In recent months, discussions surrounding healthcare pricing strategies, network adequacy, and affordability have dominated headlines. With the introduction of Machine Readable Files through the Transparency in Coverage rule, Payers are now under immense pressure to prove they are managing their members’ and employer groups’ healthcare spending responsibly. Failing to do so can lead to significant legal and reputational consequences.
Understanding Price Transparency Data
The Centers for Medicare & Medicaid Services (CMS) issued two major price transparency mandates in recent years. The first, Transparency in Care, applies to hospitals and went into effect on January 1, 2021. This rule requires hospitals to disclose detailed information about the items and services they provide, including gross charges and payer-specific negotiated rates.
The second mandate, Transparency in Coverage, applies to Payers and went into effect on January 1, 2022. This rule requires Payers to provide detailed rate information, including negotiated rates, derived amounts, and fee schedules for their in-network providers.
From a market perspective, payer data is often more complete and accurate compared to hospital data, with a higher compliance rate. However, the quality of payer data can still vary. Issues such as “ghost” or “zombie” rates (rates reported for providers who would never perform the service the rate applies to) can bloat data sets and create challenges for effective analysis.
Leveraging Price Transparency Data
When payers access high-quality price transparency data, it becomes a powerful tool for improving various aspects of healthcare management:
Provider Contracting: Payers use this data to negotiate better reimbursement rates with providers. By benchmarking their rates against competitors or market averages, they can ensure they are securing the most cost-effective options.
Network Comparison: Payers assess their networks against competitors to ensure they offer adequate coverage, especially in rural areas where provider availability might be limited.
Capitated Fees and Bundled Services: Price transparency data helps payers analyze capitated per-member-per-month fees and bundled services, allowing them to group related care activities and enhance affordability.
Network Optimization: By leveraging price transparency data, payers can optimize their networks to ensure they include the highest quality and most affordable providers, enhancing overall value.
For these strategic uses, the credibility and accuracy of the data are paramount. High-quality data enables payers to differentiate themselves competitively and meet their fiduciary responsibilities effectively.
The Pros and Cons of Prevalent Re-Pricing Approaches
Re-pricing out-of-network or non-par claims involves various methodologies, each with its own set of advantages and risks:
Secured Discounts: This approach involves single-case agreements or wrap networks where reimbursement amounts are pre-agreed between payer and provider. While this method minimizes pushback and ensures predictability, it often yields lower discounts. It also may not always be feasible, particularly for out-of-network services.
Reference-Based Pricing (RBP): RBP uses Medicare or CMS rates as a benchmark, paying providers a multiple of these rates or using other reference bases like Usual, Customary, and Reasonable (UCR). RBP is a more aggressive approach because the reimbursement is unilaterally determined by the payer and assumed or inferred as acceptable by the provider. It generates more significant discounts but also creates some additional pushback from providers who may be unsatisfied with the reimbursement.
Proprietary Algorithms: As sort of a variation of RBP, some companies come up with their own reference base using various data elements like cost to charge ratios to create a proprietary algorithm that then generates a reimbursement that they deem to be fair or reasonable. This method is controversial due to its opaque nature and has recently faced a lot of criticism and legal challenges from providers.
Payers must carefully navigate these methods to ensure they provide fair reimbursement while minimizing the risk of pushback.
The Dawn of a New Era
As payers face mounting pressure to manage healthcare costs effectively, price transparency data has become a crucial tool in ensuring good financial stewardship and regulatory compliance. Understanding and utilizing price transparency data effectively is not just a compliance requirement—it’s an opportunity for payers to enhance care quality, reduce costs, and improve satisfaction.
At MacroHealth, we equip Payers with the knowledge, insights, and tools required to navigate the ever-evolving landscape of healthcare costs. With the MacroHealth Intelligent Exchange™ (MiX) platform, you can optimize your healthcare spending and connect to an ecosystem of partners and solutions that will ensure transparent, affordable care.
To explore the full potential of MacroHealth’s Intelligent Health Market as a Service (IHMaaS) solution, contact us today.