The impact of transparency requirements on the healthcare system

Dr. Franklin Baumann, CMO of SmartLight Analytics, recently talked with Michael Chernew, PhD., Leonard D. Schaeffer Professor of Health Care Policy and the Director, Healthcare Markets and Regulation Lab, Harvard Medical School. The two discussed a variety of topics including waste and low value care in the healthcare system as well as some of the new regulations recently enacted in an attempt to help reduce the costs of healthcare in the U.S.

SmartLight Analytics recently reviewed the No Surprises Act, which took effect this year, to see what impact it might have on employers’ self-funded health plans. The bottom line for employers is still uncertain but initial impressions of the No Surprises Act is that there are mixed aspects of the new legislation but more positive than negative impacts in the form of reduced out-of-network costs and simplified regulatory requirements. So far, the most controversial part of the law’s implementation (not the law itself) is the alleged bias by the CMS toward using qualified payment amounts as the starting place for payment disagreement resolution.

With regard to the new transparency requirements now in place, Dr. Chernew said he is not sure how much impact it will ultimately have on the overall system. He said the hospital transparency requirements have “gotten relatively poor compliance,” but he is now awaiting the insurer transparency requirements.

“My personal view is the insurance transparency will make the hospital reporting irrelevant because there’s a lot of duplication. And the insurance transparency is going to have minimal impact, at least on patient shopping,” Chernew said.

“There are a lot of people who mistakenly believe the problem in American healthcare is that we don’t have activated enough consumers, which may be true. I’m a relatively free market economist, but the idea that somehow, we’re going to be able to activate them with transparency is not realistic.”

The problem with the transparency requirements, according to both Dr. Chernew and Dr. Baumann, is that it still does not enable the health care consumer to “shop” for services because of the very nature of health care and how it is delivered. Other than very basic and simple services and routine tests like a colonoscopy or mammogram, more often than not, patients require several different billable services at once and often don’t know ahead of time what will be needed before seeking treatment.

And Chernew added, “just figuring out what the pricing is (for a procedure or service) doesn’t tell the person what they’re going to pay out-of-pocket anyway.”

“It’s not like the service you’re buying has a code. For example, you may say, Oh,  I want a knee replacement. But there are many codes for the knee replacement, and no one knows exactly what price it is. And the actual details of the episode in your case depends on exactly what they’re doing (in each procedure). But the point is, except for the most simple things, like a screening colonoscopy, (transparency pricing)… is not useful.”

Employers hoping employees could be made better consumers of health care through the transparency requirements should not be counting on that to reduce costs. Plan administrative action could be taken as a result of some of the transparency pricing now available but action from consumers is not highly likely. Chernew said in the end, he thinks the transparency requirements are not going to be all that impactful to reduce healthcare costs or waste.