Rae Woods:
From Advisory Board, we are bringing you a Radio Advisory. My name is Rachel Woods. You can call me Rae.

Rae Woods:
As COVID-19 becomes more manageable, the industry is starting to come back to some of healthcare's evergreen issues, plus some of the new challenges that are headed our way. That's why in this episode, I want to talk about how three new policies will impact nearly every stakeholder in the healthcare industry. To talk about hospital price transparency, payer price transparency, and surprise billing, I've brought two guests to the pod.

Rae Woods:
Strategy expert, Rob Lazerow, and policy expert, Heather Bell. Hey Rob. Hey Heather.

Rob Lazerow:
Hey Rae.

Heather Bell:
Hey Rae.

Rae Woods:
Heather, are you so excited to be on the podcast? It's been more than a year of us having Radio Advisory and we finally get to have our policy expert on the pod.

Heather Bell:
I have been listening to this podcast pretty dedicatedly for the last year or so. Glad to finally be here.

Rae Woods:
Rob it's up to you to show Heather the ropes.

Rob Lazerow:
Well, thanks for having me back. I guess I didn't screw up too much last time.

Rae Woods:
Never.

Rob Lazerow:
Can I brag about Heather a minute?

Rae Woods:
Yeah.

Rob Lazerow:
Heather has probably the Advisory Board's most prolific author, even after changing jobs this past year, she was previously the managing editor of our daily briefing. Now she's officially part of the research team working with me on health policy issues. She still writes a weekly column. I don't know anyone else who writes as much as Heather.

Rae Woods:
Yeah. You and Alexander Hamilton and Taylor Swift, I guess. And that's a huge compliment coming from me, Heather.

Rob Lazerow:
I was going to say for you of all people.

Rae Woods:
That is a huge compliment. We're going to be talking about policy today. And policy always has a big impact on healthcare, but we're seeing some pretty bold policy moves that I think have the potential to rewrite the way that hospitals and health plans do business. What are the big policies that you are tracking?

Heather Bell:
So there are three that I'm tracking pretty much day to day. That's the hospital price transparency, transparency and coverage, AKA payer transparency, and the surprise billing legislation that just came out.

Rob Lazerow:
And one of the wrinkles is that while there are three different policies, they're also being implemented at slightly different timeframes. So we have one that's in place right now. So at the beginning of this year, the hospital price transparency rule went into effect. But at the beginning of next year, that health plan and the surprise billing ban are slated to go into effect.

Rae Woods:
We're talking about transparency, which is intricately tied to affordability. And this has been a big focus for some time. CMS has been pushing for transparency for years. What is different about these policies that make them the boldest moves to date?

Rob Lazerow:
Rae, I think what makes these particular policies and the price transparency one's in particular bold is that this is the first time that the government's requiring hospitals and health plans to publicly disclose what have otherwise been privately negotiated rates.

Rae Woods:
Maybe even secret rates.

Rob Lazerow:
That's right. And I want to go back to the premise of the question a little bit, because there's an interesting angle on affordability, because it's really a question of affordability for whom? This isn't about driving savings for Medicare. We've had so many conversations around the Medicare trust fund and it's looming insolvency in 2024. This is about driving affordability or potentially driving affordability in the private sector.

Rae Woods:
And I think that's really important because a lot of the narrative that's out there is that these are all about protecting the consumer. But what's interesting about what you just said is yes, the goal is that hopefully these policies ultimately make hospitals and health plans more consumer-friendly, but there's more to it.

Rob Lazerow:
Rae, I know we've been talking about the government. We're talking about hospitals, we're talking about health plans, but these policies also speak to a lot of other audiences. So you think about end-users, employers and consumers definitely come to mind, but also Silicon Valley and a lot of innovators who are interested in getting their hands on this data and aggregating this data to highlight the different pricing variation, both across and even within hospitals.

Rae Woods:
Heather, whenever I talk about policy, I get afraid that there's a natural instinct to assume political motivation. But the three that we're talking about today are interesting because they are Trump era laws. But because of the timing, the Biden administration is actually the one who gets to write the rules. What does that mean?

Heather Bell:
Well, so I'm going to take a step back and say, that's partly true because let's remember that the hospital and price transparency rules were written by the Trump administration and now enforcement is falling to the Biden administration. So there's a slight distinction there

Rob Lazerow:
Versus the other two that were passed at the end of the last administration and now must be implemented by the current one.

Heather Bell:
Exactly, exactly. But Rae, I think the point you're getting at is spot on. These are a collection of policies that really bridge the Trump and Biden administration. And it's kind of the first bridge we're really seeing.

Rae Woods:
And they reflect the fact that these are not partisan efforts, even though there might be some differences in implementation, let's say. These are universal efforts for all sides of the aisle.

Heather Bell:
Exactly. Yeah. These have been long standing bipartisan issues that we've been talking about on the Hill for years now.

Rae Woods:
Before we talk about any one of these policies, I'm wondering how do they actually interact together?

Rob Lazerow:
Rae, for me, that's actually the most important and interesting strategic question because I think it's very easy to look at these policies individually and ask, well, what do they do one by one? But I think it's the interaction with them that could be the most transformative. So for example, at the end of this year, we will have had a full year of hospital price transparency under our belt. So hospitals, health plans, employers will all have more visibility into what hospitals are getting paid and from whom. Beginning next year, the surprise billing ban once the rules are written in, it goes into effect, will change the stakes of hospitals being in and out of network. You put the two of those together and it could be a huge rewrite to how hospitals and health plans approach contract negotiations. It could be much ado about nothing. I have no idea. And as a researcher that really excites me.

Rae Woods:
And you're getting to the fact that it's going to be awhile before we know exactly how all three of these play out. But I do want to talk about the other two pieces of the puzzle here. So Heather, what do we actually know about the payer transparency side?

Heather Bell:
So what's more interesting is in 2023, they're going to give patients an individual estimate, not just based on the prices from hospitals, but something that also takes into account their benefits and cost sharing. So to put this in real terms, say I'm going to the doctor and I want to know upfront how much that visit is going to cost me. I can now contact my insurer, tell them about the visit and they have to respond with a reasonable cost estimate before I go to that provider visit.

Rae Woods:
That is customized to you as a patient.

Heather Bell:
Exactly.

Rob Lazerow:
Heather, I'm glad you're excited about the 2023 changes. I'm really focused on the 2022 changes because health plans are going to have to do basically what hospitals are doing right now in posting negotiated rates publicly. And I think this could actually end up being more consequential than the hospital price transparency rule. Because if you think about any given market, there are generally more hospitals than health plans. So we'll get a larger view when the health plans post their data, fewer decision-makers so likely faster action and more consistent data, at least from any individual payer. So you could easily see all this focus right now on the hospital price transparency rule, pivot to the health plan price transparency side once that data is on the table beginning next year.

Rae Woods:
But there is a third policy that is not about transparency and that's about surprise billing.

Rob Lazerow:
Surprise.

Rae Woods:
What do we know there?

Rob Lazerow:
First thing we know is Congress surprised us by passing the surprise billing ban or the no surprises act at the end of last year after it was a really hot issue in 2019 that got derailed by lobbying efforts. Serious answer. What we know is that this is essentially going to be the end of surprise bills and surprise bills have been a big topic for the last few years, largely driven by a lot of media coverage of consumers getting a big bill. It's not just that it's surprising. It's surprisingly large typically.

Rae Woods:
And surprising for what it's for. We've all seen these, the bandaid in the ER, the fee for holding my baby after giving birth. That's the kind of headline that no hospital wants to have.

Rob Lazerow:
But they generally come from someone receiving care from an out of network provider. And in many respects, consumers have ended up stuck in the middle of negotiations between hospitals and health plans. These surprised bills have become such an issue because of the way cost sharing has changed over time. It's not a new phenomenon that there are certain providers who are out of insurance networks and there's out of network care. What's different is consumers are now exposed to those costs in a way that they weren't 5 or 10 years ago. And that's why it's been such a hot issue.

Heather Bell:
And it's not just that surprise billing is outlawed now. It's that it's being replaced by this new arbitration process. And this process takes the consumer out of the middle of these negotiations and it requires payers and hospitals to come to terms. It creates a formalized model for resolving these out of network contracting disputes and it holds the consumer harmless.

Rob Lazerow:
So let's tie these ideas together. We're going to have a lot more information on who's getting paid what amounts, and different stakes are being in and out of network. And that's why I think we have to look at all of these policies together. At least once they're all up and running.

Rae Woods:
For now, I do want to go a little bit deeper onto the policy that we do know more about, which is the hospital price transparency side. I think you mentioned this already, but I want to make sure our audience is clear on it. How does this rule actually work?

Heather Bell:
The hospital price transparency rule pretty much requires hospitals to post five types of standard charges in two different formats. They need a machine readable file and a shoppable services tool for consumers to use. There's a lot of other nitty-gritty in there, but that's kind of the overarching takeaway what hospitals are trying to do right now.

Rob Lazerow:
And that requirement went into effect on January 1st of this year. And there's a financial penalty technically called a civil money penalty of, what is, $300 per facility per day for non-compliance.

Rae Woods:
And you said it yourself, Rob, that this started at the beginning of 2021. It has been five months since then. Are hospitals compliant with the new rule?

Rob Lazerow:
I wish I could answer that question, but I can't. And I won't. I think it's unhelpful right now when anyone who's not the federal government, who's not CMS tries to say someone is compliant and someone isn't compliant. We're still actually waiting to see how CMS is going to enforce this new rule. Where we are right now, they're sending letters to hospitals that aren't actively posting their prices on their website. That said, I think the helpful parallel right now, rather than getting into the nitty-gritty of are you compliant or you're not compliant is are you taking steps toward compliance? And in particular, are you engaging in the most consequential parts of the requirement? And that's posting that machine-readable file that Heather mentioned that has all of your payer specific negotiated rates.

Rae Woods:
So when it comes to the machine-readable files, who is actually posting this data so far?

Rob Lazerow:
So there are a lot of estimates that we set out to check ourselves. And we looked at a random sampling of 50 hospitals. And we found that about 52% of them had posted machine-readable file. So they've taken meaningful steps. What's interesting is as our research team started to look at those files, they found lots of small technical errors that hospitals have made along the way. So as we've been advising leaders, now the time to really dot your I's and cross your T's because as CMS is beginning to come check for compliance, you don't want to find out that you're in hot water because you didn't use the correct file naming convention. [inaudible 00:14:11] for example. So there are a lot of easy fixes, but zooming out about half of hospitals are engaging in the big part of the world right now.

Rae Woods:
And it sounds like there were some mistakes made along the way. You mentioned some potentially easy fixes, but what happens when we dig deeper into those that actually did post prices? What do they tell us?

Rob Lazerow:
Well, Rae, as you might expect, we see a lot of variation. And what's interesting is that we're now able to look at variation within hospitals, in addition to across them. If we go back in time a couple of years, we had a lot of conversations around variation across hospitals or within a given market driven by some research done by RAND. So every year for the past three years, RAND has come out with their hospital pricing report and they looked at hospital prices compared to Medicare rates. And you saw that some hospitals are charging 300, 400% of Medicare, and you can see how that changes within their sample markets.

Rob Lazerow:
But with this rule, we're able to look at that variation within a given hospital. And it didn't take long for articles to start coming out in the press. And as we do our analysis, look at the variation. So let's go back to early February, Wall Street Journal published a long article, looking at price variation at a large health system out in California. And if you look at the lead of the article, when a woman gets a C-section at this particular hospital, the price could be around $6,000 or $29,000 or $38,000 or even $60,000. So you see this huge variation. It's not expected, but we actually have the numbers now.

Rae Woods:
So this all sounds bad to me. And I'm a pessimist and we've talked about this a lot on this podcast, but when I hear only 50% of hospitals that we sampled actually publish their prices. And then even if we look at the data, there are mistakes in the file. There's all this variation. I mean, is the takeaway that this kind of pessimistic angle?

Rob Lazerow:
Well, Rae, I think there are two very different ways of looking at that question. I think there is the pessimistic one that you outlined that says hospitals are purposely avoiding posting the rates that they are looking at the current penalty of $300 a day and doing a cost benefit analysis of $109,000 penalty versus publishing all of this proprietary data.

Rae Woods:
Data that we said from the beginning was historically, I think I use the word secret.

Rob Lazerow:
But I also think there's a maybe optimistic isn't exactly the right phrasing. But if that's the pessimistic view, let's also think about the realistic view. Think about what hospitals and health systems have been dealing with for the past year. So this is a regulation that was proposed in the middle of last year, finalized in November, right at the height of the COVID pandemic, and then went into effect on January 1st. So I actually think it is a positive sign that more than half of hospitals, at least of the ones that we sampled, are already taking meaningful steps.

Rob Lazerow:
For me, I'm looking to see how that number changes over time. I'll be a lot more pessimistic if it stays at 50%, especially because as I talked to hospital leaders, some acknowledge that they are still working on this and are making progress toward publishing rates later this year. Some are also looking for partners like perhaps their EMR vendor to be helping them with it. So I'm going to reserve judgment until I can see how this number trends over the year.

Rae Woods:
Heather, what do you think? What's your opinion on all this?

Heather Bell:
I think I'm in the same boat as Rob. It's kind of we're in a wait and see period with this mainly because at least from what I've been hearing, what AHA has been raising to people on the Hill, there's a lot of confusion with the rule. So the fact that 50% of hospitals have made some progress while they're still trying to figure out legally what they have to do and not have to do, currently, I think is pretty, pretty positive.

Rae Woods:
But I want to come back to something that Rob said. Again, maybe I'm going to take on the pessimistic angle here. I do agree that it would be a positive sign to see the share of hospitals publishing anything go up. But the question I have is is the data they're actually giving us even actionable?

Rob Lazerow:
Well Rae, that's the big open question right now. So as our team looked at the machine readable files for the 50 hospitals that we surveyed, we saw a lot of inconsistency and some of it was formatting decisions literally is the table horizontal versus vertical, which then makes it hard to pull the data and compare and contrast it. We saw differences in how hospitals were choosing to extract the data, which could then complicate comparisons. So it wouldn't surprise me down the road to see more standards around what has to be reported or conversely, again, this is an area where once the health plan requirements go into effect next year, it could actually make a lot of these moot points.

Rae Woods:
Hm. Okay. Well, what I'm hearing is for now, it is really hard to make apples to apples comparisons, and that might change in the future, particularly as some of these other rules come into effect, but I am going to try to be glass half full for a moment. And let's just altogether pretend that these efforts do lead to accurate and transparent price information. Let's say we are able to make apples to apples comparisons. Will that actually make a difference in prices?

Rob Lazerow:
And that Rae is the biggest open question of them all. Can we talk about concrete?

Rae Woods:
I'm not sure where you're going, but sure.

Rob Lazerow:
Okay. So when you have this conversation with health economists in particular, I guarantee you will hear about concrete and not any concrete, but Danish concrete. Are you familiar with the Danish concrete?

Rae Woods:
I am. And I feel like you put this in here because I'm married to a Danish man, but please continue.

Rob Lazerow:
That is only part of the reason why, but it's a really, really good analogy, even if you weren't married to a Danish man. And first of all, hat tip to Margot Sanger-Katz for writing about this in the New York Times and making this so widely available. So in the early nineties, the Danish government looking to spur competition in the ready mix concrete industry required public disclosure of prices.

Rae Woods:
Kind of like what we're proposing in the healthcare side.

Rob Lazerow:
And that's what makes it such a great analogy. Now the concrete manufacturers shared their prices. And guess what happened? Prices went up by between 5 and 20%.

Rae Woods:
Wow. What's the rationale there? Why did prices go up and not down?

Rob Lazerow:
Well, it's an unexpected outcome. That economic theory would be more information sparks more competition. That's the heart of the Danish policy. It turns out what happened is the concrete industry operates... It's an oligopoly. It is a highly concentrated few manufacturers. And once they solve each other's prices, it let them all raise prices without actually having to secretly collude with each other, because it was all visible. The analogy I've made is what would happen if you learned that you were getting paid 20% less than one of your colleagues, you'd probably be asking for a raise pretty quickly.

Rae Woods:
Yeah, I would absolutely.

Heather Bell:
But this isn't just concrete. It's people's lives. It's their healthcare. Even with all these pending questions, we're seeing hospitals capitalize us and put the consumer first, they're trying to improve the patient experience and help consumers shop for care, which is really uplifting, considering the last year we all just had.

Rob Lazerow:
Heather, I think that's spot on. And I also think it's going to play out differently in different markets and with different competitive dynamics. If I am a hospital in a market that is on the more affordable side of the spectrum, maybe instead of trying to raise prices, how do I use that to my advantage to attract more market share and to grow by offering a higher value product? So I think we're going to see different reactions depending on the different competitive positions in the market.

Rae Woods:
So given all of the open questions and given that we are still going to be learning about these policies, what's the one takeaway or action item you want our listeners to focus on? Heather, let's start with you.

Heather Bell:
Hospitals should be focused on figuring out how you want to articulate your value story. Even if your unit costs look really bad, make sure you have other metrics you can be highlighting to consumers, payers, purchasers, all the stakeholders across the spectrum.

Rae Woods:
Rob, what about you?

Rob Lazerow:
I love that Heather, I'm going to build on it. My advice is to zoom out and it's very easy to focus on the particular details of any of these regulations or even how they all fit together. But I think there's a broader question about how do we continue to improve the patient financial experience and make sure we're not detracting from excellent clinical care with a frustrating consumer experience?

Rae Woods:
Well, Rob, Heather, thanks for coming on radio advisory.

Rob Lazerow:
Thanks Rae.

Heather Bell:
Thanks for having me, Rae.

Rae Woods:
Differences in health policy are clearly not going away. And as Rob and Heather pointed out, there are a lot of questions about what's to come and what it will mean for different parts of the healthcare industry. So if you're looking for more, we've added a few links to our show notes, including some cheat sheets to help you make progress on your transparency efforts.

Rae Woods:
Because as always, remember, we're here to help.