming, if not concerning, as the AHA annual survey also includes audited financial information that can be reviewed and analyzed. The IHA – presumably with the blessing of the state – appears to assume the check engine role for financially-stressed hospitals within our communities.

Going Forward…

The upcoming election will begin to determine the ‘new normal’ during the next two-to-four years. If former V.P. Joe Biden is elected president and the Democrats take hold of the Senate in addition to maintaining House majority, healthcare policy will be – along with Covid-19 and the economy – the top issue for years to come. Under this scenario, the Biden public health option will most likely be front and center, and the battles will become contentious by political party, payer and healthcare provider. As a result, one large battle will likely be centered around reimbursements for providers, specifically hospitals.  Bundled payments and alternative payment methods will presumably be analyzed to ensure that quality of care is being incentivized appropriately. But a key issue for hospitals and other providers will be just how much the public option will reimburse hospitals and how does it compare to current Medicare reimbursements that are largely considered to be at or below hospital cost.

In the final analysis, having a due diligence process in place, similar to the NASHP Model, will be necessary when assessing the survival of our critical access hospitals.

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The Plight of Rural Hospitals (Part 1)

Even before the Covid-19 pandemic hit Iowa and the U.S., rural hospitals were confronted with their own pandemic of sorts – a financial crunch that could determine business survival. As we know, all rural communities rely on having viable access to a broad spectrum of essential health care services. Iowa is no exception.

Critical Access Hospitals (CAHs)

For decades, rural hospitals in the U.S. have experienced poor financials due to a number of reasons. One large reason is the gradual exodus of people leaving rural communities for urban areas, primarily for seeking more promising career opportunities. Over time, this migration resulted in an older, lower-income population remaining in rural communities, heavily relying on Medicare and Medicaid for their health coverage. On top of this, rising patient deductibles have contributed to the overall rise in bad hospital debt.

Unfortunately for rural providers, specifically hospitals, government reimbursement levels are often below the cost of providing these services. To help offset this revenue shortage, private payments through commercial insurance carriers and self-insured employers, largely due to cost-shifting, are considerably higher than government reimbursements.

To rescue rural hospitals from the ‘death spiral’ during the 1980s and early 1990s, Congress created the Critical Access Hospital (CAH) designation (Balanced Budget of 1997 – Public Law 105-33). The CAH designation was designed to reduce the financial vulnerability of rural hospitals and improve access to healthcare, thereby keeping essential services in our rural communities. CAHs receive certain benefits, such as cost-based reimbursement for Medicare services.

Over the years, additional legislation has been amended to the CAH designation and related program requirements. As of July 19, 2019, there were 1,350 CAHs located in the U.S. According to the American Hospital Association, there are 5,198 community hospitals. Iowa has 119 community hospitals, with 82 being CAHs.  A July 2020 map shows the locations of each Iowa CAH.

In 2019, the Iowa Hospital Association (IHA) developed a proposal to reform rural health care to help address the growing financial challenges of rural hospitals using a three-pronged approach. The outcome of this initiative is unknown at present.

Arrival of the Covid-19 Pandemic

Just before the pandemic arrived in mid-March, the Cedar Rapids Gazette published an article reporting that rural Iowa hospitals are at risk of closing. The article cites a 2019 national report by Navigant, a Chicago-based consulting company, that found nearly 18 percent of Iowa’s rural facilities (about 17 hospitals) “are at high risk of closing unless their financial situations improve.” Navigant also reported that 21 percent of all U.S. hospitals (430 total) are facing a similar fate.

When the pandemic tsunami arrived, the financial hit to hospitals, specifically small, rural hospitals, became even more acute. The primary reason – due mostly to the suspension of elective procedures in clinics and hospitals, including ambulatory surgeries, inpatient surgeries and inpatient discharges.

In June, the IHA reported that audit firm, CliftonLarsonAllen, through financial modeling, projected a potential ten-figure loss for hospitals statewide due to the pandemic, jeopardizing several rural hospitals. The modeling showed that 89 Iowa hospitals may lose more than $1.4 billion by the end of September, and possibly a worst-case scenario showing more than a $2 billion loss by the end of 2020.

A new analysis by Epic Health Research Network and the Kaiser Family Foundation found that, if recent pandemic trends continue through the 2020 calendar year, total hospital admissions will be down by at least 10.5 percent of predicted levels for the entire year. If this prognostication comes close to reality, loss of revenue will adversely impact many rural hospitals that were merely holding on during the pre-pandemic era. According to an October 16 article from Becker’s Hospital CFO Report, at least 47 U.S. hospitals have closed or entered into bankruptcy in 2020.

Kirk Norris, the CEO of IHA, commented that Iowa hospitals have received millions in federal support from stimulus bills, CARES act and Paycheck Protection Program, but not enough to cover predicted losses.

According to IowaWatch, 77 Iowa hospitals collected $928.3 million in accelerated and advance Medicare payments as a government stimulus to cover expenses in the Covid-19 pandemic’s early days last spring. These funds, however, allowed health care providers to receive, in advance, three months of anticipated Medicare billings that must be paid back to Medicare and Medicaid Services. This program was separate from the CARES Act and other Covid-19-related emergency plans – such as a 20 percent add-on payment by Medicare for inpatient hospital Covid-19 patients. All told, 77 Iowa hospitals applied and received accelerated Medicare payments, including 44 critical access hospitals, who could seek ahead-of-time up to 125% of their anticipated Medicare payments for a six-month period. CMS suspended the accelerated program on April 24 to re-evaluate the other revenue sources being made available to healthcare providers.

Nationally, stimulus efforts included $175 billion in two initial rounds of CARES Act funding, with another $10 billion for rural hospitals and other distributions based on high Covid-19 admissions, etc.

Public Health Plan Option Under Biden

Another storm that could potentially hit rural Iowa hospitals will first depend on the upcoming election results. Joe Biden and the Democrats are proposing to create a public option to compete with private insurance companies. This public option would allow individuals to purchase a public option plan from marketplaces in addition to allowing employees to elect a public option plan through their employers. This would mean the payment mix received by Iowa hospitals would further erode because more Iowans would now have health coverage that reimburses hospital care at a lower rate than private insurance.

The key question, however, is just how much different will the public option reimburse healthcare providers when compared to the current Medicare arrangement? If Biden is elected and the Democrats control Congress, this will be a critical piece to watch when the public option is debated.

The process of culling out the eventual mayhem of rural hospitals under a public option approach began last year. In August 2019, Navigant released an analysis finding that Iowa’s rural hospitals could lose more than $476 million dollars under a public option, putting dozens of rural hospitals at risk for closure. Using three different scenarios, the study suggests that between 25 and 52 of Iowa’s rural hospitals would be at high financial risk for closure due to a loss of revenue.

It must be noted, however, the Navigant study was funded by an industry coalition, Partnership For America’s Health Care Future, an alliance consisting of pharmaceutical, insurance and hospital lobbyists whose desire is to fight off the expansion of Medicare and any government-driven payment system. According to IHA CEO Norris, Medicare is a low payer in Iowa relative to other parts of the country. Again, the big unknown is the reimbursement level a public option would have if passed by Congress and signed by the President. The devil will be in the details.

Transparency in Hospital Financial Reporting

In the U.S., hospitals account for the largest expenditure of healthcare dollars, comprising about 33 cents of each dollar spent. It is imperative, therefore, that to effectively address rising healthcare costs and assure financial viability of all types of hospitals serving Iowa communities, state policymakers and the public will need appropriate financial information necessary to assess and understand the financial health of hospitals.

Each state has disparate reporting requirements for hospitals to report audited financial information – with some states being more comprehensive than others. In addition to the IHA providing some hospital data on their website, Iowa does ‘require’ hospitals and healthcare facilities to report a balance sheet detailing assets, liabilities, net worth, income and expenses and “other reports of the costs incurred in rendering services as the department (of Public Health) may prescribe.” This requirement comes from Iowa Code, Section 135.75.

But is this information adequate?

According to my contact at the Iowa Department of Public Health (IDPH), Iowa hospitals submit their yearly balance sheets and capital expenditures to the IDPH, but not every hospital participates, and the IDPH does “not have the time to track down the ones that do not (report).” This statute does not have a template for hospitals to use when reporting, nor is the information collated when received by IDPH. Hospital financial information is not shared outside IDPH unless it is requested. On an as-needed basis, the financial data is reviewed for “future projects that may trigger a Certificate of Need (process)” In short, “We do not have the staff to do much more with the information and have not had for many years.”

If the fate of each rural hospital is truly critical to our communities and state – and it is – how can Iowa and other states successfully address the needs of each hospital and the communities being served?

Next week’s post will discuss an interesting initiative that a national organization has designed to help state officials assess the financial viability and transparent practices of hospitals.

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