Employers to Leverage Hospital Price Transparency to Lower Rates

A new report shows the employers will use payer-specific negotiated rates exposed by hospital price transparency requirements to extract lower reimbursement rates from providers in their communities.

The report was created by the Center on Health Insurance Reforms (CHIR), based at Georgetown University’s McCourt School of Public Policy, and supported by the Robert Wood Johnson Foundation. It details the discussion from a meeting of 21 healthcare researchers, purchasers, and state and federal insurance regulators this summer.

“Meeting participants agreed that the new hospital and health plan transparency requirements have the potential to strengthen the market power of employers relative to consolidated hospital systems and insurers, enhance regulatory oversight, and provide researchers with an abundance of information to inform policymaking,” the report stated.

However, the hospital price transparency requirements as they stand, do not yet support the goals of employers and other healthcare purchasers, participants agreed.

Compliance with the requirements, which were enacted on January 1, 2021, is still inconsistent, if present at all. A review from the Wakely Consulting Group disbursed during the meeting found that “few hospitals had yet to publish usable data under the new federal regulations, even several months” after enactment. Furthermore, the group’s review was stymied by the lack of pricing data uniformity from hospital to hospital, among other limitations.

The review is now part of a growing body of evidence demonstrating noncompliance with hospital price transparency requirements. This noncompliance is in spite of audits being performed by CMS and the threat of penalties up to $300 per day.

Employers, researchers, and insurance regulators called for greater enforcement of the requirements, including upping the penalty for noncompliance, which CMS proposed to do following the meeting under Medicare’s Outpatient Prospective Payment System (OPPS) in 2022.

CMS has yet to make a final decision about increasing penalties for noncompliance with the requirements. However, several reports said the agency has held off on penalizing hospitals for the moment.

Beyond increased penalties, participants also recommended that CMS “reduce the current flexibility granted to hospitals on how to display the data” by requiring uniform reporting and implementing display requirements.

“Meeting participants with extensive experience navigating datasets described how federal regulators could publish guidance for hospitals (and health plans) that spells out granular reporting and display requirements. They also noted that such requirements should not be a heavy lift, as ‘the infrastructure on both sides’ exists to enhance price reporting,” the report stated.

Additionally, employers and other purchasers could use their provider or third-party administrator (TPA) contracting process to increase compliance by requiring contract signees to comply with all relevant federal and state laws, such as the hospital price transparency requirements.

They also advised federal policymakers to expand on the requirements by mandating hospitals to put Medicare rates alongside private payer rates, as well as quality scores.

More accessible, standardized, and even expanded hospital pricing information would support employer efforts to lower prices from providers, the report indicated.

“Access to the federally required pricing data could help employers work with their TPAs to develop narrow or tiered network designs, or to peg patient cost-sharing for certain elective services to a median or reference price,” it stated. “Employers are also hopeful this data will prompt TPA vendors and insurers to compete over who can extract the best prices from providers.”

Self-insured employers currently have little say in hospital price negotiations, a recent study published in the American Journal of Managed Care found. Results showed that large, self-insured employers rarely had concentrated market power in most areas and that they paid over 100 percent of Medicare rates to providers.

Hospitals have staunchly opposed the price transparency requirements set by CMS, arguing that exposing payer-specific reimbursement rates would actually hinder competition in certain markets and confuse consumers even more.