Tensions between employer and hospital rise over price transparency

Employers offering health insurance coverage are closely scrutinizing hospital pricing data to get better prices for their employees, creating tension with hospitals.

Hospital spending accounted for the largest share of national health spending at $1.3 trillion in 2020, with employers paying much of the nearly $409 billion spent by private insurers, according to the most recent report. data from the Centers for Medicare & Medicaid Services.

Data showing that employers pay hospitals significantly more than Medicare pays is resulting in employers putting pressure on hospitals to control their prices. Employer health plans and health insurers are now required to make their negotiated prices with hospitals public, increasing pressure on employers to get the best prices for their employees’ coverage. That is leading to friction between hospitals and companies, as a showdown between employers and hospital groups in Indiana shows.

“As we continue to release this information to the public, employers understand it,” Marilyn Bartlett, senior policy researcher at the National Academy of State Health Policy, said in an interview. “The more transparency we get, the more this pushback will come.”

Five hospitals leave Indiana Employers Group

In Indiana, a state where Rand Corp. reports Because employers pay some of the highest costs in the country related to Medicare, five hospital systems have dropped out of the Indiana Employers’ Forum since 2020, Gloria Sachdev, president and CEO of EFI, said in an interview. The hospitals say they didn’t abandon EFI because of the reports, but because EFI is pushing policies that the hospitals believe are too strict for government control.

EFI launched the Rand Reports in 2017 with financial assistance from Arnold Ventures and the Robert Wood Johnson Foundation, and the reports have consistently shown that employers in the US pay on average more than 200% of what Medicare pays to hospitals. .

Sachdev Author an opinion piece for the Indiana Business Journal in May on Rand’s findings showing Indiana employers paid the fourth highest hospital prices in 2020 at 329% of Medicare rates, and the fourth lowest prices for medical services at 126% of Medicare rates. He urged the state legislature to implement price caps for inpatient and outpatient hospital services.

As of 2020, Parkview Health in Fort Wayne has abandoned EFI, followed by Community Health Network in 2021, hospitals that were among the most expensive in the state, Sachdev said. In 2022, Indiana University Health, the state’s largest hospital system, as well as the Franciscan Alliance and Ascension, will also leave EFI, he said.

Price transparency studies resulted in health insurer Anthem renegotiating its Parkview Health contacts, Sachdev said.

The hospital discharges reduced EFI’s fees by $50,000, less than 5% of its budget, Sachdev said.

‘Advocate for affordability’

“They are not happy with the policy work because we are advocating for affordability and the results of the Rand studies,” Sachdev said, referring to the hospitals’ reaction to EFI. “We are committed to price transparency.

EFI has advocated for policy changes in the state legislature, helping to pass legislation that restricted surprise billing, banned gag clauses under which providers and insurers agreed not to disclose negotiated rates, and required charge estimates. in good faith, Sachdev said. But EFI’s efforts to prevent hospitals from charging more for services provided in hospital settings than would be charged for the same service in a doctor’s office have stalled after hospitals backed off, he said.

On July 1, health insurers and employer-sponsored health plans were required to publish all of their health care data at negotiated prices under the coverage transparency rule (ALSO 1545-BP47), Sachdev noted. “Pricing transparency is here. They just need to accept it,” he said of the hospitals. “Employers and business coalitions will use price transparency more and more in the future.”

Brian Tabor, president of the Indiana Hospital Association, said in an interview that Indiana hospitals didn’t abandon EFI because of Rand’s findings. He cited an EFI to study of most Indiana hospitals in September 2021 and found that the median score for meeting hospital transparency requirements was 6.72 out of 8, with 8 being the best score.

Spokespeople for Indiana University Health and Parkview said in emails that they left EFI primarily because they found the employer group was not making progress in improving health care in Indiana.

“All hospitals want to work more closely with employers” to cut costs and improve quality, Tabor said. However, “the Forum is no longer an effective convener in a collaborative way,” he said.

“It’s Not About Rand”

“This is not about Rand,” Tabor said of the hospitals’ decision to leave EFI. He blamed EFI for a “strident tone, and I would say a very limited, if not singular, focus on hospitals as the only ‘problem’ in health care.”

Fast-growing specialty drugs and drug prices are also a significant part of health care costs, said Tabor, author of an opinion part in the Indianapolis Business Journal in July, taking issue with Sachdev’s call for site-neutral payments in which the same amount is paid for a service or procedure, regardless of where it is performed.

There are “many sites of care that exist in rural and underserved communities across the state, where it would not be economically viable to operate a doctor’s office,” such as outpatient clinics that provide oncology services, he said. “Given the fees the government pays for those services, if it wasn’t part of the hospital, and subject to all the regulations and costs like those clinics are if they’re hospital-based, those services couldn’t be provided.”

Tabor argued that Indiana’s low payments to doctors are a “distortion” that “is not the fault of the hospitals. Hospitals are subsidizing doctors because commercial payers in Indiana pay them so poorly.”

EFI should use the Rand and other data to help companies create tiered or tight networks that give beneficiaries incentives to use high-value medical providers and establish direct contracting agreements between employers and providers, Tabor said. The Parkview spokeswoman said the hospital has implemented direct employer health care agreements.

“The Forum has gone from being an advocate for transparency to advocating much tougher government solutions,” said Tabor.

Tabor also criticized Hoosiers for Affordable Healthcare, a group that advocates for lower hospital prices in Indiana, of which Sachdev is vice president. H4AHC has partnered with EFI in “attacks on hospitals while rejecting transparency requirements for insurance companies,” Tabor said in her July 1 editorial in the Indiana Business Journal.

“All it wants to do is take attention away from the problem,” Al Hubbard, president of H4AHC, said in an interview. “All of these hospitals have billions of dollars in the bank that they just invest in the stock market, in private equity, in venture capital. The conclusion is that they charge more. Indiana hospitals should lower their prices to the national average or below, he said.

Hospital fact sheets published on the H4AHC website shows rates for seven Indiana hospitals that are higher than the national average hospital prices, as well as high profits, cash, and investments.

Houston group approaches

Employer and hospital groups are grappling with similar concerns in Texas.

Chris Skisak, executive director of the Houston Business Coalition on Health, said he reached out to health insurers and area hospitals in 2021, mostly to no avail, to discuss why hospital prices are so high relative to Medicare rates.

“There’s a lot of pushback” from them about price discrepancies between employers and Medicare, Skisak said. However, the coalition is in talks with St. Luke’s Health, one of the big three health care systems in the Houston area, he said.

Vivian Ho, professor of health economics at Rice University, sent a letter July 18 to the Texas House Select Committee on Health Care Reform, showing lower profit margins at St. Luke’s in 2020 than the other large systems. “Employers and their workers are bearing the financial brunt of the high hospital prices that drive these profit margins,” he said.

Douglas Lawson, CEO of St. Luke’s Health, said in an interview that the cost of labor has increased significantly in the last two years due to Covid-19, which “has put a lot of pressure on us on the rates to be much more thoughtful and, frankly, careful in what we negotiate with the payer community.”

Lawson wrote a Article in the Houston Chronicle on July 3 saying that “patients receiving care at St. Luke’s Health System, including Baylor St. Luke Medical Center, pay the most affordable rates in the area.”

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