photo by Pixabay (via Pexels)
When someone begs you not to let them make more money, it is worth taking a second – or third – look at the situation. Hospital trade groups’ reaction to a plan to make pricing more transparent is a case in point.
A newly proposed rule from the Trump administration would require hospitals to disclose how much they charge for all procedures, tests and supplies. This would not only include the list price – which hospitals already must disclose – but the negotiated rates facilities charge various insurers. Centers for Medicare and Medicaid Services Administrator Seema Verma told journalists that the proposal would require hospitals to publicize gross charges before discounts, as well as the insurer-specific negotiated charges, labeled by company and insurance plan.
The rule is part of implementing an executive order that President Trump signed earlier this year, which was meant to bring greater transparency to health care pricing. The theory is that patients will be able to shop around for cost-effective care, or at least make more informed decisions. All hospitals that accept Medicare, as well as some others, would be subject to the rule. Hospital subsidiaries, such as outpatient clinics, would also be affected. If completed, the new rule will take effect in January.
Overall, it’s a good idea. Of course it’s likely to inject competition into some corners of the health care market. While competition generally pushes prices down, not everyone sees it that way. Matt Eyles, CEO of America’s Health Insurance Plans, argued that patients will suffer if this rule takes effect. In a statement, Eyles said, “Multiple experts ... agree that disclosing privately negotiated rates will make it harder to bargain for lower rates, creating a floor – not a ceiling – for the prices that hospitals would be willing to accept. Publicly disclosing competitively negotiated, proprietary rates will push prices and premiums higher —not lower— for consumers, patients, and taxpayers.”
Hospital trade groups, too, have argued that transparency will raise prices. The American Hospital Association noted that the plan could “seriously limit the choices available to patients” as costs rise. In other words, if you believe the hospital trade groups that will fight this with every ounce of political strength they can muster, their argument boils down to this: “We’re going to make a lot more money if you make us disclose our secret pricing, so please, please, PRETTY PLEASE don't make us do it!”
Call 911, because somebody’s pants are on fire.
It is worth noting that insurance companies are absolutely not the only ones who pay the discounted prices hospitals and insurers negotiate in secret. Consumers pay those same prices when they have not fulfilled their annual deductibles, which can be $10,000 or more for a family. They pay a share of those prices when they have co-payments based on a percentage of the negotiated price. The federal government bears part of the cost, too, because it allows consumers to make those payments via tax-sheltered health savings accounts. The more money consumers must put in those accounts – up to the annual limits – the more tax revenue the government sacrifices to meet those deductibles and co-payments.
Will hospital groups raise their price demands for insurers when they see competing hospitals getting higher rates? In many places, the appropriate question would be: What competing hospitals? Consolidation of institutions and medical practices has advanced to the point, in many markets and for many specialties, that a particular hospital may be the only game in town. And while an MRI may be orders of magnitude cheaper in Louisiana than in California, most patients are unlikely to travel cross-country for routine medical procedures, even “shoppable” ones. In cases when patients do have the ability and inclination to comparison shop, it will remain extremely challenging due to all the variables affecting what an individual patient pays.
This brings us back to the effect of removing secrecy from insurers’ negotiated rates. No insurance company can afford to pay more than its competitors for access to the same group of practitioners. Transparency means the price negotiated by the biggest player in the local insurance market is likely to become the price for everyone else. UnitedHealthcare isn’t going to pay a higher rate just because Don’s Dandy Doctor Insurance Co. had to do so for its tiny customer base.
As I have often said, my guiding adage is to ignore what people say and watch what they do. If hospitals are going to fight transparency this hard, it isn’t because it’s going to make them more money. We can draw the appropriate conclusions ourselves.