More than a year ago, the federal government passed the Healthcare Price Transparency Act, which was primarily directed toward hospitals. Under the rule, hospitals are required to display their prices and allowed amounts in a machine-readable and consumer-friendly format. Furthermore, they are required to display the charge amounts, as well as the allowed amounts for each of the health plans they participate in. To date, only 14% of hospitals remain compliant, while health plans and the federal government look the other way. 

The federal government is still working out the enforcement. Currently, no fines have been issued. Presumably, because the government hasn't quite figured out the program yet. Major health insurance plans, on the other hand, have done little to enforce the rule. Health plans can enforce their hospitals to follow CMS rules and regulations, and often do, but have done little to enforce that their hospital partners publish their allowable rates. 

Why don't health plans want to enforce price transparency? Health plans don't want you to know what they have negotiated and are not that interested in saving money. Health plans are bound by the 80/20 rule. The 80/20 rule requires insurance companies to spend at least 80% of the money they take in from premiums on healthcare costs and quality improvement activities. The other 20% can go to administrative, overhead, and marketing costs. The 80/20 rule is sometimes known as Medical Loss Ratio or MLR. In other words, the more money they spend, the more they get to keep. 

Pricing transparency, many argue, would drive down the costs of reimbursements for hospitals. If UHC knew what Blue Cross or Cigna were paying at the same hospital (it's almost guaranteed to be radically different), the argument is that health plans paying more would try to negotiate down to their competitors. However, because of the 80/20 rule, there is no incentive to drive down costs. 

This also begs the question, why do these same companies so enthusiastically keep trying to cut physician reimbursement, particularly reimbursement for independent practices? It's about control. The health plans decided decades ago that they don't have much control over hospitals. Instead, they diverted their strategy to “If you can't beat 'em, join 'em.” Many hospitals have turned to hospital and health system ownership and investments. Banner, a Phoenix-based hospital system, owns its own Medicaid health plan, a commercial health plan for its employees, plus a partnership with Aetna. Kaiser Permanente based in Oakland is another example of a large health system that also owns a health plan. What incentives do these systems have to save any money?

Physician groups became the way for health plans to vertically own the healthcare delivery system. If you squeeze physician groups enough, you not only get to control how they provide care, but you also get to employ physicians under these large health systems. If you make the payment system so arduous, you can control what care is provided and when. Prior authorizations, pre-authorizations, requiring medical records across the board, and reimbursement rate limitations are squeezing the margins of the typical practice, resulting in many groups selling to private equity and healthcare systems. 

This is probably one of the greatest threats to healthcare in our country, yet it continues to happen under the guise of the free market, but really, it's just crony capitalism. The amount of consolidation has meant that physicians are being funneled to these larger systems, and health plans can more easily invest in, and thus own, physicians and the entire integrated healthcare delivery system. 

The best thing a physician group can do is negotiate their reimbursement rates. If it's been more than three years since they were last negotiated, then you're likely down 15% to 20%, or perhaps more as inflation continues to grow. Keeping rates current will allow groups to be able to maintain their margins and profit. With increased costs of retaining employees, higher wages, and costs, it becomes more difficult to make a profit and sustain the business. But, if rates are increased at least on a yearly basis, groups can continue to maintain their margin and profits. 

The Healthcare Price Transparency Act may not have been the act that can lower healthcare costs, but it is certainly a step in the right direction. If we want to see true cost savings, we need to protect and maintain the competitive nature of physician practices and not allow insurance payers to try and control the system. 

NGA Healthcare offers a turnkey solution for negotiating your rates and guarantees that we'll get your practice a meaningful rate increase or there is no cost to you.  There is virtually no risk in working with NGA on your rates.  NGA Healthcare has successfully negotiated a rate increase for 100% of our clients, so please schedule a complimentary consolation to learn how we can increase your bottom line!