Price Transparency in the Healthcare Market

Morgan Muir, Esq.Consortium Graduate Research FellowUC Hastings 2012

Stephanie Alessi Consortium Research AssistantJD Candidate, UC Hastings 2013Price Transparency in the Healthcare Market1Price Transparency in the Healthcare MarketThe Problem

What is Price Transparency?

3 Levels

5 Barriers

2 Existing Initiatives2What is Price Transparency?

Price transparency would make publically accessible the prices paid to providers by insurance companies.Private negotiations & gag clauses prevent transparencyGoal: price transparency would reveal prices to both individual consumers, employers, and competitor-providers such that the healthcare market would self-regulate by facilitating healthy competition.3Different Levels of Price TransparencyContract PriceTermsBetween insurers and providers, mandating disclosure of contract price terms is one way to create transparency. 4Different Levels of Price TransparencyHealth PlanSelectionInsurer-ProviderContract InformationBetween insurers and consumers, a transparency mandate could include transparency initiatives at multiple intervals. In selecting a health plan, the ability of consumers to assess the different pricing structures on different plans within various insurance companies before becoming a member will be essential. Once in a plan, disclosure of insurer-provider contractual terms can assist consumers in provider selection. 5Different Levels of Price TransparencyReimbursementRatesA transparency initiative between providers and consumers may look similar to that at the insurer-consumer level, but, to allow consumers to compare provider prices as part of the decision-making process, it should also make transparent the amounts that each provider will be reimbursed and that a consumer is expected to cover.6A Difference of Opinion

7Barriers to Price Transparency

Contractual BarriersPrice as Trade SecretK Barriers: While some existing price transparency initiatives circumvent these contractual obligations by disclosing cost ranges or gross prices, these figures are not specific enough to be useful for consumers in making decisions about where and from whom to receive healthcare.must-have providers have the most bargaining leverage but price transparency would allow competitor-insurers to know the prices those providers are charging other insurance companies, thereby leveling the playing-field at the bargaining table.Depends on type of market: high-competition market will work, otherwise dominant providers may just get together to raise prices together.Include quality transparency so that (1) providers will have to prove their quality is equal to their reimbursement rate, and (2) so consumers will be able to match quality with price when choosing health plans and providers.Trade Secret barriers: Price information as trade secretTrade Secret Law is a state law. In California, which has adopted the California Uniform Trade Secrets Act (CUTSA), for information to qualify as a trade secret it must be a competitive advantage to its owners to keep the information secret; and owners of the information must make an effort to maintain its secrecy.Unanswered: non-healthcare cases have recognized price as trade secret, as have unpublished court opinions in the healthcare/hospital pricing context. But the specific question has not been addressed in a published opinion.Acquiring price information from government agencies -- Intentional disclosure of proprietary pricing information by a state agency is governed by the California Public Records Act (CPRA). The CPRA provides that public records are open to inspection by members of the public, unless exempted by law, and must be made promptly available upon request. The law allows individuals to bring actions to enforce disclosure of information if they feel it has been wrongfully withheld. Gov. Code 6250-76.48; see also San Gabriel Tribune v. Superior Court, 143 Cal. App. 3d 762, 772 (1983). Because the CPRA was modeled after the Freedom of Information Act (FOIA), 5 U.S.C. 552, federal case law can be relied upon to interpret and apply the CPRA. 3 exemptions that require disclosure: public insurance (Medi-Cal) 3-yrs post-Kcatchall exemption protects confidential information if the public interest is served by not disclosing the record clearly outweighs the public interest served by disclosureCity ordinance preemption?8Other Barriers

Provider Resistance: Aetnas website states that this is why they cant provide more accurate price information.Questionable consumer usage: If consumers will not comparison-shop for their healthcare like they do for other consumer products, making healthcare prices readily available to consumers will have little or no effect on healthcare spending. Complex billing practices and cost-shifting: The complex series of cost-shifts in the healthcare industryfrom the insurer through multiple providers to the consumeralso contributes to potential difficulties in obtaining complete price information. For hospital procedures, both in- and out-patient services, the billing passes through multiple providers, e.g. the anesthesiologist, surgeon, and the hospital.9Current Transparency Initiatives

Payers Bill of Rights -- requires each hospital to disclose their average billed charges for the twenty-five most common inpatient and outpatient procedures to the Office of Statewide Health Planning and Development (OSHPD). Any person who believes a hospital is in violation of the Payers Bill of rights may file a claim with the California Department of Public Health (CDPH), which investigates such claims to determine whether a violation has occurred. So far, little to no observable effect...bc patients dont pay the chargemaster price, unless they are a HDHP, and those prices are not specific to particular health planspoor explanation of chargemaster prices such that they are undecipherable to consumersNo comparable quality dataso even if you know what it costs, you cant tell how good the doctor isCal Hospital CompareA second transparency initiative is California Hospital Compare, a website launched by the California Healthcare Foundation, in partnership with the University of California, San Francisco, and the California Hospitals Assessment and Reporting Taskforce (CHART) to compare hospital quality information. This website includes ratings for clinical care, patient safety, and patient experience for over 230 hospitals who voluntarily self-report quality measures related to the most common procedures. The inverse of the price data available on OSHPDs website, the quality data presented on CalHospitalCompare.org are not linked to price data.10Implementing Price Transparency11Two Step ProcessBreak down market leverage

Disclose both price and quality information12The Problem of Hospital NetworksBerenson StudyMust-have providers13Which Stakeholders to Target?-hospital networks-providers-insurers-employers-individuals14Four SolutionsAntitrust Litigation + Legislation

Independent Healthcare Market Regions

Employer-Led Leverage Flip

Exchange Certification15