Health organizations will need to react quickly in light of two new federal rules driving hospital-payer pricing information out into the open, and new legislation to protect consumers from surprise medical bills. With more pricing information available than ever before, health organizations should rethink contracts, negotiation strategies and ways to build trust with consumers.
Traditional health organizations and new entrants have the opportunity to extract fresh insights from the newly public data and create innovative tools to help consumers to clearly understand prices. Organizations that move quickly may emerge as key partners to help payers, providers, and pharmaceutical and life sciences companies respond to the new regulations and enhance the consumer relationship. Or they may emerge as rivals to take advantage of the disclosures to challenge rates or poach market share, forcing unprepared organizations to adapt quickly.
PwC’s Health Research Institute (HRI) interviewed health industry advisers and trade association executives to gain a clearer understanding of the potential industry impact.
The final hospital price transparency rule that took effect on Jan. 1, 2021, requires hospitals to publicly post standard charges for all items and services—including negotiated rates with each payer. Hospitals also must post their gross charges, which is the amount they bill without any discounts, and discounted cash prices charged to self-pay individuals, as well as the de-identified minimum and maximum charges for all services and products.
Hospitals are posting new data showing negotiated rates paid by payers for medical services and products, though much of the information is challenging for consumers to interpret. However, payers, providers and new entrants can collect the data and derive insights that can be used to their advantage with competitors and in contract negotiations. Providers can see how their rates fare in their region and can start to build cases for why they deserve their rates, perhaps emphasizing quality, outcomes or expertise.
The Trump administration’s payer Transparency in Coverage rule, finalized in October 2020, requires the release of pricing information on the health plan side. The Biden administration has not indicated what it plans to do with this piece of regulation. The administration could let the rule continue, or Congress could stymie it through the Congressional Review Act. The rule requires health plans to publicly post negotiated rates with in-network providers, billed charges and allowed amounts paid to out-of-network providers as well as the negotiated rate and historical net prices for prescription drugs at the pharmacy location level, starting with plan years that begin January 2022.
The payer transparency rule is intended to offer consumers a more complete picture of healthcare prices, but this additional information also has the potential to bewilder people.
As the information is absorbed and scrutiny of medical costs continues, health organizations should be aware of risks to their reputation from media headlines or research that casts them in a bad light. Providers and payers should review public relations strategies to enhance communication with their audience.
Proactive efforts to strengthen consumer trust may be important foundationally as the health ecosystem shifts in response to the new regulations.
Health organizations should review their digital footprints to make sure they have the right applications and portals for consumers to access information on the 300 shoppable services required to be posted in a consumer-friendly format. Providers and payers also should improve the accuracy of data they release to make true estimates to patients.
If this does not occur, health organizations risk consumers making reactive decisions based on incorrect, or confusing, information in public data files. Companies may consider using this opportunity to enhance the relationship with consumers by building trust through useful dashboards that help consumers make sense of the pricing data and put it in proper context.
Health organizations should understand how their posted data ranks in the market — are they too low or too high? They should scan how competitors in their market have presented the information. Is it more consumer-friendly? Are there inaccuracies or discrepancies in the types of pricing information shared that may create confusion about where their organization stands in the market? This initial intelligence will be important to building a data-driven response and protecting organizations' market positions.
With the new pricing information disclosed, providers and payers may be looking to take advantage of it as they enter negotiations. Payers may look to drive down their rates with high-cost providers or bring out-of-network providers in network for lower rates. Employers also may play a more activist role in response to the public information, exerting more pressure.
Providers may want to make sure they are being paid fairly in the market. Providers with lower negotiated rates than peer facilities may use data points on competitors’ rates to build a case for increasing their reimbursement during renegotiation. Those with higher rates may want to tie those prices to higher quality and convenience, as payers and consumers may be willing to pay what seem like higher prices in some cases if there is a value argument or differentiation.
Data and health information technology firms may be poised to pull actionable information out of the newly released files and develop consumer apps and other intuitive tools for consumers and employers. Private equity firms may see opportunities to invest in them, as well as in revenue cycle management services that can improve front-office operations.
Pharmaceutical and life sciences companies will see some of their pricing information made more public in the machine-readable files hospitals already are releasing. Inconsistencies in the ways that information is reported could lead to confusion over perceived (or real) high drug prices.
The payer price transparency rule would make public additional pricing data, including in-network negotiated rates and historical net prices for all covered prescription drugs at the pharmacy location level. Pharmaceutical and life sciences companies and pharmacy benefit managers should watch this area to see if new entrants sweep up the data to extract insights that disrupt their transactions or negotiations.
The No Surprises Act, passed in December 2020 as part of the omnibus spending bill, may intersect with the new price transparency regulations to impact contract negotiations between payers and providers. The law establishes an arbitration process starting January 2022 that will resolve surprise bills arising from out-of-network emergency services and out-of-network ancillary services (such as lab, anesthesiology and radiology services) delivered at in-network facilities.
The No Surprises Act limits the amount patients pay for out-of-network services to their cost-sharing amounts had the services been in network. These provisions also apply to emergency air transport but not ground ambulances. The only exception for which a provider can bill more than the cost-sharing amount is if the patient receives out-of-network nonemergency services with advance notice that the service is out of network and consents to that service with a higher bill.
As consumers grow accustomed to retail interactions that focus on stellar customer experience, they may expect more clarity around prices. Payer and provider education efforts should focus on adding more of that clarity for consumers, to help build long-term trust that strengthens member and patient relationships.
Providers and payers should review their data systems to make sure they can deliver accurate cost estimates for patients. They also should review the systems used for insurance verification as the accuracy of those processes will be essential once the changes to surprise medical billing take effect. Companies should consider the contract management technology in place to see if investments are needed.
The expanded universe of pricing information that will be public through the new price transparency rules could enhance organizational intelligence on the market and help inform strategies on how to respond to the No Surprises Act.
Payers should review all the situations when out-of-network care might occur, assess the potential financial impact, and expand out-of-network mitigation strategies to prevent “balance billing” situations. Payers and providers should understand when to pursue arbitration, as each side will try to use leverage to force rates up or down, or control networks. Strategies should be developed according to geography and market landscape.
The No Surprises Act offers an exception to allow for balance billing in cases where a patient in a nonemergency situation can choose an out-of-network provider with the understanding that payers will not cover the full bill and they will be responsible for extra charges above their cost-sharing. Providers should consider clear communication strategies and identify the patients who fall into the category that might be interested in paying for certain providers. They also may need new processes and documentation systems to make sure they have proof of the notice and consent.