Employers that sponsor health plans are beginning to have more options for comparing prices they pay to hospitals as more organizations ramp up data services that at times show large cost variations for medical treatments.
“We’re seeing wide price variation even in the same hospitals on the same day based upon the negotiated prices by the differing health insurance carriers or health plans,” said Cynthia Fisher, founder and chairman of the philanthropic group Patient Rights Advocate, which provides free price data for nearly all of the more than 6,000 hospitals in the US. “For the employers, this is eye-opening.”
Being able to compare prices negotiated between hospitals and health insurers is important for employers and unions that run health plans, which may be able to use the information to try to negotiate lower rates. It’s also essential for employer-sponsored plans to perform these analyses in order to meet their fiduciary duty under the Employee Retirement Income Security Act.
Patient Rights Advocate on Dec. 11 introduced a hospital pricing search tool for the public. The organization pointed to prices for an injection of cancer drug Rituximab at Rush University Medical Center in Chicago that ranged from $899.33 for the Cigna Basic/Premier medical plan for Rush employees administered through Allegiance Benefit Plan Management Inc. by the Cigna Group, to $9,260.13 for the Cigna One Health HMO.
“If they’re able to offer it at a tenth of the price, why should one employer pay 10 times more?” Fisher said.
Cigna didn’t respond to a request for comment, and a spokesman for Rush said the hospital wasn’t “in a position to speak to something that specific so rapidly.”
Being able to easily compare prices will protect health plans from billing errors and fraud by hospitals and insurers, Fisher said. “The employers and unions that design health plans will be able to benefit from being well-informed about their choices and decisions to seek the best quality of care at the lowest possible prices,” she said.
Federal Rules
A hospital price transparency rule from the Centers for Medicare & Medicaid Services that took effect in 2021 requires hospitals to make their standard charges public, including posted prices, charges negotiated between hospitals and insurers, and discounted cash prices. The transparency in coverage rule that took effect July 1, 2022, requires health plans to make public negotiated rates for all covered health care items and services, including prescription drugs.
CMS updated its rules this year to standardize the format used by hospitals for data reporting, and it has updated its methods to assess hospital compliance. Beginning Jan. 1, 2024, CMS may publicize on its website information related to a hospital’s compliance and any actions taken against them.
Organizations like Patients Rights Advocate along with data service companies have cleaned up and posted data collected from hospitals complying with the rule, making pricing databases searchable for employers and patients.
Ariel Levin, director of policy at the American Hospital Association, said in an email that providing accurate and timely estimates about the costs of care “is a complex endeavor that takes into account multiple factors, including a patient’s health insurance coverage.”
CMS in 2022 found that 70% of hospitals websites’ had fully complied with the federal rules’ posting requirements for standard pricing data, an increase from 27% the previous year.
“We expect those numbers are even higher today, but patient uptake remains low,” said Levin, referring to use of the data by consumers of healthcare.
“We continue to believe that the best path towards helping patients make informed decisions about their care is to simplify (and reduce) the amount patients owe in co-pays and other cost-sharing, as well as to ensure all estimates take into account the patients’ health care coverage,” Levin said.
Fiduciary Duty
With pricing data becoming more complete and usable, an employer-sponsored health plan has a fiduciary duty “to look at those numbers for your network,” said Tony Sorrentino, an attorney who is chief compliance officer with Health Plan Fiduciary Guides in Parker, Col., an employer plan consultant.
“They’re starting to warm to the task,” Sorrentino said of employer plans, but “they are woefully behind.”
Employers need to be able to demonstrate to health regulators, if they are asked, that they’ve compared prices of services with other networks in their area, he said.
“What you have to assure your plan participants is that you’ve gone through a fiduciary process of benchmarking in order to prove that you’ve done the best by them,” he said. Benchmarking means comparing accessibility, pricing, and outcomes of their plan with other plan networks that are available in their area, he said.
Employers are “paying more attention to their own data,” Gloria Sachdev, president and CEO of the Employers’ Forum of Indiana, said. The forum is an employer-led health care coalition that includes medical providers, hospitals, health plans, and benefit consultants. However, she said, “I see employers getting roadblocked by their third party administrators and PBMs from getting their own data.”
Cost Transparency
The Indiana forum sponsors a free Sage Transparency tool for employers that combines data on prices and quality. The tool will be updated by May 2024 to include price data for administered medications such as injections or infusions provided in hospital out-patient clinics, as well as information based on legislative districts, Sachdev said.
Data analysis is necessary for employers, because the data collected by the federal government is “not in a usable format for them,” she said.
Turquoise Health, another company that compiles price data for hospitals and health plans, published a report Dec. 12 exploring health care costs for 500 services CMS lists as “shoppable.” Those are the easiest services patients can schedule in advance and compare options for, such as lab tests, common procedures such as knee replacements, or common drug therapies.
Turquoise found prices for vaginal deliveries with post-delivery care in Los Angeles that ranged from $1,183 to $32,563 in its most recent report based on prices disclosed by national health insurers and large hospitals.
Employers “might be spending at the upper range of that price for services for their employees and not even know they’re at the upper range,” Marcus Dorstel, vice president of operations for Turquoise, said.
Turquoise is finding more complete hospital data postings than has been the case in the past, Dorstel said. Of the 6,357 hospitals it has looked at, 5,764 have posted files, and 4,548 of those files are “relatively complete machine-readable files,” he said.
Health insurers have posted pricing data pertaining to about 90% of the people they cover in the US, which includes data for employer plans, according to Dorstel
“With price transparency data employers can see where they fall in that price range and start to choose better cost options for their employees,” Dorstel said.