Price Transparency Can Open Doors for Patients and Employers
Turquoise Health is a technology company that collects, analyzes and disseminates healthcare cost data.
Dorstel discusses new regulations requiring health insurers to post price information for covered services.
Insurers are now posting machine-readable files of all of their negotiated rates with payers as well as out-of-network allowed amounts. It’s information on literally every healthcare price in-network for every insurer. This is a monumental change in the industry.
Then, January 1 is when a patient-facing cost estimate tool is required. Insurers will have to post a tool that allows patients to search for the cost for different providers for shoppable services. That’s really when consumers will see a big change or feel a lot of the benefits of this legislation. We are working with some plans and using the price transparency hospital tool and plan to make some information public on our website ahead of that January 1 date. Companies like ours are working to create tools and apps and widgets with this data.
There is a lot of data right now. These files are pretty massive, so they really aren’t consumer facing. For most of these files, someone couldn’t do much with the data just using their laptop. They are meant to be out there and made available for the industry for third-party vendors like Turquoise Health to make usable to the broader public.
It can feel like drinking from a firehose at first, but what you learn is that you need to focus your analysis on the things that matter. If you are trying to look at each commercial rate for all cardiovascular codes across the nation, you will end up with millions of results. Focusing in on what is important to you will help you make more sense of the data. Not to quote Uncle Ben or anything, but with great data comes great responsibility.
We have seen really strong compliance. All of the large, national carriers have complied, like the Cignas, Aetnas, Blue Crosses. Because they are complying, that alone is a majority of covered lives in America and a majority of the healthcare prices in America. Compliance has been really good so far, and the big reason is the potential financial penalties associated with this. This falls under the ACA [Affordable Care Act], so regulators adopted those penalties. Insurers who aren’t complying have to pay $100 per member per day. If you think about a UnitedHealthcare for instance, with 70 million members, if they are not complying each day, that adds up really quickly.
Also, CMS [Centers for Medicare & Medicaid Services] did a pretty good job at laying out the schema and instructions for how to put these files together. They gave payers a road map on how to comply rather than leaving any part of it in a gray space, which is helpful.
We are already making data available to our customers, and we are in the process of gathering more and more as files come out. For us, what we do is get the data cleaned up and structured and out to our customers. We are working on building out more reporting and analytics to make it more usable and will be releasing that over the coming months.
It’s exciting because there is so much we can do with it. Part of the excitement is we don’t even really know all of the possibilities that may come out of this.
Some major impacts and benefits of the data coming out is that the veil has been lifted here on prices. So, for the first time, we can know what prices are for services in different geographies and see that kind of variation and what average rates are. Hopefully this will lead to some market rate equilibrium among prices from different providers. A colonoscopy could cost anywhere from $2,000 to $16,000 just in one area, but we can see now that market rate equilibrium in that place may be around $4,000. So it could lead to that major variation decreasing so everyone is in or around $4,000 to $5,000 versus such wild swings up or down. This is the place where, as a consumer, sometimes you might get a good deal or a bad deal, but no one ever really knew. We can get a lot more control on costs and understand where the value is, based on this information.
They can target down to granularity. They can look at who has better negotiating power—Blue Cross or United—at a local hospital. Or, if they are a major self-funded employer and there is another company about their size in that state, they can see if they are getting good rates or if their competitor is getting better ones.
The opportunity for self-funded employers is this gives them choices once they have this knowledge. They can now go to a large carrier and lease their rates or work with a payer to get a network built up, or they can build a network themselves through direct contracting. Knowing what is out there and what the prices are, employers have a greater opportunity to have some leverage when they talk to payers. They can say, “I know what you charge the other guy, but I also have an opportunity for direct contracting.” They know what the local rates are and can go directly to providers and say, “Here is the price I’m willing to offer,” and they can cut out the middlemen for that. There is lots of opportunity for this, and it will be interesting to see what angle folks want to take with it all.
I think the thing for self-insured employers is this gives them a chance to at least give themselves a report card and understand how their rates compare to others’. The first step is to know if they are happy with where they are or if there is opportunity for improvement. Then, they can take action from there if they want to. If the prices are out there and the knowledge is available, they can help make people more savvy consumers of healthcare services, and from there, they can create a strategy to control medical costs or find the best rates or engage in direct contracting.