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FHC President Discusses Hospital Non-Compliance in Health Transparency Legislation

President, Freedman HealthCare, LLC

John, principal of Freedman HealthCare LLC, has 25 years of experience in performance measurement & improvement, health IT, care delivery, and health care reform. At FHC he has helped many states create all-payer claims databases, implement health insurance exchanges, and support health care transformation.

This piece on hospital price transparency non-compliance originally appeared on healthcare innovation, authored by Rajiv Leventhal.

Having hospitals and insurers disclose their prices for items and services they provide has been a key federal healthcare initiative of late, but already, reports of non-compliance have dominated much of the conversation.

As of Jan. 1, 2021, new regulations from the Centers for Medicare & Medicaid Services (CMS) mandate that hospitals make public a list of their standard charges for items and services they provide, and to update this list annually. There are two ways hospitals can satisfy this requirement: via a comprehensive machine-readable file, or through a consumer-friendly shoppable services file. Insurers must comply beginning in 2022, as outlined in the previous administration’s Executive Order, which has so far been unchanged by President Biden.

However, last month The Wall Street Journal  reported that hospitals were using special coding that shielded such pricing information from Google and other search engines. “Hundreds of hospitals embedded code in their websites that prevented Alphabet Inc.’s Google and other search engines from displaying pages with the price lists, according to the Journal examination of more than 3,100 sites,” according to that report. A separate analysis of hospital compliance, this one published in Health Affairs, found that 65 of the nation’s 100 largest hospitals were “unambiguously non-compliant” between late January 2021 to early February 2021.

This week, the Committee on Energy and Commerce penned a letter to new HHS (Department of Health and Human Services) Secretary Xavier Becerra, urging the department “to enforce the final rule to ensure hospitals are fully compliant with the disclosure requirements so that patients can readily access the price information for all items and services in an easy-to-use format. Given the widespread non-compliance by hospitals, we urge HHS to revisit its enforcement tools, including the amount of the civil penalty, and to conduct regular audits of hospitals for compliance,” the members of Congress wrote.

Across the industry, healthcare leaders have expressed their frustration with the early signs of hospital non-compliance, and some have even questioned if the federal regulations in their current form will result in the transparency that’s desired. John Freedman, M.D., president and CEO of Freedman HealthCare, a Newton, Mass.-based consulting firm, for one, notes, “It’s becoming clear that we cannot rely solely on the healthcare industry to support and report price transparency.”

Freedman, who was recently interviewed by Healthcare Innovation, asserts that a better supplemental source of data for healthcare analysts can be found in all-payer claims databases (APCDs), which are state databases that collect and aggregate healthcare claims from public and private payer sources, including Medicare, Medicaid, and private insurers. The data is culled from medical claims, pharmacy claims, dental claims, and eligibility and provider files and can be used to examine market dynamics and compare costs across counties and states. To date, 18 states have legislation mandating the creation and use of APCDs or are actively establishing APCDs, and more than 30 states maintain, are developing, or have a strong interest in developing an APCD, according to the Agency for Healthcare Research and Quality (AHRQ).

Freedman admits that he has biases when it comes to APCDs; his consulting firm supports states in planning, management and implementation of multi-payer claims databases. However, Freedman still has a great deal of experience in the industry, having been a practicing physician for more than a decade, while also running quality initiatives at organizations such as Kaiser Permanente and Tufts Health Plan. Freedman recently discussed the price transparency rules and APCDs in more detail with Managing Editor Rajiv Leventhal. Below are excerpts of that interview.

Broadly speaking, what were your overall thoughts on the price transparency rules?

It’s a really valid attempt, a step in the right direction, and well-meaning, but being done as an Executive Order may not have been the ideal way to do it. It would have been better to do it legislatively, perhaps, and it could have been rolled out somewhat differently. But all in all, I am in favor of it. At minimum, the public has a right to know these things. It’s such an obscure and obtuse industry, and all of us are interacting with [the system] all the time, even if we’re well. Most people find [navigating healthcare] to be a pain in the ass; it’s really hard, even for those working inside the industry. So this is a step—one of many—to try to get more information into the hands of consumers, and a little more pressure on our increasingly monopolistic players in this space to be able to have some kind of attention to price.

What do you make of recent reports that hospitals are being less than forthcoming with this data?

These reports are very concerning. I don’t know the motivations of folks and there could be various explanations for why this has come about, but at the end of the day, the fact is that if you’re a member of the general public, you can’t easily go on and find the information you need to find. Despite this law, there are hospitals either not posting it or posting it in a difficult manner. And that flies in the face of the spirit of the law, as well as the spirit of competition. You can’t drive around to gas stations that hide their pump prices.

It’s a real problem; I am saddened, but not shocked that the American Hospital Association has taken a formal position against [the regulation] and that unfortunately some of our leading institutions seem to be less than fully engaged. This also implies that they won’t be effective partners, either because it’s hard for them to do or because they choose not to do it. So we might then have to go to payers and tell them they are going to need to talk about exactly what they pay [hospitals] and make that public, and/or go to states and say let’s open up your APCDs, gather this data and make it available to citizens of your state so they don’t have to suffer from these crazy prices and the opacity of the existing system.

Given the way health plans are structured, there often isn’t a whole lot that can be done for the everyday consumer in terms of price shopping across the region for an operation or procedure. So how do you see these rules ultimately impacting consumers?

This an excellent question. The reality is there’s a limit to how much you can shop. Going back to the metaphor of buying gasoline, it’s easy because it’s a commodity and healthcare is not. There are certain things in healthcare, however, that are absolutely shoppable that people do—anything from drug prices to an imaging study that’s not an emergency, to something like finding a podiatrist or dentist. Those things can and should be shopped. But so much of medical care is not shoppable and immune to transparency as a cost containment method. So if you really want to save money on open heart surgery, transparency won’t be your best bet for doing that because people will go where they feel the care is best, where they feel trust, and they won’t shop around. So for total healthcare expenditures, a lot of it is not shoppable, and as a result of that, transparency is a useful step but far from a sufficient answer to the question of cost.

You touted all-payer claims databases as a data source that offers more transparency than what hospitals are being asked to publish themselves. Can you explain this sentiment further?

Remember, I make a living helping states run these [databases], so my bias is disclosed. With APCDs, you have in there the actual record of what service was done, by whom, and how much they got paid by that insurance company. You have the actual data there, so if states are willing to open that up, you can make a treasure trove of this data available. Transparency is a useful tool for this, but it won’t solve all of our problems. APCDs are a neutral third party being run by data professionals at a state, so there are people who are scrutinizing the submissions coming in from the insurance companies to make sure they are complete, cross-checked, and accurate. So you don’t get this situation like we do under this current executive order where people aren’t complying or it’s hard to find it. You can do it in a standardized way, so that’s one big advantage.

What’s preventing further rollouts in states that don’t have APCDs?

Roughly half of the states either have them or are in the process of building one. Almost all of them are mandated, with a few specific exceptions. But almost all require that if you’re an insurance company, you must hand us this data. One barrier is cost; they cost in the millions of dollars to run annually. As a fraction of healthcare spending in a state, it’s in the ballpark of .01 percent of healthcare spending, but for state governments that are always struggling for money, that’s a concern sometimes. The recently passed No Surprises Act includes $2.5 million for funding for every state that wants it, to get themselves up and running. That covers a substantial portion of getting started.

The other barrier is a legal one. Commercial health insurance falls into two buckets: fully insured, which is regulated by the state, and self-insured that’s covered under ERISA [the Employee Retirement Income Security Act of 1974] and exempt from state regulation. Under a Supreme Court hearing in 2016, the court ruled that states could not compel ERISA plans to turn over data about their enrollees. And that’s roughly half of all commercial enrollees, so it’s a real problem for data collection. Fortunately, there is now a pathway to rectify that. There will now be a national data standard for submitting claims to the APCD; in fact, they just announced the formation of the committee which has until June to come up with a national standard to then come up with a pathway to collect all of that data.

How do you see this all playing out in the near future?

This will put more pressure on the hospitals, who I believe should feel embarrassed by these reports of [non-compliance], and they will either decide to step up their game or not. To not be able to gather the data about these enormously important things is no longer acceptable. It’s taken us 15 to 20 years to get us around 25 states with APCDs; I have a feeling we will be at around 40 in three years. We’re at a real tipping point where folks realize there’s no way you can be a governor, legislature, or public health official, and not have this information available to you to take care of your citizenry.

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Want to learn more about how states around the country are using their APCDs to achieve better health outcomes in their communities? Check out our website and find our solutions here.

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