State transparency study spooks hospitals and insurers
It isn't often that insurers and hospitals come together on an issue involving payments, but that's what seems to be happening in reaction to a new study being funded by the state's Department of Financial Services.
Both groups worry that this project, which aims to add transparency to contract process between private hospitals and private insurance companies, could reveal proprietary information, and produce results that will be taken out of context.
"We’re very concerned that the study’s narrow focus would lead to faulty, incomplete conclusions," said Kathleen Shure, senior vice president at the Greater New York Hospital Association.
But the study comes in response to a real challenge, which is an insufficient understanding of what makes health costs rise, and, related, a limited ability to slow them.
It is a joint effort between the New York State Health Foundation, Gorman Actuarial, Massachusetts-based Freedman Healthcare and Managed Care Revenue Consulting Group, which contracts with several New York hospitals.
The state financial services department awarded a $450,000 no-bid contract to Marlborough-based Gorman Actuarial, a consulting firm that did a similar study for Massachusetts. The money comes from a grant worth several million dollars that the state received from the federal Center for Consumer Information & Insurance Oversight.
The study will create a hospital price index that assigns a relative price to all hospitals included in the analysis; an examination of how relative price correlates to quality metrics, an analysis of how relative price correlates to other hospital attributes including market share, geographic location, teaching hospital status, and payer mix; and a trend analysis that assesses how provider reimbursement impacts insurer premiums.
It is vital to achieve a greater understanding of health care costs and greater transparency can lead to necessary reforms, said David Sandman, a senior vice president at New York State Health Foundation, which is working on the study.
"Transparency is the future, everything is moving in this direction," sad Sandman.
He added that researchers are sensitive to the concerns about confidential information.
Still, health systems and insurers want certain aspects of their business to remain confidential, and have expressed concerns that the recent flood of pricing data provides the public, and the media, with the wrong idea of why health care costs really rise.
The study "doesn’t address the significant shortfalls that hospitals experience from other payment sources such as Medicare and Medicaid (to say nothing of uncompensated care), which puts pressure on remaining revenue sources," Shure said, in an email.
Contracts are complicated, and numbers without an explanation can do more harm than good, said Leslie Moran, spokeswoman for the New York Health Plan Association, a trade group.
“Just throwing information out there without giving it some context, without giving consumers the tools to use this information to make better decisions, to compare provider A to provider B … could also add to the noise for consumers,” she said.
Insurers, she said, are also unnerved because they have asked for, but not yet seen, the actual contract, which would outline the scope of the project.
“Lack of this knowledge leads to the major and as yet unresolved concern,” Moran said. “This relates to the proprietary nature of the data and plans’ contract terms. Similar to the hospitals, we have concerns about confidentiality of this information and uncertainly about what D.F.S. plans to do with the data. Additionally, if plans do provide this information will it be subject to FOIL requests?"
Moran also said that there is plenty of data at the state government's disposal. There is, she said, the Statewide Planning and Research Cooperative System, which collects patient-level detail on patient characteristics, diagnoses and treatments, services and charges for each hospital in-patient stay and out-patient visits. The departments are also working with a group called Catalyst for Payment Reform (CPR) to collect updated data on payment reform and insurers’ value-based coverage with the goal of developing a New York Scorecard.
“Before responding to yet another request for data, the question [is] how all this other information is being used and how do all of the requests for ever more information and data mesh with one another–if in fact they do or can,” Moran said. “Another request for data increases the demands on plan resources, adding to the administrative burdens when plans have very tight [Medical Loss Ratios], and at a time when New York’s prior approval process of rates is resulting in rate suppression that puts even more downward pressure on administration costs."
These concerns are unfounded, Sandman said. This is just a culling and organizing of data that already exists and the model has worked before, he said.
The Massachusetts study, which received criticism from some of the larger health systems in that state, was followed by legislation that included an overall spending cap, and taxed hospitals and insurers to pay for investments in prevention and wellness ($60 million), health information technology ($30 million), and struggling community hospitals ($135 million). Health care spending has slowed in Massachusetts, according to state reports, but it is unclear how much the new legislation contributed to that because health care spending has slowed across the nation.
Why health care costs rise, and whether greater market leverage contributes to the increase has been a vexing question for public health officials across the country and in New York, where health care spending has consistently outpaced the growth of the overall economy and wages.
It's also been a central question in this new era of consolidation, where mergers and acquisitions occur at a feverish pace. Recently, Ken Davis, C.E.O. at Mount Sinai, wrote an op-ed for the Wall Street Journal in which he claimed consolidation could lower costs because it elimtinates redundancies. It's a controversial claim and recent studies show that isn't always the case as the increase in market share leads providers to demand higher prices from insurers, which often get passed down to patients in the form of higher premiums.
Because of rising costs, public health officials have put a greater emphasis on transparency, working under the theory that patients and employers would make more cost-effective decisions if they were armed with better information.
Last year, the federal government released hospital charge lists for the 100 most popular services provided by Medicare, which led to a flurry of media coverage. Former state health commissioner Nirav Shah was enamored with transparency and released charge data form every hospital in the state for 1,400 conditions. That showed some pretty wild variations. For example, Lutheran Medical Center charges $8,000 for a C-section and New York Methodist, one mile west, charges $19,000.
The problem with hospital charges is that almost no one pays the sticker price so it often does not present an accurate picture of health care costs.
This study will try and see how actual payment contracts between insurers and providers influence premiums and the overall costs of health care.
Sandman said the New York study would have similar goals as the Massachusetts study and hopefully provide policy makers with a better understanding of the drivers of health care costs.
“Health care costs are so high and they are rising and fundamentally they end up hitting consumers right in their pocketbooks in the form of ever increasing insurance premiums,” Sandman said. “It's a complex system but those costs do get passed through. We have to understand the factors that are behind these costs.”