As inflationary concerns spread through the economy – with gas, groceries, and necessity prices rising at 30-year highs – will the average healthcare organization see similar price changes? The answer is complicated, as the implementation of price transparency regulations shine new light on reimbursement and enable consumerism to a degree that was impossible before.
Price transparency regulations are like a geyser with underground pressures – in the form of the provider and payer transparency regulations, interoperability rules, proliferation of digital tools, consumer education efforts, and high deductible health plan adoption – that continue to build. Consumers are mostly unaware of these pressures and are only seeing glimpses via the press.
2022 may be the year that these pressures break through, and the “price transparency geyser” bursts for the first time. The resulting outflow of data, tools, awareness, and information will create an opening for a cascade of complexities as the regulations that have formed the basis of the movement are enforced. The question that remains is how much these complexities will impact and permanently change the landscape of the healthcare ecosystem that has evolved over previous decades. Let’s explore why 2022 is different, what the market can expect, and how organizations can capitalize on opportunities.
There are three key drivers that increased the temperature on payers and providers in 2022.
Although hospital compliance with price transparency regulations can be summarized as lackluster (only 14% of hospitals were found compliant, even a year after the mandate’s effective date), CMS has doubled down on its efforts in four distinct ways.
As such, 2022 will be the year that the largest ever tranche of payer and provider machine-readable files will be published, representing the largest standardized set of healthcare pricing information to ever be made available to the public.Beyond the availability of data, there is additional legislation and mandated requirements that directly impact consumers—not just the entities and organizations that determined rate-level adjustments and payment methodologies behind closed doors.
While the original intent of price transparency regulations were to increase competition and lower the overall cost of receiving healthcare in the US, the No Surprises Act (NSA) has the most direct impact on what costs the patient will ultimately pay at the time of service.
At the heart of it, the NSA is patient-protection legislation. The law forbids hospitals from balance billing patients in three ways:
The NSA also protects uninsured and self-pay individuals by requiring hospitals to provide patients with estimates of how much a service will cost before they receive care. These estimates, known as Good Faith Estimates, directly inform patient healthcare costs and, in certain situations, may result in the patient being able to manage the costs of services before they receive them. Upcoming Advanced Explanation of Benefit rules will have a similar impact on insured patients.
Exposed pricing will result in significant stakeholder scrutiny, from competitors to government regulators, consumers, third parties, and the media.
Payers and Providers
Payers and providers have been engaged in brinksmanship negotiations for years creating significant pressure on the entire healthcare landscape. Although value-based care initiatives and payvider partnerships have attempted to relieve some of the pressure by fostering collaborative arrangements that put value over volume, the new price-focused regulations could create enough healthcare landscape pressure to reverse the progress.
In addition to payers and providers or their association/trade groups reverting to pointing fingers at each other being responsible for the high prices of healthcare, more aggressive negotiations are expected. Providers that are paid below market average or below their competitors will likely seek to increase rates. Conversely, providers that are paid above market will attempt to defend rates, citing market power, clinical quality, and perceived quality. If providers are unable to achieve their definition of parity, it may lead to additional consolidation in a market that is already ripe with M&A.
Government regulators may target large organizations on both the payer and provider side to audit (or continue auditing) compliance. They may use rate information to test compliance across the various mandates, which could result in additional regulations that payers and providers must continue to respond to. This information will be useful to understand pressures on rural and critical access hospitals.
The media will continue to scrutinize all three of the underlying healthcare landscape pressures. A story that exposes how much common healthcare services cost in one area versus another is a gold mine for savvy healthcare reporters. They will continue to point to variability in costs across common services, top health systems, and competitive markets. They will also scrutinize the patient experience, which will be significantly impacted by these regulations – including the individual stories that illustrate a frustrating journey through the healthcare system.
Employer groups (and the brokers who represent them), who have had to bear the brunt of rising healthcare expenses dictated by payer/provider negotiations, will have access to data that can help them re-evaluate offerings for their employees, granting them leverage to renegotiate existing partnerships with healthcare providers and payers.
This could cause significant shifts in commercial membership among some of the largest payers in the country. The public will likely not access payer machine-readable files, given their incredibly large size. Employees may pressure their employers to switch carriers, switch carriers themselves, or delay care as they shop for the lowest cost services and/or react to media reports.
Consumers are more involved than ever in driving their own healthcare choices—but remain several steps removed from the meaningful, actionable data and technology that enables them to shop and make decisions in the way they do for other services. Patient choices will continue to be driven by physician referrals, integrated delivery systems, and ease of access. However, it is only a matter of time before the combination of eager startups and tech titans that are focusing investments in healthcare consumerism (Amazon, Apple, etc.) find ways to use this data to attract patients.
Third party vendors may saturate the market with solutions that aggregate pricing, benefit/product design, and claims editing data on behalf of the above stakeholders, fueling existing market responses, and continuing to put pressure on the entire healthcare ecosystem to manage the cost of healthcare services.
Technology investments will be required to develop interoperable solutions that deliver accurate, comparable, and consistent information between providers and co-providers, providers and payers, payers to members, and health systems to patients. Unfortunately, it will not be easy, as payers and providers each have proprietary information and methodologies of determining the pricing they charge and pay for services.
One way that both payers and providers are attempting to manage the impact of price transparency is by developing or enhancing their digital solution offerings that integrate not only their own proprietary information but also incorporate information from their partners. However, without regulatory guidance to develop a solution that would work regardless of the health system, electronic health record technology, claims processing, or product offering, there is a trepidation to move quickly. These consumer-facing digital solutions take a significant amount of time and money to effectively develop.
Providing meaningful, valuable, and user-friendly solutions to enhance the consumer experience is a key differentiator for any healthcare player in today’s market. While payers and providers are at different points in their transparency journey, Guidehouse has worked with both types of organizations to respond to and prepare for mandate compliance, as well as integrate these initiatives into broader strategic goals. This includes bringing both entities together to standardize and integrate their solutions, align data sources, and enhance digital offerings to produce accurate and consistent pricing information. It’s critical to make a good faith effort to achieve compliance by clearly understanding your current capabilities, community needs, market differentiation strategy, and proactive/reactive communications tactics.
When payers and providers work together to create collaborative, bi-directional data exchanges, these differentiating tools not only support their patients in informed decision-making, but ultimately help reduce their own administrative burden, improve financial standings, and move toward reductions in overall cost of care.
For example, payers and providers can look to leverage required price transparency disclosures as a targeted opportunity to build and enhance relationships with their provider/payer counterparts. Particularly in competitive markets, coming to the table early and with transparent market information can provide organizations a proactive opportunity to get ahead of the curve and further develop and/or expand their relationships rather than reacting to new market conditions once both payer and provider data transparency is fully implemented and available. These kinds of collaborations can also be well received by the market and consumers who are looking to cut through the noise of payer-provider brinksmanship.
Key questions for providing consumers access to accurate and consistent pricing information:
Despite the geyser-like pressure that the entire healthcare industry is facing, the stakes regarding consumer trust and loyalty and an individual organization’s market position are too high for leaders not to put their best foot forward.
Jeffrey Leibach, Partner, Guidehouse
David Brueggeman, Director, Guidehouse