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Into the woods

Health-care rule’s happily ever after by CRAIG WILSON SPECIAL TO THE DEMOCRAT-GAZETT | July 3, 2020 at 2:40 a.m.

In Disney's 2014 movie adaptation of the Broadway musical "Into the Woods," all of the fairy-tale characters have wishes, and, halfway through the story, their wishes come true. But then chaos ensues for the characters, who are driven by circumstances out of their orderly villages into the untamed forest, leaving them asking whether what they wished for was what they really wanted.

For those who have long desired health-care price transparency--and for those who are disgusted by recent reports of shocking variation in prices for coronavirus testing--the U.S. Department of Health and Human Services appeared to grant their wish in 2019 when it finalized a rule requiring hospitals to disclose insurer-specific negotiated rates to consumers. Hospitals quickly sued to block the rule, and in late June a federal judge roundly rejected arguments by the industry.

Part of a broader health-care transparency agenda, the rule is intended to further the Trump administration's goals of shedding a light on hospital prices and providing more information to consumers so they can make more informed choices. The agenda also included a requirement for drug manufacturers to disclose prices in advertisements, an action that has now been rebuffed by two courts.

Absent a successful appeal by the hospitals, at the beginning of next year each hospital must publish a data file that includes gross charges, insurer-specific negotiated rates, and the amount the hospital is willing to accept in cash from a patient for all items and services. The hospital must also display similar information in a "consumer-friendly" manner for 300 "shoppable" services that can be scheduled in advance, such as imaging and lab tests. Failure to comply may result in a $300-per-day fine.

Wish granted, right? Well, here we are, only halfway through the story.

A second rule, proposed but not finalized, would require insurers to tell patients their out-of-pocket obligations ahead of time. This is a critical piece of the puzzle if the administration's goal is informed consumers. Lacking this information, hospital groups say, consumers are likely to be confused rather than informed.

That is one reason hospitals sued. They also claimed the rule would intrude into First Amendment rights to have private conversations with insurers and would constitute an unjustifiable and overly broad requirement to disclose trade secrets that could lead to anti-competitive behavior, ultimately harming consumers.

What underlies the strong reaction by hospitals is the reality that achieving the goal of providing consumers meaningful information to make value-based health-care decisions is difficult. States, including Arkansas through its Healthcare Transparency Initiative, have been on this journey for quite a few years, and we've learned some lessons.

The first lesson is exactly what hospitals are talking about: Health-plan information about anticipated out-of-pocket costs for a consumer is needed to make price data meaningful. Patients don't pay the rates negotiated between the hospital and insurer; they only pay a portion set by their health plan.

Second, the hospital frequently provides only a portion of the services needed. Professional services provided by physicians staffing a hospital are often billed separately. Lab tests and imaging services--arguably "shoppable" services--may be provided by a facility that is not affiliated with a hospital.

The third lesson is about quality. If consumers are shopping on price alone, they may fall into the trap of assuming that a higher price means higher quality and better outcomes. In health care, that is seldom the case. Quality must be a part of the equation for consumers to make value-based versus just price-sensitive decisions.

Finally, health-care transparency tools are vital for comparison shopping. Many states have created these tools, either by using their all-payer claims databases to do it themselves or through crowdsourcing.

Under the federal rule, consumers will have to search each hospital's list of services to comparison shop, and while there are some requirements for standardization, consumers will likely find their shopping experience complex and overwhelming. Perhaps the required liberation of the data will invigorate state efforts to provide meaningful consumer-facing information and stimulate tech startups to join.

What we wished for may not be what we actually wanted. The untamed forest of information that we find ourselves in may not be as consumer-friendly as we hoped.

It doesn't mean we should stop wishing, though. We should instead cling to the goal of providing consumers with the most relevant information to drive health-care decisions and make our way out of the forest.


Craig Wilson, JD, MPA, is the director of health policy for the Arkansas Center for Health Improvement, an independent, nonpartisan health policy center in Little Rock, and administrator of the Arkansas Healthcare Transparency Initiative.


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