Here's some food for thought from this article:
- What patient-facing technology would this order mandate?
- What negotiated rates would pose a technology issue for providers and payers?
- What technology is already out there solving these problems?
- Is any of this a good business course of action with or without a government mandate?
In the coming weeks, the Trump Administration is expected to release an executive order that mandates disclosure of negotiated rates between providers and payers. This follows in line with last year’s mandate for hospitals to disclose their chargemasters and this year’s (shelved) attempt to curb Part D drug prices. Per Trump’s press conference on the topic, this is all in the name of increased true price transparency in an effort to encourage competition, drive down prices, and eliminate surprise bills.
For those of us in operations and rev cycle, the flurry of news is a lot to take in. Industry insiders know the nuances between provider and payer contracts, so we ask ourselves: would these efforts to force transparency actually bring cost enlightenment to the patient? Or would they just create a technical and administrative snafu for an already resource-constrained industry?
Opponents of this move argue that such an order is an illegal, and if it were to pass, could actually drive prices up. In this article, I’m going to save that discussion for elsewhere and focus on the technical implications for providers and payers if such an order were to pass and be enforced. How might organizations comply with these potential new requirements from a technical perspective?
How Charges and Negotiated Rates Actually Matter to the Patient
In the once-popular improv show Whose Line Is It Anyway?, Drew Carey always opened with the same refrain: Here, everything’s made up and the points don’t matter. Opponents of Trump’s actions - healthcare industry insiders - treat hospital charges and their corresponding payer rates with the same grain of salt: the charges are inflated, and the list price usually doesn’t matter (to the patient).
But in many scenarios, negotiated rates based off these charges affect the patient's out of pocket.
Quick refresher of the basics: If Appletown Hospital’s CT ABDOMEN W/ CONTRAST charge is listed at $3,000 in a hospital’s CDM, this is usually not what an insurance company or patient pays. On an outpatient basis, there is likely a secret fee schedule shared between a provider system and payer. Depending on the provider, a payer may owe a percentage multiplier of the fee schedule based on this charge’s corresponding five-digit CPT code.
OK, as a patient, you’ve already lost me - I can’t even figure out why I’m being charged for HBO now that Game of Thrones is over.
But as a patient, I also may not be paying any of these rates. Per my actual Summary of Benefits in my insurance plan (which is a great read, by the way), I would owe a $200 Advanced Radiology per procedure fee.
However, if I were to visit for infusion therapy services, I would owe a 20% coinsurance of the (currently non-disclosed) contracted rate. And herein lies the problem.
Coinsurance-Based Benefits Tie Patients to the “Secret” Negotiated Rate, and Percent of Charge Payer Contracts Tie Patients to the Provider List Price
When a patient’s coinsurance-based benefit lines up with a percent of charge rate, the amount owed is linearly tied to the CDM.
If a savvy patient was trying to estimate an out-of-pocket total prior to outpatient chemo treatment, he could now find list prices of drugs and infusion services in the public CDMs on a hospital’s website, as of January 1st, 2019 (we've downloaded thousands of these files - a lot of them contain drug prices).
But he is trying to solve the complex conditional logic flow of:
IF “in network”, THEN I owe:
List price x payer percent of charge multiplier x coinsurance multiplier = my price
Oh boy. I owe full billed charges and maybe I should look elsewhere for this service
He needs a coverage determination and the payer percent of charge multiplier to solve the equation.
To accurately provide an avenue for a patient to understand his cost of care, providers and payers would have to link benefits data, hospital charge data, and negotiated rates data. And patients will not want to have to wait on hold for an offshore call center to figure this out.
This is all assuming providers can first answer basic questions of coverage and in/out of network benefits.
Lawmakers Are Onto This, and “Internet Websites” Are Coming. This Means More Interoperability Is On the Horizon
In a draft of the Health Care Price Check Act of 2019, which hit the senate floor last week and carries similar implications to the expected executive order, congress describes an “Internet Website” and “Toll-Free-Number” that would articulate the “specific” out of pocket costs for patients checking and comparing prices for in-network providers, taking into consideration all cost-sharing components discussed above.
This bill would essentially require payers to reference provider charge data and member benefits data to calculate an estimated coinsurance on the fly.
As a technologist (no one that works in technology calls themselves a technologist, but I’ll go with it) and healthcare industry insider, my first impressions are that a bill like this would shine a spotlight on these tech considerations:
- Pricing Logic APIs: This could require payers to expose both their patient liability and provider claim pricing logic to a subscriber-facing web application
- Intuitive Text Search: Patients are not going to be able to name the cocktail of CPTs for a forthcoming outpatient visit. This type of web application would need an intuitive search feature based on common names, and it would return routinely associated services as mentioned in the Price Check act above
- Over-Engineering: Are patients even asking for this level of transparency? Many patients are still confused whether they even have insurance, or which providers are in network. Product designers should prioritize the most acute needs first with user research.
In a world where providers must provide more of these "internet website" tools, focus on the charges that frustrate patients first. Percent coinsurance and percent of charge contracts are both the easiest to calculate, and most frustrating to a patient. Consider a simple web app that addresses these estimated costs before going after complex fee-schedule and CPT-based services.
The Technology You Should Be Interested In As a Provider or Payer
APIs. These are top-level layers of code that allow to systems to talk to and exchange data with one another. For example, an ambulance company might tap into an EHR’s API to glean subscriber information from a patient visit by providing a patient’s identifying information. This way, the ambulance company doesn’t bill the patient for full billed charges without first billing the insurer (something that happens all the time).
Certain standard APIs already exist for healthcare providers. While the FHIR API has been a central focus of development in the clinical space, the FHIR financial module is yet to be adopted by many systems. Adoption of a standard, lightweight API for querying benefit, coverage and cost data would go a long way of decreasing the gap between encounter and price assignment. Custom APIs and API cleanup may also be required.
In a similar vein, machine learning has seen wider spread adoption with clinical applications (such as classifying radiological images, or augmenting care-provider decision making), but it will soon make more of a splash in operations and revenue cycle. Here are some ways that machine learning algorithms that already exist could affect transparency:
- Clustering algorithms to suggest commonly associated services to a patient’s service query
- Natural Language Processing for Intuitive Search: Relying on natural language processing to parse a patient’s unstructured text query into an estimated cost description
- Price Compare for Selling Services: If a patient ends up using this type of tool as a price compare feature, this tool now becomes a sales medium. It would behoove providers and payers to analyze a patient’s care history to suggest a service option that matches geographic and cost preferences.
Does the recent news have you concerned as a technologist or administrator for a payer or provider? Let’s keep the conversation going. Arcosta provides custom interoperability and machine learning services for healthcare organizations looking to become more tech forward.
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