U.S. Hospitals And Insurers Might Be Forced To Reveal The True Prices They Negotiate | Connecticut Public Radio
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U.S. Hospitals And Insurers Might Be Forced To Reveal The True Prices They Negotiate

Mar 11, 2019
Originally published on March 12, 2019 10:23 am

The Trump administration is weighing whether to require hospitals to publicly reveal the prices they charge insurance companies for medical procedures and services — prices that are currently negotiated in private and kept confidential.

The Department of Health and Human Services says its aim is to boost competition and cut costs by letting consumers see how prices vary from place to place. But health economists say such "transparency" might not actually bring down costs for patients.

HHS tucked two questions about publicizing the negotiated prices into a separate, 187-page provisional rule released earlier this month that governs health care information technology. The Wall Street Journal reported on the idea last week.

"The availability of price information could help increase competition that is based on the quality and value of the services patients receive," HHS argues in its proposed rule. "The Department is considering subsequent rule-making to expand access to price information for the public, prospective patients, plan sponsors and health care providers."

Zack Cooper, a health economist at Yale University, says he's skeptical that this particular attempt at price transparency would reduce overall spending on health care.

"Most consumers don't look at the price of health care services before they access care," Cooper says. "So I think we need to understand that most folks are not going to, all of sudden, go Googling hospital prices and then make big changes as to where they [go for] care."

Still, Cooper's research suggests HHS is looking in the right direction. In a paper he published last month in Health Affairs, in which he analyzed the prices negotiated between hospitals and insurance companies, Cooper found that most health care inflation comes from rising prices for hospital care.

"By and large, physician prices haven't gone up in the last 10 years," he says. "In contrast, we've seen pretty remarkable growth — on the order of 5 percent per year — in hospital prices."

Those high prices end up in insurance premiums, which have also been rising, Cooper says.

The American Hospital Association is opposed to making its negotiated prices public.

"This isn't really what consumers need or want," says Tom Nickels, the AHA's executive vice president for government affairs. "What consumers need and want is 'What are their out-of-pocket costs?' "

Almost 60 percent of people with employer-sponsored health insurance carry plans with deductibles of more than $1,000. That means more people are exposed to high health care charges for hospital visits. In addition, patients complain frequently of surprise bills they receive after a hospital stay. Those surprise bills often arise when a patient is treated by out-of-network doctors who happen to be working in hospitals that do participate in the patient's insurance network.

Congress is already considering bills to address such surprise billing practices.

Nickels, the representative of the hospital association, says consumers have no need to see the prices insurance companies pay hospitals, just as they don't need to see what a grocery store pays for cases of Coca-Cola.

But a glance at the public comments posted on regulations.gov suggests members of the public don't agree with him.

The agency argues in this proposal that the complexity — and opaque pricing in the health care system — make the system less efficient and hurt patients' health.

"Enough with the secrecy and back room deals," writes one commenter.

Another writes: "When we purchase groceries, cars, homes, airfare, hotel rooms, etc., we know the price before we buy. Shopping around of lower prices is easy. The glaring exception is health care."

In contrast, Nickels argues that revealing the secretly negotiated deals would actually cut competition. And he questions whether it would be legal.

"We have a system that basically allows people to have private contracts between each other in an economy," he says.

The hospital price proposal is the latest in a series of efforts by the Trump administration to boost price transparency in health care.

In the past few months, HHS Secretary Alex Azar has proposed several rules to make drug prices more transparent and to change the system for negotiating those prices.

The first would require drug companies to include the list prices of their medications in any television or magazine ads promoting their drugs. Another proposal would tie the price that Medicare pays for many cancer and arthritis drugs to the prices other countries pay for those medications.

Finally, the agency wants to upend the entire system for pricing prescription drugs that people buy at their local pharmacy. Right now the prices of those medications are determined by negotiations between drug companies and middlemen known as pharmacy benefit managers who negotiate discounted prices on behalf of insurance companies.

But those discounts come in the form of secret rebates — and the pharmacy benefit managers keep a share of those rebates for themselves. Now HHS wants to make those rebates illegal and force the players to negotiate discounts upfront.

Sara Fisher Ellison, a health care economist at MIT, is pessimistic that these proposals will reduce costs in the prescription drug market.

"They're trying to, around the edges, improve the function of the market," she says. "But to be honest they probably missed the mark. That's because the market for pharmaceuticals is not like a standard market."

She says the problem is consumers don't have the power to easily switch to a competitor product if the drug they're taking has a high price.

"In pharmaceuticals, the end consumer — the patient — is not the only decision maker, and in fact is often not even the most important decision-maker," Ellison says.

In reality, she says, it's the insurance companies and the doctors who decide what drugs a patient gets, and often what hospital a patient goes to. And those are the people who are already negotiating the price.

Copyright 2019 NPR. To see more, visit https://www.npr.org.

MARY LOUISE KELLY, HOST:

The Trump administration is considering requiring hospitals to post publicly the prices they charge to insurance companies for in-network services. This would be a big deal. That is because these prices are negotiated in secret and kept that way by hospitals and insurers. It's one of several efforts by the administration to shed light on the murky business of health care pricing. Joining us now is NPR's Alison Kodjak to talk all about this idea and how it might fit into the administration's strategy on health care costs. Hi, Alison.

ALISON KODJAK, BYLINE: Hi, Mary Louise.

KELLY: OK, so what is this proposal? What's the goal here?

KODJAK: So it's not a full-blown proposal. But HHS is arguing that the health care system, the hospital pricing system is way too complex and opaque. Consumers don't know what they're buying and what they're paying for it. You know, we've been doing this whole series of stories about patient bills...

KELLY: Yeah.

KODJAK: ...Where they're just shocked by what they or their insurance company are charged for services. So HHS suggests that if people know those prices, they can shop around for care on price. But the point's debatable whether they'll actually do that.

KELLY: Debatable why - I mean, why wouldn't you shop around for a better price?

KODJAK: Well, the theory, it could work. But it doesn't always work at the level of the patient. People running to an emergency room aren't going to shop for price. People who are scheduling surgery, they often go to where their doctor sends them or to that hospital with the best reputation, which might be the most expensive one. I talked to Zack Cooper, who's an economist at Yale who's looked at this stuff pretty closely. And here's what he says.

ZACK COOPER: So the first thing we know is that most consumers don't look at the price of health care services before they access care. I think we need to understand that most folks are not going to often go Googling hospital prices and then make big changes to where they access care.

KODJAK: But what Cooper does say is that the administration's probably pointing in the right direction here because he just published a study, and it shows that hospital prices are rising much faster than, say, doctors' fees.

KELLY: Right, which prompts me to ask, if it's debatable whether you or I or any of us might make different decisions based on these price points, is another piece of this that shaming health care providers into not charging those crazy prices you've been reporting on might be facilitated if there is more public transparency here?

KODJAK: Yeah, and there's some research that shows that companies are responsive to consumer anger, like naming and shaming. There was a recent survey by the Kaiser Family Foundation that showed that companies worry about what consumers think. But economists still say that if these prices are revealed, lower-priced hospitals might also increase their prices when they see the better deals that their competitors are getting.

KELLY: Has there been much public reaction so far?

KODJAK: Well, it's been pretty mixed. There are public comments on the government's website where they posted this. And people love it. The people out there are saying, yes, we need this. We want to see this. So even if research shows they're not shopping, they seem to want it to be out there - the American Hospital Association, not so happy with the idea. I talked to their head of government relations, Tom Nickels. And this is what he said this morning.

TOM NICKELS: That isn't really what consumers need or want. What consumers need and want is what are their out-of-pocket costs. The negotiated rate between a hospital and an insurer or a physician and an insurer is not particularly relevant to the consumer.

KODJAK: So they're saying the consumers aren't paying these prices, so why would we post them? And that's similar to the reaction that drug companies have had when HHS has made similar proposals on pricing there.

KELLY: Although, is it fair to see this as part of a bigger effort to deal with health care prices, drug prices, all of it writ large?

KODJAK: Yes, it is. And as I mentioned, the administration put out these proposals on drug prices. They also really push for more transparency and less complexity in the pricing market so that people can see what their health care providers and their drug companies are charging their insurance companies because that eventually gets into premiums. So the administration overall is trying to just make the market more transparent.

KELLY: NPR's Alison Kodjak, thank you.

KODJAK: Thanks Mary Louise. Transcript provided by NPR, Copyright NPR.