The Trump administration, hungry to notch a win on healthcare prior to the 2020 election, continues to push ahead on initiatives designed to reign in healthcare costs. We applaud these efforts and are disappointed and dismayed by those in the healthcare industry opposed to these undertakings.
Announced November 15, the White House’s price-disclosure initiative would most certainly upend the $3.5 trillion healthcare industry. In fact, the requirements called for, by executive order, are far more extensive than many industry experts predicted. Somewhat expectedly, they have drawn the ire of hospitals and healthcare delivery providers caught in its crosshairs.
The Executive Order On Healthcare Transparency
Issued jointly by the Department of Labor (DOL), Department of Health and Human Services (HHS) and the Treasury Department, the proposal imposes new transparency requirements on group health plans and health insurers in both the individual and group markets.
In the simplest of terms, the proposed rule will force hospitals and insurers to disclose the highly secretive rates they negotiate with each other for an extensive list of services, including doctor and facility fees, supplies, and even drug costs.
The rule even stipulates that these disclosed rates will have to be published in computer-friendly files formats. Insurers would also be required to provide transparency tools to consumers, allowing them to obtain cost information prior to receiving care. Once public, it wouldn’t be long before consumers could easily access and compare pricing across multiple providers – the holy grail for advocates of consumer-driven healthcare.
According to the rule, hospitals will have to publish negotiated prices for 300 specific procedures. Seventy of those services are specified in the rule (such as colonoscopies and hip replacements), while hospitals will be able to choose the other 230 “shoppable services” for which they disclose pricing. (The rule defines shoppable services as “services that can be scheduled by a healthcare consumer in advance such as x-rays, outpatient visits, imaging and laboratory tests or bundled services.”)
As consumers of healthcare are becoming aware (not the least of which include employers who provide healthcare), prices charged for medical services vary widely from one provider to the next, even in the same geographic region. Prices also differ considerably based on if a provider is considered “in-network” or “out-of-network”, as defined by the patient’s insurance plan.
According to Clear Health Costs, which publishes health cost data, a lower back MRI costs $141 at an imaging center in Jefferson, Louisiana but nearly 54 times more ($7,646) at a hospital in Torrance, California. Is it any wonder then that such disparity in pricing has placed a target on the backs of these providers?
We Fully Support Price Transparency (And You Should Too)
We are 100% in support of these efforts to bring price transparency to healthcare (which includes the pharmaceutical industry, though we’ll leave that for another day). That’s why we are particularly disappointed by a suit filed last week by the American Hospital Association and other groups to stop the Trump administration’s price transparency rule.
Their argument includes a laundry list of objections which include; the cost and burden of compliance, regulatory overreach, and a violation of the First Amendment (by provoking compelled speech).
While there may be merits to some or all of those, what we find most preposterous is the argument they are making that “this rule will lead to widespread confusion” amongst patients. That’s according to Rich Pollack, President and CEO of the AHA.
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The suit goes on to claim that rather than bringing down prices, the rule will have the opposite effect, causing competitors to increase prices to match their rivals, to a point where consumers will decide against receiving care.
Associations and special interest groups such as the Rural Hospital Coalition, the Association of American Medical Colleges and the Federation of American Hospitals piled on, speculating about unintended industry price fixing and the dangers of providing cost data without corresponding data indicating quality of care.
Voltaire, Confucius and Shakespeare Had It Right All Along
All of this, in our opinion, is hogwash. We are hard pressed to think of a single industry where pricing transparency didn’t only radically alter but also vastly improve an industry, in many cases for consumers and providers alike.
Consider the way we now buy cars, purchase air travel, book hotels, and shop for new homes, just to name a few transformed industries which immediately come to mind. All of these industries historically shared at least one thing in common – an unequal balance of power between buyer and seller in terms of pricing, product/service specifications, and quality/satisfaction scores.
In all of these industries, technology, in the form of online payments, ecommerce shopping platforms, comparison tools, and consumer ratings/ reviews engines, brought about radical change and leveled the playing field. And in all cases, I think it fair to say, a far better consumer shopping experience was born.
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It should also be noted that in none of those industries were providers so decimated that it destroyed an industry, nor led to price fixing, or paralyzing consumer confusion and discord. Quite the contrary.
While some of the advancements in these industries took longer to come about than others (reliable quality scores and verifiable consumer ratings/reviews comes to mind), having all these features in place prior to launch was not a prerequisite for transformation and long term success.
The adage “don’t let the perfect be the enemy of the good” is quite fitting here. While that’s attributed to Voltaire, Confucius agreed, stating “better a diamond with a flaw than a pebble without”, while Shakespeare wrote “striving to better, oft we mar what’s well”.
While there is a 60-day public comment period on the proposal, we are hopeful the Trump administration stays the course and implements this sweeping change in healthcare price transparency.