The Price Transparency Data Tidal Wave and How To Surf It

Contents:

• What is Medical Price Transparency?
• What data is available now?
• How can Hospitals use the data?
• How can Health Plans use the data?
• How can Employers and Patients use the data?
• What are shortcomings of the data?
• Where can I find more information?  

What is Medical Price Transparency?

Medical price transparency helps consumers know the cost of a covered item or service before receiving care. The Centers for Medicare & Medicaid Services (CMS) has issued two price transparency mandates: one for Hospitals and one for Health Plans:

1. Hospitals: Starting January 1, 2021, each hospital operating in the United States will be required to provide clear, accessible pricing information online about the items and services they provide in two ways. As a comprehensive machine-readable file with all items and services. In a display of shoppable services in a consumer-friendly format. This information will make it easier for consumers to shop and compare prices across hospitals and estimate the cost of care before going to the hospital.
2. Hospitals: Beginning July 1, 2022, most group health plans and issuers of group or individual health insurance will begin posting pricing information for covered items and services. This pricing information can be used by third parties, such as researchers and app developers to help consumers better understand the costs associated with their health care. More requirements will go into effect starting on January 1, 2023, and January 1, 2024 which will provide additional access to pricing information and enhance consumers' ability to shop for the health care that best meet their needs.

What data is available now?

Data is now available for each hospital's Gross charges, Discounted cash prices, Payer-specific negotiated charges and De-identified minimum and maximum negotiated charges.  Data is also available for each health plan's reimbursement rates for all covered items and services between the plan or issuer and in-network providers, as well as allowed amounts for, and billed charges from, out-of-network providers. Reimbursement rates include fee for service, bundled and capitation rates.

The data is required to be published on their websites by each hospital and health plan in "machine-readable format".  These files are complex for three reasons: (a) Volume, (b) Variety, (c) Velocity.

1. Volume: The data files contain thousands of combinations of health plans, providers, billing codes and negotiated rates which exponentially increases the volume of data published by each health plan.  The files expand to Terabytes in size.

2. Variety: The data files contain a variety of embedded files which require sophisticated data engineering techniques to read and transform into a consumable structure.

3. Velocity: The data files are published each month which further contributes to the rate of change of data over time.

How can Hospitals use the data?

Hospitals and healthcare provider organizations such as Managed Service Organizations (MSOs) and Independent Physician Associations (IPAs) can use this information to benchmark their health plan negotiated rates with rates negotiated between other hospitals and healthcare provider organizations and the same health plans. 

For example, assume "Provider Organization of America" has negotiated with "United Health Plan of America" to be paid $30,000 for Appendectomy without complications.  The Vice President of Managed Care Contracting at Provider Organization of America can work with Medlyze to review rates for Appendectomy without complications United Health Plan of America has negotiated with all providers in the country with special focus on providers within Provider Organization of America's geographic area (i.e., MSA).  Upon further analysis, if Provider Organization of America's negotiated rate is lower than other negotiated rates the Vice President of Managed Care Contracting can prioritize preparing a strategy to renegotiate for a higher rate for Appendectomies without complications.  This approach can be taken for all billing codes.  

How can Health Plans use the data?

Health plans can use this information to benchmark their negotiated rates with hospitals and healthcare provider organizations with rates negotiated by competitor health plans with similar organizations.  In addition, this information can be used to inform sales and marketing opportunities to acquire new employer customers.

For example, assume "United Health Plan of America" pays "National Hospital Health System" 150% of Medicare for services based on the patient volumes they cover.  The Chief Actuary and Pricing Executive at United Health Plan of America may analyze what the payment rates "Acme Health Insurance Co." pay to National Hospital Health System and discover Acme only pays 125% of Medicare for the same services.  The Chief Actuary and Pricing Executive at United Health Plan of America can strategically leverage this information when evaluating the terms of its contract with National Hospital Health System.  In other words, health plans can use this information to reduce their total cost of care.

In addition, the Chief Sales and Marketing Officer of United Health Plan of America may discover that another competitor "Universal Health Coverage Inc." pays hospitals 175% of Medicare.  All employer groups who subscribe to Universal Health Coverage Inc.'s health plans would potentially be interested in considering United Health Plan of America to reduce their cost of healthcare.  In other words, health plans can use this information to target new customers.   

How can Employers and Patients use the data?

Employers and patients can use this information to identify hospitals, healthcare provider organizations and health plans that provide the lowest cost for healthcare.  Large employers in particular can identify providers with the lowest cost and highest quality and choose to directly contract with them for services.

Employers can also better monitor health plans using available pricing information by benchmarking payment rates health plans negotiate with providers.  Also known as "unit cost analysis", employers can benchmark unit costs of health plans to ensure unit costs of their health plan is competitive. 

Similar to employers, patients can use this data to identify the most affordable location for healthcare services.  Since hospitals are required to publish prices for the top 500 services, patients are able to "shop" for healthcare services and reduce "surprises" of receiving high bills for healthcare.  This is the consumerization of healthcare.  

What are shortcomings of the data?

Not all hospitals and health plans comply with the requirements for medical price transparency.  Health plans are subject to CMS's enforcement authority and if they do not comply they may be faced with several enforcement actions, including: requiring corrective actions and/or imposing a civil money penalty up to $100 per day.  The same applies to hospitals who do not comply.

Hospitals and health plans that do comply also may not provide accurate information.  Therefore it is important to cross-check and reference information before utilizing it for decision-making.  As hospitals and health plans improve systems and processes to prepare data for publication, the accuracy of information is expected to generally improve.

Where can I find more information?  

Medlyze is a leader in providing and analyzing price information published by hospitals and health plans. 

Contact us to discuss how we can support your efforts to maximize the value of the information now available. 

• We provide Data as a Service so your team may internally analyze pricing information.
• We provide Insights as a Services so your decision-makers can glean insights using our analysis dashboards.
• Lyz AI, our artificial intelligence expert, proactively notifies you and your team of opportunities to take advantage of pricing changes.