Payer/Provider relationships

The price to replace a hip or knee in the U.S. can vary dramatically, even within a single hospital, new data show. At a Sutter hospital in San Francisco, a procedure can range from $22,865 to $101,571.

It all depends on the patient's insurer.

As of Jan. 1, hospitals must publicly reveal the negotiated rates reached with insurers for services, a landmark shift in the sector notoriously opaque when it comes to pricing. The data offer a peek behind the curtain, exposing prices long kept a secret.

The hospital lobby fiercely opposed the move and tried to block it from going into effect by turning to the courts, but failed. Judges forcefully pushed back against the American Hospital Association's claims that the policy was unlawful and that some prices were "unknowable" and therefore hospitals could not publish them.

"Why is the price of the X-ray unknowable?" Judge David Tatel of the D.C. Court of Appeals asked AHA lawyers during a colorful line of questioning at oral arguments in October.

For employers, the new rules represent an opportunity to trim costs by kicking out high-cost providers. But compliance is spotty thus far, limiting that potential.

For consumers, questions remain on how useful the data will be. Ultimately, the price a consumer is on the hook for depends on their insurance benefits. Some experts have criticized the Trump-era policy because it does not reveal exactly what a consumer will owe, though it gets them closer than before.

Healthcare Dive analyzed the new pricing data released by a handful of separate health systems across the country and found dramatic price ranges for the same procedure, even within the same hospital. Prices swing widely between markets, too. Healthcare Dive examined the prices for joint replacements and deliveries, including caesarean sections.

While the swings can be eye-popping, the data are not surprising to some researchers and industry experts steeped in the U.S. healthcare system.

"The fact that the price for a knee replacement can vary from $23,000 to $100,000 at a single hospital in one area of the country just demonstrates the total insanity of American healthcare pricing," Niall Brennan, CEO of the Health Care Cost Institute, which is partially-backed by payers, said.

Findings

For the first time, it's possible to directly compare the prices each insurance company negotiated with a hospital for a single service like a hip replacement due to rules put forward in 2019 under former President Donald Trump's administration.

Joint replacements are among the most common surgical procedures. Typically, patients know in advance when they need to replace failing hips and knees for new joints, making it possible to shop around, unlike with emergency medical situations.

Part of the new rule is designed to help these patients calculate their potential costs. It's especially important for consumers with high-deductible health plans. 

The prevalence of these plans has increased dramatically, exposing patients to a greater share of their healthcare costs with the hope that with more "skin in the game" they'll be more alert to prices and apt to shop around.

When shopping, consumers and employers will likely first notice the variation in prices for a single procedure.  

For example, the price for a joint replacement at California Pacific Medical Center Van Ness in San Francisco ranges from a low of $22,865 to a high of $101,571.

In Chicago, at Northwestern Memorial Hospital, the same procedure to replace a joint ranges from $4,613 to $50,680.

In New York, a hip or knee replacement price may be anywhere between $14,202 to $45,387 at New York Health + Hospitals Elmhurst location in Queens. 

At University of Florida Health Shands in Gainesville, price ranges from $8,114 to $66,734.

The swing in prices was also evident for both vaginal and C-section deliveries with ranges reaching nearly $55,000 between the minimum and maximum price at one location.

The outlier was Kaiser Permanente, an integrated system that serves as its own insurer and does not contract with other payers.

AHA defended the span in prices.

Costs can vary by region, facility and by patient, all of which can lead to a variation in prices, the lobby said in a statement.

Other factors go into the negotiated rates between insurers and providers, AHA said, including expected patient volumes, performance-based metrics and the population the facility serves.

"Rates reflected in these spreadsheets often do not reflect what is actually paid, due to individual episodes of care and adjustments as laid out in contracts," AHA said.

Tool for employers

Still, the "mind-boggling" price variations mean there might be cost-saving opportunities for employers, Ge Bai, a researcher and associate professor at Johns Hopkins, said.

Employers can kick out expensive hospitals from their networks and steer patients to other less-pricey ones, Bai said. They can also form purchasing alliances to improve negotiating power, Bai said.

This is a wake up call for the average business owner, Anne Ladd, associate director of purchaser innovation for the Purchaser Business Group on Health, said.

"You hate the high healthcare costs and, in fact, they're putting you out of business. But here's something you could do about it," Ladd said.

The data provide a roadmap to which hospitals employers should include in their networks. The caveat is the pricing data need to be paired with quality data.

Still, some resistance is often found in the C-suite, Ladd said.

Executives who compete for top talent want wide open health provider networks, seeing it as an edge to recruiting even though they know narrower networks can lead to price savings.

While a benefits expert at a mid-sized company may create a narrow network, an executive's spouse, for example, may want to go somewhere not in the network.

"And there's a pillow talk that happens. And the next thing you know that hospital is in the network," Ladd said.

Spotty compliance

Even though the government requires hospitals to share this information, not all facilities are doing so.

A review of 1,000 facilities across 27 states found that 30% of providers were not compliant with providing either a consumer-friendly file of prices or a machine-readable one, according to the firm Guidehouse.

The penalty does not have enough teeth, according to some critics including Ladd. The consequence for failing to comply with the rule is a $300 fine per day, which some critics called a pittance.

The lack of compliance makes it difficult to make meaningful comparisons within a single region of competitors and across markets in the U.S.

Plus, there is no central repository for all the data, forcing researchers to hunt and peck around thousands of hospital websites to find the information.

In January, shortly after the policy went into effect, CMS said it was auditing a sample of hospitals and probing complaints it had received about noncompliance.

More recently, CMS said the matter is still under review when asked if any hospital had faced a penalty for failing to comply with the requirement. "This matter is currently under CMS review. CMS looks forward to sharing additional information about this program soon," an agency spokesperson said.

Yet, Sutter Health in California did receive some praise for its compliance with the price transparency rule.

"I would like to give them some kudos because they're one of the few that really, really complied with the letter of law," Ladd said, noting her organization isn't always singing Sutter's praises.

Sutter previously reached a $575 million antitrust settlement with California Attorney General Xavier Becerra to resolve allegations the dominant system in Northern California drove up prices through its anticompetitive practices. Becerra now awaits a confirmation vote in the full Senate for his nomination to be HHS secretary.
 

Methodology

For this story, Healthcare Dive collected data from five hospitals on negotiated rates with insurers. The five hospitals include Kaiser Permanente Oakland Medical Center, Sutter Health's California Pacific Medical Center - Van Ness, University of Florida Health Shands, Northwestern Memorial Hospital and NYC Health + Hospitals Elmhurst. These were selected because prices were accessible and locations are spread in different regions of the country. Data for each hospital was downloaded from its website (see below for links). 

Data was collected for three services, determined by specific codes. The codes and corresponding descriptors are the following:  

• 470 Major hip and knee joint replacement or reattachment of lower extremity without MCC

• 788 Cesarean section without sterilization without CC/MCC

• 807 Vaginal delivery without sterilization or D&C without CC/MCC

 

Many types of insurers were included in the prices beyond just commercial plans. 

Links to download data on company websites:

• Kaiser Permanente (prices effective December 2020)

• Northwestern Medicine

• NYC Health + Hospitals

• Sutter Health

• UF Health Shands

Article top image credit: "Numbers And Finance" by Ken Teegardin is licensed under CC BY-SA 2.0

Dive Brief:

• Health experts warn patients may soon see big bills related to treatment for COVID-19, according to a new report from researchers at the Kaiser Family Foundation.
• Of the two largest insurers in each state, including D.C., 72% are no longer waiving cost sharing for patients who are treated for the disease. The report comes as hospitals are reporting surges of COVID-19 patients due to the highly transmissible delta variant.
• More insurers are expected to end the moratorium on patient cost sharing by the end of October, putting the financial responsibility back on patients, KFF said.

Dive Insight:

Last year, during the height of the pandemic, many insurers voluntarily waived patient cost sharing for COVID-19 treatment.

Cost sharing is what a patient owes out of their own pocket, either through a deductible, copay or coinsurance.

Insurers waived those costs while experiencing record profits due to many people across the country putting off care either due to lockdowns or out of fear for contracting the virus.

The deflated volumes had a greater affect on providers, who saw revenues plummet, but for payers it meant still collecting premiums without having to pay for as much care compared with a normal year.

The high profits, along with Affordable Care Act limits on insurer profits, all played a role in spurring payers to do away with out-of-pocket cost for COVID-19 patients. Some states did make it a requirement for fully insured plans.

Insurers have largely done away with those waivers and more are expected to disappear by the end of October as COVID-19 patients inundate hospitals once again, leaving them more exposed to the costs of the disease.

This could pose a new strain for providers, as some Americans are left to cover their out-of-pocket costs and not the insurer.

The average annual deductible was $1,644 in 2020, though much larger figures for families, according to KFF. But many Americans, four in 10, don't have $400 in the bank to cover an unexpected expense, let alone $1,644, per the Federal Reserve's report on Americans' economic well-being.

With patients unable to pay, it potentially leaves hospitals in the lurch with either no or partial reimbursement.

The federal government did mandate insurers to cover testing and vaccines. But the requirement does not extend to paying for the patient's share of treatment costs.

However, insurers are held to certain profit limits thanks to the ACA. Payers must spend a certain percentage of premiums on healthcare instead of profits, marketing or administration expenses. If an insurer fails to meet those minimums, then it must rebate its clients, which was what motivated some insurers, at least in part, to institute the waivers on cost sharing.

Article top image credit: Fotolia

The pandemic has accelerated how organizations respond to health care consumers' shifting expectations around accessing care. As more people turn to digital platforms to make things easier, their demand for convenience will increase in nearly every aspect of their lives—including health care.

For payers and providers, health care consumer centricity needs to be top of mind. Organizations that prioritize this understand that it signals their commitment to the member or patient and has the potential to improve outcomes.

Consider travelers' experience in the hospitality industry. Customers visit a hotel's website to see room availability and pricing and book the room they want with only a few clicks. When they arrive, they know exactly what they're getting. If they have questions or requests, it's easy to contact hotel staff. At the end of the stay, the hotel requests feedback so it can improve. Transparency, accessibility, and insights are central to this experience and reflect what members and patients want — and now demand — in health care. Drivers of change like purpose-built technology platforms, increased data access, and revised business models and policies are fueling the following trends and steering the health care industry toward achieving health care consumer-centricity more quickly:

• Proactive and Predictive: Patients increasingly expect a more curated health journey in and out of the health care setting. Access to quality member and patient data is becoming even more important to that curation, and the data sets are expanding beyond clinical data to incorporate social determinants of health, personal communication preferences, behavioral data, and more.
• Personalized: Health is becoming more personalized — from a medical, clinical, and experiential perspective. A 360-degree view of each patient and member is absolutely critical to understanding the individual and personalizing experiences.
• Decentralized: Care is moving away from the traditional four walls of a health care system and toward a "care anywhere" model through services like virtual care.
• Empowered: Health care consumers want more convenient access to care, a better understanding of their costs and options, and control of their personal data. They see this in other industries and want it in health care.
• Value-Based: During the pandemic, volume-based health care systems suffered financially and further exposed the problem with fee-for-service versus fee-for-value models.

New technology addresses these imperatives and makes it possible to adopt health care consumer-centricity at scale. Customer relationship management platforms, for example, enable more personalized engagement for better outcomes, increased collaboration for more informed decision making, and greater organizational efficiency.

We commissioned this research to better understand how these imperatives and others have dramatically shifted health care and what organizations should focus on as they continue to improve upon the health care consumer experience. Whether it's integrating disparate systems of record to gain a complete view of the patient or member or streamlining collaboration between payers and providers, surfacing data insights and streamlining workflows will enable personalized engagement at scale to improve outcomes.

Sponsor perspective provided by Dr. Geeta Nayyar, General Manager of Healthcare and Life Sciences and Executive Medical Director at Salesforce

Article top image credit: Adobe Stock

Dive Brief:

• The nation's most powerful hospital lobby is ramping up its defense of hospital mergers as the Biden administration aims to crack down on provider consolidation.
• The American Hospital Association sent a letter Wednesday to top officials in the White House, HHS, Department of Justice and Federal Trade Commission defending health system M&A and attempting to shift Washington's rising antitrust focus from providers to commercial health plans.
• The letter included an updated AHA-funded study on the benefits of hospital mergers, which was previously criticized by outside experts for cherry-picked data, among other methodological weaknesses.

Dive Insight:

In an executive order signed in July, President Joe Biden directed regulatory agencies to vigorously enforce antitrust laws, including in healthcare as hospital M&A continues at a rapid clip. The order came shortly after the FTC said it plans to prioritize healthcare in its enforcement strategy over the next decade, as research indicates lack of industry competition has led to price increases without improving the quality of care.

"Too many hospital mergers lead to jacked up prices and diminished care for patients most in need," Lindsay Kryzak, the FTC's director of public affairs, said in a statement earlier this month. Kryzak's remarks followed a U.S. district court's decision to grant a preliminary injunction against New Jersey system Hackensack Meridian Health's proposed acquisition of close competitor Englewood Healthcare Foundation, a deal the FTC opposed.

"The Court has hit pause on this merger, which the FTC alleges is unlawful. Hospital executives hatching merger plans should take note," Kryzak said.

The recent swell of M&A filings prompted the FTC earlier this month to warn organizations looking to merge that the agency would be retrospectively reviewing deals, which could result in completed mergers being unwound. Regulators have forced hospitals to unravel completed deals before, including ProMedica's acquisition of a Toledo, Ohio, hospital in 2015 following a five-year court battle.

The Biden administration's renewed antitrust efforts have drawn a response from industry groups, as shown by the AHA's new letter to policy and regulatory officials. AHA CEO Rick Pollack called Kryzak's remarks "unfortunate" in the letter, as "most proposed hospital mergers present no competitive issues and offer real benefits for those communities."

As evidence, AHA sent regulators a study conducted by Charles River Associates, first published in 2019 before being updated to include more recent data this August. The study found contemporary hospital mergers result in cost savings and quality improvements, without a corresponding increase in revenue consistent with the acquisition of market power.

The 2019 version showed acquired hospitals realized a greater than 2% reduction in annual operating expenses, while the 2021 version found a more than 3% reduction. Both said that lowering in costs was tied to a statistically significant drop in inpatient readmission and mortality rates.

However, that study contradicts a mountain of research finding prices tend to be higher in more consolidated markets and that providers with greater market share see higher commercial profit margins, leading to higher costs per discharge. The brunt of those higher costs is often borne by consumers in the form of higher premiums and out-of-pocket costs.

In its letter, however, AHA maintained that cost savings from mergers are passed onto plans, but it's unclear whether they make their way to consumers. The trade association, which represents some 5,000 hospitals, criticized antitrust agencies for stringently reviewing hospital mergers and avoiding the commercial health insurance industry, saying they receive unequal amounts of attention.

Payers appear to "have skirted much of the antitrust enforcement and regulatory attention provided by this assemblage of federal agencies," Pollack said.

Hospital mergers have been increasing over the past decade. Deal size was even accelerated by the pandemic as many smaller facilities, facing the risk of closure as volumes plummeted, had little choice but to consolidate with larger systems to avoid shutting their doors.

In the first half of 2021, deal revenue was at $17.2 billion across 27 transactions, according to a Kaufman Hall report. During that same period last year, revenue was $17 billion across 43 transactions.

Article top image credit: White House

Dive Brief:

• Two Midwest healthcare organizations, Minnesota-based Medica and SSM Health, are launching a joint venture, the companies confirmed to Healthcare Dive following a Wednesday announcement.
• Medica, a nonprofit insurer, will invest an undisclosed sum in Dean Health Plan, a subsidiary of St. Louis-based SSM Health — one of the nation's largest nonprofit health systems — to enhance services and products. 
• The two will retain their separate brand identities and the agreement is expected to be finalized during the fourth quarter pending regulatory approvals.

Dive Insight:

Healthcare consolidation has continued at a steady pace even amid the volatility spurred by the COVID-19 pandemic. 

Analysts expect hospitals, both for-profit and nonprofit, to continue M&A at a robust clip following the pandemic, according to a Moody's Investor Service report. And payers also have been active in dealmaking, scooping up complementary businesses. For example, Humana has acquired the remaining stake in Kindred, a giant in the home-health space, in a deal completed on Wednesday.

Cigna's health services business said in February it was acquiring telehealth vendor MDLive in an attempt to capitalize on telehealth services that have been in high demand since the onset of the pandemic. And Molina has continued to buy up health plans to expand its core business.  

However, Medica and Dean Health Plan are not calling the "strategic relationship" an acquisition or merger. Instead, they characterized it as a joint venture between Medica and SSM Health that will still need regulatory approval. 

Medica covers almost 1 million people across nine states throughout the Midwest. Employer-based coverage is by far its largest segment, insuring about 594,000 people, according to the nonprofit insurer's 2020 annual report. Medica sells Medicare, Medicaid and individual and employer-sponsored plans. 

Meanwhile, Dean Health Plan covers 500,000 people across four Midwestern states. 

Article top image credit: CCO Public Domain

Dive Brief:

• UnitedHealthcare has agreed to pay $15.6 million in a settlement after Department of Labor investigators found the insurer reduced reimbursement rates for out-of-network mental health services and denied payment for some services.
• UnitedHealth also failed to disclose these practices to plans and beneficiaries. All of these actions, which date back to at least 2013, violate the Mental Health Parity and Addiction Equity Act of 2008, DOL said Thursday.
• The settlement includes $13.6 million to be paid to about 135,000 affected beneficiaries as well as nearly $2.1 million in penalties. UnitedHealth also agreed to improve its disclosure plan and commit to future compliance.

Dive Insight:

In a call with reporters Thursday, DOL officials said the agency is stepping up enforcement of the parity law, especially as the COVID-19 pandemic has caused a greater need in those services.

"There are really a number of people that really are looking at these issues in a different way," said Ali Kwahar, acting assistant secretary of labor for employee benefits. "And these efforts, our efforts today and our ongoing efforts to enforce parity really are part of a broader approach that we have that also includes making sure that we're raising awareness and reducing some of the stigma that exists around these conditions."

During the pandemic, four in 10 U.S. adults have reported symptoms of anxiety or depression, compared to one in 10 before the onset, according to the Kaiser Family Foundation.

Investigators found that UnitedHealth flagged mental health patients as needing additional review, resulting in the claims denials.

DOL officials pointed to changes from the Consolidated Appropriations Act that they said allow for greater enforcement of the parity act. For one, insurers are now required to perform a written analysis of the limitations they have on mental health coverage that aren't numerical, such as a restriction on the number of visits.

Those non-quantitative limitations can be harder for investigators to pursue, but are becoming a greater focus, Kwahar said.

"You should expect to see more investigation," he said. "We have taken a look at our existing inventory of cases and ... I predict this will be a very active issue for us for years to come."

In a statement, UnitedHealth Group said it is "pleased to resolve these issues related to business practices no longer used by the company."

Article top image credit: Alex Wong via Getty Images

Dive Brief:

• CVS Health said its Aetna unit will offer virtual primary care to self-funded employers nationwide in a move that underscores the growing popularity of telehealth services fueled by the COVID-19 public health emergency.
• Using Teladoc Health's physician-led care team model, the Aetna Virtual Primary Care service is intended to help strengthen the patient-doctor relationship and improve access to care, the vertically integrated company announced Tuesday. Members can receive health services remotely and in person.
• The initiative follows Amazon's nationwide rollout in March of its virtual care pilot program, Amazon Care, offering free telehealth consults and in-home visits for a fee to employees and their families. Amazon will also offer on-demand primary care services to other companies in Washington state.

Dive Insight:

The pandemic has shown that telehealth can be a viable long-term option for consumers. A recent survey by Social Sciences Research Solutions for the Bipartisan Policy Center, for example, found 90% of patients were satisfied with their telehealth care and would use the service again, with 80% saying their medical issue was resolved as a result of the virtual visit.

Telehealth use declined as patients ventured back into doctor offices in recent months amid tapering COVID-19 case numbers, but virtual visits appear to have steadied in May, according to Fair Health's monthly telehealth regional tracker. Utilization, measured as a percentage of all medical claim lines, climbed 2% from April to May among privately insured people. Telehealth claim lines as a percentage of medical claim lines rose 5.6% in the South and 4.8% in the West.

With COVID-19's rapid reemergance in communities across the United States, already straining hospital capacity in some Southern states, Aetna's telehealth initiative appears well-timed. "The future of digital health solutions is rapidly unfolding," Aetna President Dan Finke said in a statement.

The program combines telehealth services and access to in-person visits with providers in the CVS Health-Aetna network, including MinuteClinic and HealthHUB locations. There is no co-pay for virtual primary care visits and some in-person services after deductibles are met.

Members can maintain a continuous relationship with a primary care physician and have access to a team of specialists based on their health needs. No referral is needed for in-person visits with providers in the network. Existing Aetna virtual care services including mental health counseling, dermatology and round-the-clock urgent care are included in the benefit, as is virtual access to a nurse support team.

The telehealth boom has fueled a burst of M&A activity, some of it involving payers. Earlier this year, Cigna's Evernorth health services business acquired telehealth provider MDLive for an undisclosed sum. The insurer plans to sell MDLive's telehealth offerings to third-party clients and offer it to beneficiaries. Teladoc itself paid $18.5 billion last year to buy chronic care manager Livongo.

Aetna's new virtual primary care offering looks to be following the path of Amazon Care, which will be available to outside companies in direct competition with virtual care giants such as Teladoc, Amwell and Doctor on Demand.

Teladoc hinted at its primary care deal with Aetna when it released better-than-expected second-quarter earnings in July. The company is looking for ways to keep the momentum going after benefiting from surging volumes during the pandemic lockdowns.

Article top image credit: Bruce Bennett via Getty Images

Delaware lawmakers passed a sweeping healthcare bill this summer that puts caps on hospital price growth and compels insurers to boost investment in primary care.

The multi-pronged bill also forces certain payers to tie nearly half of their business to alternative payment models by 2023, and create shared accountability for both the cost and quality of care. Essentially, it forces payers and providers to enter into these arrangements faster, hoping to pay for quality rather than quantity of care.

Modeled after similar reforms in Rhode Island, the legislation passed both chambers and is now awaiting the signature of Gov. John Carney, a Democrat. However, providers were successful in lobbying for a sunset provision that will require legislators to renew certain aspects of the bill before Jan. 1, 2027, including the rate caps.

Still, one of the state's health regulators is hopeful the reforms will curb the cost of care while strengthening primary care.

"We think it's going to have a profound impact," said Trinidad Navarro, Delaware's insurance commissioner, who characterized the bill as aggressive.

Delaware is the latest state looking to take a stab at stemming the rising cost of healthcare. Most recently, Nevada passed legislation to launch a public option plan that aims to give residents lower-priced plans on the Affordable Care Act marketplace by requiring some insurers to sell plans with premiums below a certain threshold.

Hospitals face price caps to fuel primary care investment

Delaware's bill attempts to tackle a few problems at once to curb costs.

One major objective is to increase investment in primary care by requiring insurers spend a defined percentage of their total healthcare spend on services such as annual checkups and the management of chronic care.

In Delaware, spending on primary care trails the national average. At the same time, the state is seeing a decline in primary care physicians, partly due to retirement and perhaps low reimbursement. At the same time, its residents tend to be sicker and older, according to a report from the state's Office of Value-Based Health Care Delivery in partnership with Freedman Healthcare, consultants that worked as an independent contractor with the department's staff.

Some research has established a correlation between the ratio of primary care physicians in a region and overall healthcare spending. In areas with a higher proportion of primary care physicians, Medicare spending tended to be lower that year, according to a report in Health Affairs, suggesting that a robust primary care network can bend the total cost of care.

The Delaware effort hinges on the premise that a greater investment in primary care will root out patient health problems earlier — before they become more expensive — and lead to better outcomes and spend less overall.

For insurers to spend more on primary care, the bill seeks to constrain spending elsewhere, letting fully insured payers with more than 10,000 members set caps on hospital price growth in their contracts, the second prong in the bill. By 2022, price growth for nonprofessional services at hospitals can be either the greater of 3% or core CPI plus 1%. And for 2024 through 2026, either the greater of 2% or core CPI plus 1%.

CPI, the consumer price index, measures the cost of goods and services and how it changes over time. And core CPI excludes energy and food prices, which can be more volatile. By capping hospital prices to CPI, it ensures increases are minimal and provides a ceiling on spiking prices.

However, core CPI rose 4.5% from a year ago, the largest 12-month increase since November 1991, which could dampen the bill's impact if prices continue to rise. Even still, it puts a ceiling on hospital price growth, an arena that previously had no limits.

Although not explicitly stated, the bill attempts to even the power balance between providers and payers, which is hinted at in the Freedman report.

Like much of the U.S., many of Delaware's hospital markets are highly concentrated, making it difficult for insurers to walk away from a hospital system's proposed price increase in a given year, according to that report. Of the six acute adult hospitals in the state, two control more than 80% of the discharges in their service areas in 2018, the report notes.

The third prong of the bill tries to push providers and payers away from fee-for-service reimbursement by mandating how much care must be delivered through alternative payment models.

That aligns with larger industry trends, as the nation's health system is moving toward a system that pays for the quality of services, not the quantity.

Health system ChristianaCare, the state's largest private employer, declined to comment. In an email, the Delaware Healthcare Association, which represents hospitals, said it took no position on the bill.

Did it work in Rhode Island?

Delaware looked to Rhode Island as a model for its effort.

In 2010, Rhode Island implemented a series of what it called "affordability standards" to increase spending in primary care while slowing hospital price increases. Similar to Delaware, Rhode Island bet that the more it spent on primary care, the less it would spend overall on healthcare.

Compelling evidence suggests the strategy worked.

Researchers found total spending growth decreased without negatively affecting health quality measures, according to study that examined spending over a decade.

"State regulators in Rhode Island achieved among the largest total health care spending changes observed from payment reforms to date," the 2019 research paper in Health Affairs reported.

The study compared spending among a large group of commercially insured Rhode Islanders to a cohort of a similar size, about 38,000 adults, located in other states to serve as the control group. Researchers began comparing the spending between the two groups in the years leading up to the reform and in the years that followed.

The results are striking. The amount spent on care per adult decreased $76 per enrollee compared to the control group, a decline of about 8.1% compared to 2009, before implementation. And Rhode Islanders ended up paying less out of pocket compared to peers in the control group.

Rhode Island didn't start to see the effects until a few years after implementation.

Delaware lawmakers included an amendment that will require them to renew certain aspects of this law before 2027.

"That's one of the challenges with these policies, like politically ... it takes a few years for them to show financial results, so longer term evaluations are really important," Aaron Baum, one of the researchers in the Health Affairs study, said.

Article top image credit:

Monkey Business Images/Shutterstock.com

Dive Brief:

• The Department of Justice is reportedly considering a lawsuit to block UnitedHealth Group's $8 billion acquisition of data analytics company Change Healthcare as the Biden administration steps up its antitrust efforts.
• According to The Information, which cited people familiar to the matter, the DOJ recently reached out to private attorneys about the possibility of litigation to halt the transaction as it evaluates whether UnitedHealth, which owns the biggest private payer in the U.S., might have an incentive to block access of competing insurers to Change.
• The deal was first announced in January and immediately drew opposition, including from competing payers, the American Hospital Association and the American Antitrust Institute, over anticompetitive concerns.

Dive Insight:

According to The Information, several state attorneys general have aired issues with the transaction, and the DOJ has been looking for sworn witness testimony for the potential trial. In late March, UnitedHealth and Change disclosed the DOJ had requested additional information and documents from them as it embarks on deeper scrutiny of the proposed tie-up.

A UnitedHealth spokesperson declined to answer questions about its response to the potential suit or how it could change the timeline of the deal. But despite the stricter DOJ review, the two said earlier this year they still expected the deal to close in the second half of this year.

And in the merger agreement, UnitedHealth said it would be open to divesting assets if required for approval, though it noted such divestitures couldn't account for more than $650 million in annual revenue, which would be a "burdensome condition."

AHA in March called on the DOJ to give the merger a stringent review, as the deal — meant to beef up UnitedHealth's data analytics arm OptumInsight — could also result in less competition for health IT and revenue cycle management services, and give UnitedHealth's payer business UnitedHealthcare an unfair edge in contract negotiations with hospitals, the hospital lobby alleged.

AHA also aired concerns the tie-up could result in a massive consolidation of healthcare data under UnitedHealth, which could distort decisions about patient care, claims processing and denials. Currently, Change as an independent alternative to Optum serves as a check against those outcomes, AHA said.

In response to the concerns, UnitedHealth has maintained Optum's and UnitedHealthcare's operations are kept separate.

"With distinct and complementary capabilities, this combination will help health care providers and payers better serve patients by more effectively connecting and simplifying key clinical, administrative and payment processes to the benefit of the health system and the people we serve," an Optum spokesperson told Healthcare Dive on Thursday.

The potential suit comes as the Biden administration steps up its antitrust efforts. On Tuesday, the Federal Trade Commission, said that due to a "tidal wave" of recent merger filings, it would now potentially deem combinations unlawful even after the companies consummate their merger. The alert could dampen accelerating M&A, as unwinding a transaction that's already closed is expensive and complex.

The FTC has also said it's prioritizing healthcare as part of its enforcement strategy over the next decade, as the lack of competition in the industry can lead to price hikes that threaten patient access to care.

And the DOJ's already taken its opposition to a major healthcare deal to court this year.

In June, the DOJ sued to block Aon's $30 billion acquisition of Willis Towers Watson, saying it would harm competition in retiree multicarrier healthcare exchanges, among other markets. The deal was then called off in late July after the two insurance brokers failed to reach an agreement with regulators.

Change management did not take questions from investors on a Thursday morning call on its first quarter results, citing the pending acquisition. However, the Nashville-based health IT company's stock took a nosedive on Wednesday following the news, dropping roughly 7% in morning trading.

Article top image credit: Coolcaesar/Wikimedia Commons

Dive Brief:

• Hospitals with a higher share of Medicare patients had lower profits and were more likely to be acquired or close compared with hospitals less dependent on Medicare, according to a new study from Health Affairs. The findings are likely to affect commercial prices, according to the report.  
• The report analyzed Medicare inpatient discharges between 2010 and 2016, operating margins and calculated Altman Z scores — a measure that helps predict hospital bankruptcy — to assess financial health for nearly 3,000 general acute care hospitals in the U.S.
• Hospitals with higher Medicare discharges were more likely to be nonteaching facilities in rural areas with fewer beds. They were also more likely to be in counties with an older and slower-growing population.  

Dive Insight:

The study's findings pose challenges for policymakers. Researchers caution that they should not view these results as a reason to avoid reducing Medicare reimbursement.

"Paying more than needed for most care to preserve access to some care and to forestall consolidation-induced commercial price increases would exacerbate the fiscal challenges facing Medicare," the researchers wrote. 

Instead, researchers said policymakers should address consolidation in the industry through antitrust enforcement and consider regulation to limit commercial price increases. 

The study challenges a commonly held belief in the healthcare sector: Hospitals tend to raise commercial prices to make up for lower reimbursement from Medicare and Medicaid, a practice known as cost shifting. 

The paper argues that prior analysis has not considered how public prices can affect the number of hospitals operating in a market, which can ultimately affect commercial pricing. The researchers argue it's more nuanced than just cost shifting, but instead "consolidation-induced cost shifting."  

Researchers warn that "reductions in public prices must be undertaken cautiously. Mechanisms to limit closure- or acquisition-induced increases in commercial hospital prices may be important."  

These findings come as public insurance programs are likely to face increased financial pressure, which the pandemic has only exacerbated. 

The Congressional Budget Office expects the Hospital Insurance Trust Fund to become insolvent two years earlier than previous forecasts due to COVID-19. The fund, which finances Medicare Part A, is now expected to be insolvent by 2024.

At the same time, the nation's population is skewing older and a growing number of adults will be eligible for Medicare. Plus, a record number of people are now covered by Medicaid and the Children's Health Insurance Program.   

Article top image credit: Permission granted by The Boldt. Co.

Dive Brief:

• The Biden administration on Thursday issued a highly anticipated regulation codifying surprise billing legislation passed last year, thought to be one of the most significant consumer protections in healthcare in a decade.
• The interim final rule, issued through HHS, the Labor and Treasury departments and the Office of Personnel Management, bans surprise out-of-network and balance billing beginning in 2022 for people in employer-sponsored or individual marketplace plans.
• Notably, the rule does not set a "fair price," or a baseline for arbiters to consider in determining how much a provider should be reimbursed for out-of-network services. HHS officials said on Thursday it was the first of several regulations to be issued this year implementing the requirements of the law.

Dive Insight:

Surprise billing occurs when a patient inadvertently receives out-of-network medical care at an in-network facility. The practice can result in extremely expensive unexpected bills that can be financially devastating for American: Two-thirds of all bankruptcies filed in the U.S. are tied to medical expenses.

And it's is unfortunately a common occurrance. Research has found that among large group health plan enrollees, one in five emergency room visits and one in six admissions to an in-network hospital led to a surprise medical bill.

Despite heavy industry lobbying from hospitals and insurers, Congress was able to pass bipartisan legislation barring this practice in December, viewed as the most significant consumer protection in healthcare since the Affordable Care Act.

The No Surprises Act prohibits surprise out-of-network billing beginning in 2022. The legislation requires plans to apply in-network cost sharing to surprise medical bills and prohibits out-of-network providers from balance billing patients for the unexpected costs. It resolves any disputes between payers and providers over out-of-network bills via third-party arbitration, a method preferred by providers. 

Insurers hoped instead to tie payments to in-network rates in the eventual fix, which had been deliberated on Capital Hill since 2018. But doctors and physician staffing companies, many backed by deep-pocketed private equity groups, spent millions lobbying against the idea.

Insurers and providers alike have been eagerly waiting additional rulemaking from HHS to clarify details on the arbitration process.

The interim final rule says the total amount paid to a provider will be based on a state's all-payer model agreement — a rate-setting system applicable to all payers — and if a state doesn't have one, an amount determined by state law. If both are missing, the provider will be reimbursed an amount agreed to by the plan and the provider, or — if all three are lacking — an amount determined by the arbiter.

The​ 400-page-plus regulation issued Thursday failed, however, to set a baseline for arbiters to consider. That baseline is key for both providers and payers, as it'll determine how much reimbursement a provider eventually nets.

Biden administration officials said HHS would issue regulations "soon" regarding what entities would serve as arbiters and giving more details on the process.

"We certainly have to work on this whole issue of arbitration, and the cost. There will be a need to make further clarifications on definitions," HHS Secretary Xavier Becerra told reporters Thursday.

The No Surprises Act does prohibit the arbiter from taking Medicare and Medicaid rates into consideration when deliberating an out-of-network charge, a win for hospitals and a loss for insurers.

However, arbiters were told to take the median in-network rate for an item or service into account, and they're banned from considering providers' billed charges, which are often significantly higher than what a patient eventually pays.

For patients, the rule limits cost-sharing to in-network levels, requires it to count toward any deductible and prohibits balance billing. The rule says any cost-sharing for out-of-network services must be based on an applicable all-payer agreement, state law or — if neither exist — whichever is a lower amount between the billed charge or the plan's median contracted rate.

The interim final rule also requires providers to make a one-page notice publicly available about the new regulations prohibiting balance billing, and any state prohibitions or limitations.

Providers also have to inform patients how to contact state and federal agencies if they believe they've received an illegal surprise bill.

In limited cases, a provider can inform a patient about potential out-of-network care, and — if a patient consents to the out-of-network services and any extra costs — can bill them. However, the exception doesn't apply in most situations where surprise bills are likely to happen, like non-emergency specialist services, such as anesthesiology, provided at an in-network facility.

The interim final rule is the first in a series to stand up the No Surprises Act.

Later this year, the Biden administration plans to issue regulations regarding the independent dispute resolution process, the patient-provider complaint and dispute resolution process and price comparison tools, according to the rule.

Under the law, the federal government has the authority to fine up to $10,000 per billing violation. It protects patients for services rendered in hospitals and by doctors and the large majority of providers, but left out ground ambulances.

Critics said at the time it was a notable oversight, as a large proportion of emergency rides result in surprise bills. Slightly more than half of emergency ground ambulance rides resulted in an out-of-network bill, according to a recent analysis from the Kaiser Family Foundation.

Comments on the interim final rule are due 60 days after its publication in the Federal Register.

Article top image credit: Phil Roeder, Flickr