By Stacey Pogue and Nadia Stovicek
Many Americans struggle to access health care due to high and rising costs. Half of adults in the U.S. find it difficult to afford health care, and one in four skipped or put off needed care in the last year due to cost. As health care has become less affordable for families and employers, state policymakers have become more focused on strategies to lower commercial health care prices, including by increasing transparency of prices and shining a light on other opaque features of the health care system.
Transparency approaches have often targeted consumer health care decisionmaking, though evidence suggests that transparency efforts to encourage smarter consumer shopping have minimal impact on costs. States are also pioneering ways to increase transparency that can be leveraged more broadly by employers, researchers, regulators, and policymakers, to help them identify the drivers of health care cost growth and better target solutions. While transparency-focused approaches are a relatively weak cost-containment tool, they can serve as a means, not an end, informing more robust policy actions. Transparency-focused approaches also tend to have bipartisan support and often require less state investment or infrastructure than other strategies, making progress possible in many state political environments.
This blog post reviews a set of options for state policymakers seeking to advance health care transparency–of prices, ownership, and billing–including options that better equip employers, researchers, regulators, and policymakers to rein in commercial health care prices.
Ownership Transparency
Rampant consolidation and the growing corporatization of health care providers, including hospitals and physician practices, has reduced competition and led to higher prices. State policymakers and regulators who want to understand consolidation or encourage competition need accurate information on the ownership and control of provider entities, but it is often hard to come by.
A physician’s practice today could be owned by a health system, an insurance conglomerate, a private equity firm, or other corporate entities, and ultimate ownership or control can be obscured by a complex web of interrelated corporate entities. There are incomplete, yet publicly available sources of ownership information for hospitals, but not for physician practices, making it hard for states to understand or respond to trends that can drive prices higher, like vertical integration and private equity acquisitions.
States seeking to understand their health care markets or encourage competition have increased ownership transparency through two routes. First, several states require health care entities to notify the state of certain material changes, like mergers and acquisitions, allowing the state to foresee changes to competition.
Second, states can require providers to annually or periodically report ownership information. This approach can help states understand the entities and dynamics across the health care market today and track changes over time. Massachusetts uses both approaches, and its program to systematically collect and publicly post ownership, contracting, and clinical relationships of large provider organizations serves as a state model. The Indiana House of Representatives passed a bill this year, which later died in the Senate, that would have required health care organizations to annually disclose entities that have an ownership or controlling stake, including private equity firms. The information would have been publicly available on a state website.
The National Academy for State Health Policy (NASHP) recently updated its state model law for health care merger oversight. This comprehensive model contains a range of provisions, including requirements for notifying state entities of proposed material changes and establishing an annual ownership reporting mechanism.
Billing Location Transparency
Often when patients get care at a hospital, they get two bills: one from the physician(s) who provided care and another from the hospital to cover the overhead of running 24/7 hospital operations (the “facility fee”). As hospitals buy up physician practices and rebrand them as hospital outpatient departments, patients are increasingly exposed to facility fees for routine outpatient care. (The physician bill also may increase in these scenarios because health systems have greater leverage to negotiate higher prices from insurers than independent practices.)
States have a variety of approaches to reform facility fees: banning them for certain settings or services, limiting how much consumers must pay out-of-pocket, and requiring greater transparency in hospital billing or patient communications. Four states– Colorado, Maine, Nebraska, and Nevada–use a billing transparency approach. They require off-campus outpatient departments to indicate the location where care was provided on medical claims forms, often by using a unique national provider identifier (NPI) number that differs from the main hospital campus’ NPI. This approach creates a paper trail to allow payers, employers, researchers, and policymakers to better understand where and in what contexts patients are charged facility fees. In addition, 12 states require providers to increase transparency by notifying patients who may or will be charged a facility fee through on-site signage or other means, while six states have adopted annual reporting requirements to shed more light on facility fee billing.
Building on Federal Price Transparency
Congress and federal agencies have taken several steps in recent years to increase transparency of health care prices, but price information is often still elusive. As the primary regulator of both hospitals and health insurers, states can play a key role in facilitating price transparency, by enforcing federal requirements in their state or by building on them to make them more effective.
Federal Price Transparency Rules
Federal rules have required hospitals (since 2021) and health plans (since 2022) to post their prices, including previously proprietary negotiated rates. Hospitals and payers must produce price information in a consumer-friendly format meant to help patients shop. They both must also publicly post price data in machine-readable files, including data pertaining to self-funded employer plans that have historically fallen outside states’ regulatory power. These files are meant to give researchers, analysts, and app developers ready access to raw data, so they can translate it into actionable insights for consumers, employers, regulators, and policymakers. This vision is still largely unrealized because health plan files are unwieldy and inaccessible to all but a few users, and hospital files are often incomplete and, until very recently, not standardized.
Several states have codified, and even built on, federal price transparency requirements aiming to improve hospital compliance. Some states have extended federal hospital price transparency requirements to additional provider types. For example, Florida and Minnesota have both extended certain price transparency requirements to ambulatory surgical centers, and Minnesota went further, extending requirements to large practices that provide lab, imaging, oncology, anesthesia, dental, and certain surgical services.
Colorado has built on federal price transparency requirements in several ways. It requires hospitals to add Medicare prices to their machine-readable files, conducts audits of hospitals’ data and posts information on compliance, and prohibits hospitals that are out of compliance from pursuing medical debt collection against patients. Earlier this year, Colorado enacted a law requiring health insurers to submit price transparency files to the state’s department of insurance twice a year using a standardized template. The department oversees several initiatives to lower costs for health care and coverage that could be informed by price data. Colorado has also created the first state-sponsored web-based tool in the nation to make federal hospital price transparency data available free-of-charge. The tool displays hospital prices by service and payer, including charges, discounted cash prices, negotiated rates, and Medicare rates, that are otherwise hard to access directly and expensive to buy from commercial data aggregators.
Consolidated Appropriations Act of 2021 Transparency Provisions
States have also taken action to enforce or build on various federal provisions from the Consolidated Appropriations Act (CAA) of 2021 intended to shed more light on health care prices. Three states passed laws this year that provide examples of possible state approaches.
The CAA prohibited the use of “gag clauses” that have historically restricted employers’ access to their own medical claims data, limiting their ability to evaluate their plan’s performance on cost and quality. Despite this ban, employers report ongoing barriers getting needed information from third party administrators (TPAs). Indiana passed a law earlier this year that ensures an employer can request an annual audit of its TPA contract and requires the TPA to provide unfettered access to information, including prices billed by and paid to providers as well as fees charged by the TPA.
A new Colorado law requires health insurers to submit data on prescription drug and health care spending–referred to as the RxDC report–to the state department of insurance. The CAA established the RxDC report and requires health insurers and health plan sponsors to annually submit it to federal agencies that will use the information to inform upcoming federal reports on prescription drug cost trends.
Florida passed a bill this year that strengthens a requirement that facilities give patients a good faith estimate of charges shortly after services are scheduled, and requires health insurers, in turn, to use that estimate to produce an “advanced explanation of benefits,” or AEOB. An AEOB, established in the CAA, will give consumers upfront information about their expected out-of-pocket costs for a medical service by combining information from providers about their charges and from health plans about the consumer’s coverage. Florida requirements will take effect once delayed federal regulations are finalized.
All-Payer Claims Databases
Another state transparency approach is to create an all-payer claims database (APCD) that captures data on health care prices and utilization within a state from medical claims paid by commercial health insurers, public payers, and some employer health plans. Claims data differs from price transparency data, though there is overlap. Price transparency data focuses on negotiated rates for services while claims data collected in APCDs sheds light on prices actually paid in practice, the volume of each service delivered, and even certain quality indicators. APCDs are powerful tools to help policymakers, researchers, and other stakeholders understand how a state’s health care system performs and advance cost containment goals. The 2016 Supreme Court ruling in Gobeille v. Liberty Mutual Insurance Company, struck a blow to the utility of state APCDs, exempting self-funded employer plans, which cover the majority of workers, from state requirements to report data to APCDs.
Currently, 25 states have or are implementing an APCD, and they use their APCDs to increase transparency and target policies in a variety of ways. For example, both Utah and Colorado use their APCDs to track trends in low-value or wasteful health care spending.
Takeaways
While transparency is not the strongest lever available to states seeking to contain health care cost growth, it is a source of rare bipartisan agreement and can be advanced in various state political environments. Transparency also provides the foundation needed for more robust policy and regulatory approaches. States have been innovative in their approaches to increasing transparency of health care prices, ownership, and billing, outlining a menu of options for policymakers, advocates, and stakeholders to consider as they prepare for 2025 state legislative sessions.
