Transparency Data is Often Missing, Incomplete, Deloitte Finds | Deloitte US has been saved
By Christi Skalka, managing director, and Chris Murray, senior manager, Deloitte Consulting LLP
Nearly two years have passed since the Centers for Medicare & Medicaid Services (CMS) began requiring hospitals and health systems to display negotiated prices for “shoppable services” in a user-friendly format.1 A similar rule, which went into effect July 1 (after a six-month delay), requires health plans to post the rates they have negotiated with clinicians, hospitals, health systems, laboratories, imaging companies, and other entities.2 Health plans will also be subject to additional requirements—such as providing members with online tools to enable price shopping—in 2023 and 2024. (See our 2021 report on the Transparency in Coverage rule.) Both rules are aimed at pulling back the curtain on prices that providers and payers have long considered to be proprietary.
Our team has been digging through mountains of machine-readable files and pricing data. So far, the volume of information is both overwhelming and substantively incomplete. Over the next couple of years, however, we expect the transparency rules will dramatically alter the competitive landscape. Health care payers and providers should prepare now for a new era of consumerism where they will compete on price, quality, and access.
Price transparency has long been the Holy Grail of health care (see New and future transparency rules could push health plans and health systems to collaborate). Unlike virtually every other consumer market, the prices for health care products and services are typically shrouded in mystery and often presented months after care was provided. As a result, prices can vary widely among hospitals—even those that are in the same geography. Moreover, negotiated contracts can mean every health plan pays different prices for identical services at the same facility performed by the same clinicians. Negotiated rates are not tied to outcomes or value. Rather, they tend to reflect which entity (the health system or health plan) was most successful at the negotiating table.
The price transparency regulations have twin intentions: (1) to boost market competition among hospitals and health systems and, ultimately, drive down prices; and (2) to provide consumers with the information needed to make informed decisions.3 While consumers, regulators, employers, and the broader ecosystem are demanding more information around health care prices, it could be several years before consumers are able to comparison shop. We expect the transparency rules, along with new interoperability rules, could eventually lead to less price variation among health care providers, improvements in market differentiation, and shift to value-based care (see our blog on the Final interoperability rules). This outcome lines up with Deloitte’s vision for the Future of Health.
Health plans are having similar challenges
After sifting through machine-readable files, we determined that the data provided by health plans is inconsistent and often inaccurate or incomplete. We did some work with one health system and determined that prices submitted by one of its health plans—for one service line—were up to 10 times the actual negotiated rate. Additionally, only a portion of the services they had negotiated were included in the file. These are issues that should be identified and resolved in the monthly reporting required of health plans under the Transparency in Coverage rule.
The challenges in reporting health care pricing in a machine-readable format was not unexpected. Pricing for ancillary services like laboratory and radiology is generally straight forward and maintained in fee-schedule or unit-cost-based pricing structures. More complex services, like surgical procedures and inpatient stays, are often priced based on acuity. The price might reflect the number of procedures performed, the length of stay, the type of implants, and/or the drugs required. The price might also factor in the level of care required given the morbidity of the patient. This pricing is not conducive to a matrix-like reporting structure. These issues will likely be resolved over time, which will mean a more accurate and fair representation of health care prices across the ecosystem.
While there are clear challenges with implementing the new reporting standards, we are energized by the breadth and depth of this data. With unit prices now available for institutional and professional services across all sites of service (and paired with utilization data), we can begin to compare the cost of care within and across markets to improve decision-making for all stakeholders in the health care ecosystem.
Inflation could push insurance costs higher in 2024
Providers and health plans are expected to eventually use the new pricing information during contract negotiations. This application of the data could change the dynamics in contract negotiations over the next few years.
Several high-profile contract disputes between health plans and large health systems have been in the news lately.4,5 This trend could continue if providers and plans struggle to share rising medical and pharmaceutical costs. Depending on the region of the country, hospitals and health systems are dealing with inflation rates of between 10% and 25%, according to our estimates. This near-record inflation is being driven by rising drug prices, high occupancy rates, a still-unreliable supply chain, and growing labor costs.6
Rising costs on the provider side are putting pressure on health plans, which generally have already set their rates for the 2023 plan year.7 We don’t expect insurance coverage costs will increase significantly in the near term, but they likely will over the next two years. However, given the tight labor market, we expect some employers will try to absorb at least some of those costs rather than pass them on to workers. Some employers might switch benefits or carriers to help minimize rate hikes. As transparency data becomes more accessible, employers could use it to make coverage decisions. Moreover, innovative benefit design could be used to drive employees to high-value services, and power tools to support employee decision-making.
360 degrees of transparency
The machine-readable file data being released by hospitals, health systems, and health plans was never intended to be used directly by consumers. One stated intention of the transparency regulations was to encourage data disruptors to enter the market and figure out creative ways to transform the data into something that consumers can access and use. “We continue to believe that the use of a third-party tool would enhance public access to pricing data,” CMS noted in its final rule.8
There is a fair amount of skepticism that transparency data will have an impact on consumer behavior anytime soon. That outcome is likely still several years away. Some CFOs tell us that they don’t think price transparency will ever change consumer behavior. However, our consumer survey found that a majority of people would use a tool that aggregated their likely out-of-pocket costs for health services. However, such a tool would need to be contextualized with quality, conveniency, coverage, and user reviews.
Given the state of transparency—and the clear market forces driving increased competition and appetite for informed decision making by employers and patients—many health systems and health plans are making a series of no-regret moves to prepare for a possible future of 360 degrees of transparency including:
We acknowledge that pricing transparency might be a long–term evolution. However, preparing for a future where consumers are at the center of the health care ecosystem, are informed about cost in their care decisions, and have trust in the health care system is a future worth striving for.
Latest news from @DeloitteHealth
1 Price Transparency Requirements for Hospitals to Make Standard Charges Public, Federal Register, November 27, 2019
2 Transparency in Coverage proposed rule, Federal Register, November 27, 2019
3 Price Transparency Requirements for Hospitals to Make Standard Charges Public, Federal Register, November 27, 2019
4 450,000 North Texans could lose in-network coverage as Blue Cross contract negotiations continue, KERA News, September 22, 2022
5 Johns Hopkins warns it may split with CareFirst, Maryland’s largest insurer, Baltimore Sun, September 8, 2022
6 Providers, insurers poised for 'bloody' negotiations amid inflation, Modern Healthcare, June 28, 2022
7 Inflation-dogged health systems confident payers will concede higher rates in 2023 contract negotiations, Fierce Healthcare, July 29, 2022
8 Hospital price transparency frequently asked questions, CMS, May 6, 2022
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