Last Tuesday, bipartisan leaders of the House Energy and Commerce Committee sent a letter to HHS Secretary Xavier Becerra calling for action on hospital price transparency: “We are concerned about troubling reports of some hospitals either acting slowly to comply with the requirements of the final rule, or not taking any action to date to comply”.
Citing studies by Millman, Hilltop Institute and others showing that the majority of hospitals are non-compliant and an investigative report by the Wall Street Journal that found some high-profile hospitals had used blocking codes to shield consumer access to prices (see Fact File), the letter closed “We urge HHS to revisit its enforcement tools, including the amount of the civil penalty ($300 per day), and to conduct regular audits of hospitals for compliance. We also request a staff briefing on the implementation of the final rule and on the agency’s audit of hospitals’ compliance with the final rule.”
Price transparency is not a new issue for hospitals. But the complexity, timing and apparent bipartisan support for Congressional Action is unprecedented.
To be compliant, hospitals’ files must be machine-readable and contain the gross charge, discount cash price, payer-specific negotiated charges, de-identified minimum and maximum charges, and descriptions of, and codes for the 300 shoppable services including 70 that are standard for all hospitals. For the payer-specific negotiated charges, hospitals must reveal both the name of the payer and plan. The final rule, known as “Price Transparency Requirements for Hospitals to Make Standard Charges Public,” was a significant shift from the previous price transparency regulation that only required hospitals to post their chargemasters online. But the complexity for complying far exceeds previous requirements.
The precursor to the CY 2020 Hospital Outpatient Prospective Payment System (OPPS) Policy Changes: Hospital Price Transparency Requirements (CMS-1717-F2) was President Trump’s “Executive Order on Improving Price and Quality Transparency in American Healthcare to Put Patients First” signed June 24, 2019 at the height of partisan rancor, in the early stages of the 2020 Presidential campaign and pre-pandemic. It was part of the administration’s price transparency trifecta along with rules for health insurers and drug manufacturers. Per Altarum, hospital prices have increased faster than any other sector in healthcare since before the pandemic. Understandably, employers, health insurers and voters are increasingly concerned about affordability and many see complicity in their pushback by hospitals from this rule. Thus, hospital price transparency enjoys growing support among employers, lawmakers and voters.
Notably, the leaders of the powerful House Energy and Commerce Committee were alerted to hospital pushback from the rule by employer coalitions and others keen to see new HHS Secretary Becerra take action against non-compliant hospitals. The fact that the letter came from the Committee’s leaders from both parties comes at a time when hospitals are asking Congress for relief from the American Rescue Act’s PAYGO obligation that cuts $36 billion from Medicare funding and additional funds as they recover from the pandemic.
Hospital pushback from this rule is justified because the rule itself is flawed. To create an apples-to- apples comparison of hospital prices requires standardization of codes, specificity about the scope of services included by whom and where, and adjustments for patient severity and risk factors. Regrettably, the rule’s creators depended too much on claims data not enough on clinical processes and local payer-mixes in crafting their rule. And requiring that hospitals disclose their prices and underlying costs on a payer-specific basis compounds the issue: contracts between payers and hospitals are legal instruments. A better requirement, at least initially, would have been that hospitals disclose the range of prices negotiated with plans for each shoppable service. And lawmakers could have used the opportunity to offer comparisons on for key operating costs like administrative costs, interoperability and HCIT investments, staffing and other line items to help consumers make judgements.
But hospitals can ill-afford to address growing demand for price transparency by claiming the costs for compliance are burdensome (CMS estimates $15,000-$20,000 per hospital but hospitals reported it’s 2-4 times more than that) and consumers only care about their out-of-pocket costs. Large employers, managed care programs in Medicaid and Medicare and other payers are keen to equip and incent consumer price comparisons for hospital services, and private equity investors are backing providers who seize on those opportunities.
The American Hospital Association went to court seeking to block the rule and failed. And an attempt to delay the rule’s January 1, 2021 implementation deadline was unsuccessful.
So, price transparency is an issue that’s not going away for hospitals. The willful neglect of the Hospital Price Transparency Rule by the majority of hospitals has not gone unnoticed by lawmakers and provides an easy target for hospital critics. As I opined when the Executive Order was first penned (“Hospital Price Transparency: The Long Road Ahead” November 18, 2018), the road to hospital price transparency is long and bumpy, but there are no off-ramps.
“Lawmakers urge HHS to conduct ‘vigorous oversight’ of hospital price posts after reports of noncompliance”; April 14, 2021; Healthcare Dive
Morgan Henderson, Morgane Mouslim “Low Compliance From Big Hospitals On CMS’s Hospital Price Transparency Rule”; March 16, 2021; Health Affairs
“Hospitals Hide Pricing Data from Search Results” March 22,2021; Wall Street Journal
“Congress seeks stepped-up price transparency enforcement as compliance issues continue to emerge”; Apr 15, 2021; HFMA
Xiao et al “Analysis of Price Transparency for Oncologic Surgery Among National Cancer Institute–Designated Cancer Centers in 2020”; April 14, 2021; JAMA Network
“Coding to Hide Health Prices from Web Searches Is Barred by Regulators”; April 14, 2021; Wall Street Journal
“Early results from federal price transparency rule show difficulty in estimating the cost of care”; April 9, 2021; KFF
FACT FILE: PRICE TRANSPARENCY RULE COMPLIANCE
Milliman reviewed price transparency postings from 55 health systems in 42 states between January 1 and March 3: 68% of health systems had posted at least one machine-readable file listing gross charges, discounted cash prices, payer-specific negotiated rates, and deidentified maximum and minimum charges by item/service. 21% had posted payer-agnostic standard charges only; 9% percent posted payer-specific negotiated rates; and 2% had not posted any files at all.
Hilltop Institute: collected the price transparency files for the largest 100 hospitals in the US (by certified bed count) from late January 2021 to early February 2021. Of the 100 hospitals in its sample, 65 were unambiguously noncompliant. Of these 65,12/65 (18%) did not post any files or provided links to searchable databases that were not downloadable.53/65 (82%) either did not include the payer-specific negotiated rates with the name of payer and plan clearly associated with the charges (n = 46) or were in some other way noncompliant (n = 7).
Wall Street Journal: Investigators searched 3,190 disclosure pages whose addresses were provided by Turquoise Health Co. for a tag in the pages’ background coding that instructs search engines not to index the page. The Journal found 164 webpages hosting disclosure files for 307 hospitals that contained versions of that blocking syntax. Some pages include information for more than one hospital within a system. The code was removed from pages with data for 182 hospitals soon after the Journal contacted their owners.
A Kaiser Family Foundation analysis released April 9 examined the websites of the two largest hospitals in every state and Washington, D.C., (total of 102 hospitals) and found that while most hospitals displayed gross charges as required (81%) — for both the machine-readable file and shoppable services — only about half (56%) were providing discounted/self-pay rates. Only a third (34%) were providing payer-specific negotiated rates in the machine-readable file and only 3% were doing so for shoppable services. Furthermore, in the machine-readable files, “it is unclear whether all participating insurers were included.”
Cancer center compliance:Researchers analyzed price transparency for radiation therapy services at National Cancer Institute (NCI)–designated cancer centers in March 2020. Findings: In March 2020, 43 of 52 included NCI-designated cancer centers (82.7%) publicly disclosed MS-DRG–level charges for at least 1 inpatient cancer operation. Among these cancer centers, rates of disclosure varied by disease area. Whereas all centers (N = 43; 100.0%) disclosed charges for chest cases without CC or MCC, only 14 (of 43; 32.6%) disclosed charges for prostate cases without CC or MCC.
Altarum: Health Prices Increased 2.7% YTD
Per Altarum’s Health Sector Economic Indicators (HSEI) Report through March 2021:
Health spending in April 2020 declined by 24% and employment by 10% from just two months prior.
Overall inflation fell to 0.6% year-over-year growth, but health care prices increased to a peak growth rate of 2.7%, resulting in excess health care price growth of over 2.0%
9 of the most recent 12 months have had year-over-year growth rates in overall health care prices of 2.5% or greater and health care services in particular are experiencing the fastest period of price growth since the passage of the Affordable Care Act in 2010. where health care services prices are now 3.9% higher than a year prior.
Monthly health price growth from April 2019 to March 2021: hospitals +4.8%, physician services +2.9%, nursing homes +2.8%, dental care +2.6%, and prescription drugs -2.3%.
In the first quarter of 2021, the combined average prices of health care products—including retail prescription drugs, durable medical equipment, and other nondurable medical products—were 3.1% lower than a year before.
“Perspective: Are Rising Healthcare Prices a Side Effect of COVID-19?”; April 16, 2021; Altarum
Study: American Rescue Act Subsidies would Increase Coverage by 4.2 million
Under the ARPA, people with incomes over 400% of poverty are eligible for subsidies to buy health insurance on the ACA marketplace according to the Urban Institute study. Subsidized enrollment would increase 60% (5.1 million) and 317,000 people with non-ACA-compliant coverage would switch to a more comprehensive ACA-compliant plan. An earlier report by the Urban Institute in July 2020 estimated that 3.5 million people would lose their employer-sponsored health insurance.
“What if the American Rescue Plan’s Enhanced Marketplace Subsidies Were Made Permanent? Estimates for 2022”; April 14,2021; Urban Institute
Microsoft Acquisition of Nuance Adds Emphasis on cloud-based AI Services in Healthcare
Microsoft Corp said this week it would buy artificial intelligence and speech technology firm Nuance Communications Inc for about $16 billion, as it expands cloud solutions for healthcare customers. The deal comes after the companies partnered in 2019 to automate clinical administrative work such as documentation. Nuance pioneered speech technology that helped Apple’s virtual assistant, Siri. The company said it serves 77% of U.S. hospitals, providing intelligent solutions including clinical speech recognition, medical transcription, and medical imaging.
“Microsoft Accelerates Industry Cloud Strategy with Acquisition of Nuance”; April 12, 2021; Microsoft
UnitedHealth Group First Quarter 2021 Revenues, Earnings Up; Shareholders Approve Change Healthcare Acquisition
UnitedHealth Group released its first-quarter earnings report on Thursday:
UnitedHealth Group posted $4.9 billion in profit for the first quarter of 2021, up from $3.4 billion in the prior-year quarter.
Revenues were also up by 9% compared to the first quarter of 2020hitting $70.2 billion. Revenues in the first quarter of 2020 were $64.4 billion.
UnitedHealthcare added more than 1 million customers; revenues grew by 7.9% year over year, reaching $55.1 billion compared to $51.1 billion in the first quarter of 2020.
Optum revenue growth, hit $36.4 billion compared to $32.8 billion in the prior-year quarter, or growth of 10.8%.
Separately, last Tuesday, shareholders of Change Healthcare approved a $13 billion deal to become part of UnitedHealth Group’s Optum Insight. The deal still faces scrutiny from the Department of Justice and criticism from the American Hospital Association which claims the deal is anticompetitive.
“How UnitedHealth Group is aiming to harness the dual capabilities of its health plan, Optum” April 15, 2021; Fierce Healthcare
Anthem-Blackstone JV with K-Health Targets Employers
Anthem and Blackstone have partnered with digital health startup K Health to launch Hydrogen Health to lower healthcare costs and make care more accessible. The venture will utilize K Health’s artificial intelligence tools to bring digital health products to both the employer and consumer markets. K Health was founded in 2016 and since has focused on primary care improvement, along with developing tool to assist in the care of mental health conditions like anxiety and depression through an app.
“Anthem, Blackstone, digital health startup K Health launch joint venture to curb costs”; April 14, 2021; Healthcare Drive
Bright Health Acquires Zipnosis
Bright Health announced that it has acquired telehealth company Zipnosis, which provides virtual triage and diagnosis solutions to almost 60 health systems nationwide. Zipnosis was an early developer of asynchronous diagnostic tools, which allow patients to be evaluated and treated without directly interacting with a clinician.
“Bright Health snaps up Zipnosis to build out telehealth services”; April 8, 2021; Fierce Healthcare
House Votes to Delay $18 billion Sequester Cut by Medicare
Last Tuesday, the House voted 384-38 Tuesday evening to rescind one of two scheduled Medicare cuts, sending the bill on to President Biden for his signature. The measure addresses one of the two budget cuts the Medicare program is facing. One cut, part of the normal budget process, is a 2% — or $18 billion — cut in the projected Medicare budget under a process known as “sequestration.” That moratorium was set to expire on April 1. Another projected cut — this one for 4%, or $36 billion — will eventually be triggered by the COVID relief bill formally known as the American Rescue Plan Act.
“House Passes Bill to Forestall $18 Billion in Medicare Cuts”; April 14, 2021; MedPage
Pitchbook: First Quarter 2021 Private Equity Deals Down
Private equity firms’ healthcare deals totaled $20.2 billion in the quarter ended March 31, down from the quarter ended Dec. 31, 2020, when private equity dropped $41 billion on healthcare deals. Highlights of report:
The drop in healthcare investments is in line with a broader dip in private equity deals and deal value across all industries in the first quarter. Total estimated deal value—while still a sizable $203 billion in the quarter ended March 31—was down from an estimated $294 billion in the fourth quarter of 2020. The number of estimated deals was down, too, from 2,232 in the fourth quarter to 1,763 in the first quarter.
Healthcare deals comprised 15% of all private equity investment in the first quarter of 2021, down from 17% in the fourth quarter of 2020. The first quarter figure was up from the first quarter of 2020, however, when healthcare deals comprised just 11% of overall investment.
Note: the Pitchbook report is in line with Bain’s 2020 report that healthcare deal value fell 17% year-over-year to $66 billion in 2020, from $79 billion in 2019. It expects PE deals to be strong in 2021 around 3 major investment themes:
Consolidation of fragmented specialties and sites of care with the pandemic accelerating this trend
Risk bearing providers offering opportunities for outsized returns when they have a proven model for managing costs.
Healthcare IT providing solutions in alternative sites of care
“US PE Breakdown” Pitchbook April 9, 2021; Pitchbook
“Global Healthcare Private Equity and M&A Report 2021”; March 2021; Bain
Medscape: Physician Income Held Steady in 2020
Based on responses to an online survey from more than 17,903 U.S. physicians across 29 specialties, the survey—conducted Oct. 6, 2020, to Feb. 11, 2021—found that average salaries for primary care physicians held steady at $242,000 from $243,000 the previous year. Similarly, specialists’ average salaries dropped $2,000 to $344,000. The Medscape report only includes physicians’ full-time salaries, excluding bonuses and profit-sharing for employed physicians. For self-employed physicians, the salaries report includes earnings after taxes and deductible business expenses, before income tax. Highlights:
44% of physicians reported reductions in patient volume and nearly 1 in 4 saw a decrease in hours.
45% of doctors said they experienced no loss of income, but 13% reported there were months when they had no income at all.
Nearly one in four doctors reduced their hours during the pandemic, but 58% of primary care physicians and 65% of specialists said income and average hours worked per week are now at pre-pandemic levels, according to the survey.
Plastic surgeons topped the list in earnings this past year ($526,000), experiencing a 10% spike over the previous year, likely driven by what many in the field call the “Zoom boom.” Orthopedists and cardiologists followed as top earners, with compensation at $511,000 and $459,000, respectively.
Following plastic surgeons, oncologists saw the biggest salary increase last year, with compensation rising 7% from $377,000 to $403,000. Cardiologists’ salaries increased 5% from $438,000 to $459,000, and rheumatologists also saw a 5% increase in compensation from $262,000 to $276,000.
The lowest-earning physicians were those in public health and preventive medicine ($237,000), family medicine ($236,000) and pediatrics ($221,000).
Emergency medicine doctors actually saw their compensation drop by 1% last year from $357,000 to $354,000.
“Medscape Physician Compensation Report 2021: The Recovery Begins” April 16,2021; Medscape
Study: Confusion Among Medicare Beneficiaries Widespread
GoHealth commissioned 2,000 online interviews from January 21 to January 26 of 2021: 1000 MA members and 1000 original Medicare (OM): Findings:
About 30% and 80% of OM enrollees indicated that they are not familiar with MA benefits
More than 4-in-5 believe their coverage alone provided out-of-pocket maximum, which it does not
3-in-10 believe Medicare Advantage is more expensive
Nearly two-thirds were not familiar with Medicare Advantage providing Part A and Part B coverage
More than one-third responded that they did not know Medicare Advantage has more benefits
OM beneficiaries were less knowledgeable than the MA beneficiaries in multiple areas, including benefits and costs.
Nearly 80% said cost savings is why they enrolled
“How Confusing is Medicare for Seniors? Diagnosing Older Adults’ Knowledge Gap of Medicare Plans in 2021”; GoHealth