New hospital pricing regulation does little to bring cost clarity

A potentially game changing federal rule went into effect Jan. 1, requiring hospitals to make public their negotiated rates with health plans.  

Though some of the nation’s largest hospital chains had filed suit to block the new regulation, a federal appeals court ruled in late December that hospitals must post online the rates they negotiate with all accepted health plans for each hospital item and service, as well as individual health plan rates for 300 “shoppable” services.

More than one month later, however, local insurance brokers say most consumers are not even aware they can access the information, much less know what to do with it.  

“Most of my clients don’t even know this is out there,” says Kerry Drake, president of employee benefits for BSX Insurance. “Until this information gets out there and people really see the different prices hospitals charge they’re not going to demand change.”

The idea behind the mandate, which was an initiative of the Trump administration, was to require hospitals to be more transparent about their pricing—not only what they charge on paper for a particular service but what price they actually negotiate with private insurers, Medicare and Medicaid.

In theory, the information should enable individuals to shop around for the best price on a particular procedure or service, which, in the long run, would force hospitals to become more competitive on price.

But the data can be somewhat misleading, critics have pointed out. It doesn’t include the cost of outside providers—like an anesthesiologist group or radiology group—that may provide services to a hospital but bills the patient and their insurer separately.

Also, including Medicaid pricing structure in the mix can throw off the averages because the federal government dictates what it will pay for services under Medicaid and it is often far less than what it actually costs a hospital to provide them.

Local hospitals have noted some of those issues in disclaimer statements on their new pricing transparency websites.

“Everyone’s case is different based on that patient’s medical condition,” the website of Our Lady of the Lake says.

Similarly, Woman’s Hospital notes that, “Hospital charges are the same for all patients, but do not reflect the amount that patients and insurance companies actually pay.

Drake says part of the problem is that health care financing has become so complex it’s hard to untangle the system—which is still based more on fee for service than a value-based model—and compare apples to apples.

Blue Cross and Blue Shield of Louisiana health care economist Mike Bertaut says another problem is that individual costs can vary greatly from one patient to another, depending on factors like age and preexisting conditions.

“The ability of a consumer to see what the average price of these 300 services is can be useful,” Bertaut says. “But you can’t take it to the bank because your actual experience might be different.”

Part of the problem, say some, is that the Trump administration didn’t work with hospitals and insurers in creating the new regulation, which fails to acknowledge that sometimes a hospital will negotiate a better deal with a large insurer in private than out in public.

Others, like Drake, say that mentality has to change if the country wants to get a handle on rising health care costs and the premiums that insurers have to pay.

“Eventually, people are going to push for a better model,” Drake says. “But employers are going to have to be willing to really band together and it is an uphill battle.”