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Will public hospital prices persuade employers to self-fund?

The latest effort in the push for healthcare price transparency is a new federal requirement for hospitals to publish prices for charges for uninsured or out-of-network insured patients publicly on their websites.

As of Jan. 1, these lists are up and accessible, but they feature complicated medical billing codes and high sticker prices that don’t reflect insurer discounts. As a result, many in the industry have taken the position that these lists aren’t particularly useful.

To be sure, we are still in the early stages of what is a long, winding journey toward more price transparency for consumers. Centers for Medicare & Medicaid Services Administrator Seema Verma said herself that this is “just the beginning” for price transparency.

But even if these hospital lists aren’t the consumer-friendly price-shopping tool many in the industry are looking for, they are likely to be extremely valuable for the cost containment sector, and may have particular benefits for brokers working to move clients away from fully-insured plans.

Hospital pricing transparency

Opaque hospital pricing has long contributed to rising costs for employers, and many of the cost containment efforts employers have implemented over the last few years haven’t effectively addressed this fact.

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Ryan Corwood, an operation department practitioner prepares a drip infusion in an operating theatre at the BMI Weymouth hospital in London, U.K., on Thursday, Sept. 2, 2010. BMI Healthcare Ltd opened the flagship hospital in August this year. Photographer: Chris Ratcliffe/Bloomberg *** Local Caption *** Ryan Corwood

For example, the rise of HSA-eligible plans has given employees more control over their healthcare dollars, but the success of this strategy has been stunted by limited price transparency. As a result, many employers are looking to their broker for solutions that better address the root of rising costs.

Hospital price lists give brokers another set of tools to help clients move away from annual plan design changes and double-digit rate increases under the fully-insured model, and toward a more sustainable self-funded strategy.

Illustrating cost and quality variance

Brokers can use these list prices to illustrate that hospital prices in their market vary substantially, and aren’t necessarily reflective of quality.

This provides an opportunity to explain to clients the role of insurer discounts. A 40% discount may sound substantial, but if it’s off of a triple-digit list price, employers may have reason to question the value of carrier discounts.

Many brokers have already been working to advise clients on this dynamic and move groups toward funding strategies that give employers more control over their healthcare spend. However, using list prices publicly available on hospitals’ own websites to demonstrate cost discrepancies will likely be more convincing than using third-party data, which employers may be more willing to write off as inaccurate.

The new cost data could lead more employers to see the value of self-funding, and ultimately even embrace strategies like direct contracting or reference-based pricing.

Long-term, these price lists might also impact the negotiations between hospitals, insurers and employers, but that isn’t yet clear. For now, the clearest value in this data may be demonstrating how widespread pricing and quality variation are, and the impact that this has on employers.

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Cost transparency Healthcare costs Healthcare industry Healthcare benefits Healthcare plans Healthcare delivery Health insurance
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