By Julie Appleby, Kaiser Health News
Anyone who has tried to “shop” for hospital services knows one thing: It’s hard to get prices.
President Donald Trump on Monday signed an executive order he said would make it easier.
The order directs agencies to draw up rules requiring hospitals and insurers to make public more information on the negotiated prices they hammer out in contract negotiations. Also, hospitals and insurers would have to give estimates to patients on out-of-pocket costs before they go in for nonemergency medical care.
The move, which officials said will help address skyrocketing health care costs, comes amid other efforts by the administration to elicit more price transparency for medical care and initiatives by Congress to limit so-called surprise bills. These are the often-expensive bills consumers get when they unwittingly receive care that is not covered by their insurers.
“This will put American patients in control and address fundamental drivers of health care costs in a way no president has done before,” said Health and Human Services Secretary Alex Azar during a press briefing on Monday.
The proposal is likely to run into opposition from some hospitals and insurers who say disclosing negotiated rates could instead drive up costs.
Just how useful the effort will prove for consumers is unclear.
Much depends on how the administration writes the rules governing what information must be provided, such as whether it will include hospital-specific prices, regional averages or other measures. While the administration calls for a “consumer-friendly” format, it’s not clear how such a massive amount of data — potentially negotiated price information from thousands of hospitals and insurers for tens of thousands of services — will be presented to consumers.
“It’s well intended, but may grossly overestimate the ability of the average patient to decipher this information overload,” said Dan Ward, a vice president at Waystar, a health care payments service.
So, does this new development advance efforts to better arm consumers with pricing information? Some key point to consider:
Q: What does the order do?
It may expand on price information consumers receive.
The order directs agencies to develop rules to require hospitals and insurers to provide information “based on negotiated rates” to the public.
Currently, such rates are hard to get, even for patients, until after medical care is provided. That’s when insured patients get an “explanation of benefits (EOBs),” which shows how much the hospital charged, how much of a discount their insurer received and the amount a patient may owe.
In addition to consumers being unable to get price information upfront in many cases, hospital list prices and negotiated discount rates vary widely by hospital and insurer, even in a region. Uninsured patients often are charged the full amounts.
“People are sick and tired of hospitals playing these games with prices,” said George Nation, a business professor at Lehigh University who studies hospital contract law. “That’s what’s driving all of this.”
Some insurers and hospitals do provide online tools or apps that can help individual patients estimate out-of-pocket costs for a service or procedure ahead of time, but research shows few patients use such tools. Also, many medical services are needed without much notice — think of a heart attack or a broken leg — so shopping simply isn’t possible.
Administration officials say they want patients to have access to more information, including “advance EOBs” outlining anticipated costs before patients get nonemergency medical care. In theory, that would allow consumers to shop around for lower cost care.
Q: Isn’t this information already available?
Not exactly. In January, new rules took effect under the Affordable Care Act that require hospitals to post online their “list prices,” which hospitals set themselves and have little relation to actual costs or what insurers actually pay.
What resulted are often confusing spreadsheets that contain thousands of a la carte charges — ranging from the price of medicines and sutures to room costs, among other things — that patients have to piece together if they can to estimate their total bill. Also, those list charges don’t reflect the discounted rates insurers have negotiated, so they are of little use to insured patients who might want to compare prices hospital to hospital.
The information that would result from Trump’s executive order would provide more detail based on negotiated, discounted rates.
A senior administration official at the press briefing said details about whether the rates would be aggregated or relate to individual hospitals would be spelled out only when the administration puts forward proposed rules to implement the order later this year. It also is unclear how the administration would enforce the rules.
Another limitation: The order applies only to hospitals and the medical staff they employ. Many hospitals, however, are staffed by doctors who are not directly employed, or laboratories that are also separate. That means negotiated prices for services provided by such laboratories or physicians would not have to be disclosed.
Q: How could consumers use this information?
In theory, consumers could get information allowing them to compare prices for, say, a hip replacement or knee surgery in advance.
But that could prove difficult if the rates were not fairly hospital-specific, or if they were not lumped in with all the care needed for a specific procedure or surgery.
“They could take the top 20 common procedures the hospital does, for example, and put negotiated prices on them,” said Nation at Lehigh. “It makes sense to do an average for that particular hospital, so I can see how much it’s going to cost to have my knee replaced at St. Joe’s versus St. Anne’s.”
Having advance notice of out-of-pocket costs could also help patients who have high-deductible plans.
“Patients are increasingly subject to insurance deductibles and other forms of substantial cost sharing. For a subset of so-called shoppable services, patients would benefit from price estimates in advance that allow them to compare options and plan financially for their care,” said John Rother, president and CEO at the advocacy group National Coalition on Health Care.
Q: Will this push consumers to shop for health care?
The short answer is maybe. Right now, it’s difficult, even with some of the tools available, said Lovisa Gustafsson, assistant vice president at the Commonwealth Fund, which has looked at whether patients use existing tools or the list price information hospitals must post online.
“The evidence to date shows patients aren’t necessarily the best shoppers, but we haven’t given them the best tools to be shoppers,” she said.
Posting negotiated rates might be a step forward, she said, but only if it is easily understandable.
It’s possible that insurers, physician offices, consumer groups or online businesses may find ways to help direct patients to the most cost-effective locations for surgeries, tests or other procedures based on the information.
“Institutions like Consumer Reports or Consumer Checkbook could do some kind of high-level comparison between facilities or doctors, giving some general information that might be useful for consumers,” said Tim Jost, a professor emeritus at the Washington and Lee University School of Law.
But some hospitals and insurers maintain that disclosing specific rates could backfire.
Hospitals charging lower rates, for example, might raise them if they see competitors are getting higher reimbursement from insurers, they say. Insurers say they might be hampered in their ability to negotiate if rivals all know what they each pay.
“We also agree that patients should have accurate, real-time information about costs so they can make the best, most informed decisions about their care,” said a statement from lobbying group America’s Health Insurance Plans. “But publicly disclosing competitively negotiated, proprietary rates will reduce competition and push prices higher — not lower — for consumers, patients, and taxpayers.”
Kaiser Health News (KHN) is a national health policy news service. It is an editorially independent program of the Henry J. Kaiser Family Foundation which is not affiliated with Kaiser Permanente.
