Last week, President Trump signed an executive order meant to improve price transparency in healthcare. As the market moves toward increased transparency, local healthcare companies are trying to figure out how it will impact their business, and some are very well-positioned to embrace the move toward a purer market.
“Opaque pricing structures may benefit powerful special interest groups, such as large hospital systems and insurance companies, but they generally leave patients and taxpayers worse off than would a more transparent system,” the order reads.
In January, a federal law went into place forcing hospitals to post their prices, though these charges were often worthless and confusing. They meant very little to the average patient because negotiated rates with insurance carriers change what people actually pay, and no one really pays the sticker price. In addition, the lists were often hard to read for someone who isn’t used to interpreting how medical procedures are coded.
While the order has left it up to the Health and Human Services Department to figure out how to implement the rules, it seems poised to address those issues. It says the prices posted must be easily understood, include negotiated rates for shoppable expenses, and be updated regularly. Many insurance companies already allow members to search providers based on their plan information to see where the best-priced services are, but this would add another level of transparency to finding healthcare.
Steve Love of the DFW Hospital Council, is also on board. “We totally agree with transparency, and we want people to understand what their hospital care will cost,” he said. “‘What are we going to pay out of pocket?’ That’s what people really want to know.”
The order cites a study in the 2019 Annual Report for the Council of Economic Advisers that found 73 percent of the 100 highest-spending medical cases were shoppable, or widely available from hospitals and doctors. The thinking is that if patients are able to clearly understand the prices of an item, they will be wiser with where they spend their healthcare dollars, helping the healthcare field approach a true market and letting the providers with the best prices and quality survive.
The order also will push insurers and hospital systems to share information about the rates they charge and reimburse, as well as claims data to help create the data that will be posted.
But what many consumers don’t know is that hospitals and some outpatient facilities have different reimbursement rates for Medicare and some insurers based on the patient information such as age, zip code, medical history and other factors that are likely to increase or decrease a medical procedure. When a patient leaves the hospital, they are given what is called a diagnosis related group, which determines the reimbursement rate. So no matter how much was actually used to treat the patient, they are reimbursed by on the DRG, which could be good or bad depending on how efficient the care was.
Local startup ClaraPrice is poised to take advantage of the transition by accessing the DRG data. The company is a recent graduate of Healthcare Wildcatters, and is signing its first contracts with hospital systems and payors to provide price transparency. The software is meant to take a patient’s demographic and insurance information and predict an out-of-pocket cost for medical procedures. ClaraPrice found the DRG data for hospitals, and allows patients to get an estimate about how much their procedure might cost at an individualized level.
ClaraPrice software lives on a benefits page or hospital home page. The new executive order asking hospitals to provide more transparency presents a big opportunity for the company, who have already figured out a way to do just that.
Though the executive order calls out hospital systems as a group that has benefitted from the lack of transparency, ClaraPrice co-founder Jory Hatton says that it could actually benefit them because there will be fewer surprises and less confusion about what things cost. “Patients are happy, not confused about their bill, and are more willing to pay,” he says. People aren’t mad about paying for a Mercedes if they know they are getting top quality and have an idea about how much it will cost before they even step on the lot. Hatton thinks price transparency for healthcare will have a similar impact.
But Love says that setting the price is a complicated matter. “When hospital and payers negotiate, there is more in play than just cost,” he says. The acuity of the procedure, the type of service, and other factors have to be taken into consideration.
He also worries that the set prices will interfere with market dynamics and competition and a default rate could reduce the desire of hospitals to negotiate. “Hospitals don’t like the idea of a default benchmark rate for out-of-network services,” he says. “It may interfere with market dynamics and competition.”
Love worries that an online resource might not be able to accurately estimate the actual cost for real patients. He prefers using financial counselors and a discussion with the physician to augment any data found through software, in order to give the patient all the information they need. “We can get as many tools as possible to get people to ask the right questions, so hopefully they can take all things into consideration,” he says.
Insurers are being asked to share data they have long held secret, but Richardson-based BlueCross BlueShield of Texas released a statement saying they look froward to working with the federal government as the rules are made about price transparency. “We have reviewed the Executive Order signed by the President and support the Administration’s goal to reduce the cost of health care and improve coverage,” the company said via statement. “BCBSTX provides a suite of tools to ensure our members are equipped with meaningful, actionable information so they can make informed decisions about their health care. We look forward to sharing our knowledge and experience with federal departments over the next several months during the rulemaking process.”