Prime-UnitedHealthcare spat shows price transparency data will color contract talks
By demanding more money from insurance giant UnitedHealthcare, Prime Healthcare’s New Jersey hospitals are armed with a new bargaining tool: price transparency data.
As of Jan. 1, a federal rule requires hospitals to publicly disclose the prices they charge for medical care, including the rates negotiated with insurers. Even though compliance has been dismal, Prime said he can still see he is being paid far less than many of his local peers. This has led to a brawl that threatens network coverage for thousands of patients.
“All we’re asking for are fair prices compared to our competition,” said Dr. Sonia Mehta, Prime’s regional CEO for the market which includes New Jersey. Premium For Profit is headquartered in Ontario, California.
Hospitals have fought fiercely to remove the price transparency rule, arguing in part that patients would not use it and, furthermore, that they would find the numbers confusing. But the Prime-UnitedHealthcare example offers another result: that data will be at the center of future contract negotiations and could even trigger more disputes, which are already commonplace. Whether this serves to advance the talks or to sow discord remains to be seen.
Insurers may also comb through the data and find they are getting a gross deal. In that case, hospitals will not be happy, said Adam Block, assistant professor of health policy and management at New York Medical College.
“It wouldn’t be about a 5 percentage point dispute over a price, it would be a roughly 100 percentage point or 200 percentage point dispute over a price,” Block said. “Problems like this can lead to very tangible contractual disputes that can delay or end a relationship between a payer and a supplier.”
Healthcare systems have always had a certain level of price data, although it has never been more accurate, said Mike Schatzlein, former Ascension executive and director of consultancy firm Schatzlein Group. He believes the data will make negotiations more focused, but it won’t result in a bunch of contract terminations.
Contract disputes are a chicken game that are almost always resolved just in time, Schatzlein said.
“I can’t see it leading to an increase in layoffs just because of the inconvenience associated with them,” he said.
Even in Prime’s case, the parties are in a “cooling off” period in which UnitedHealthcare members can still obtain networked care while negotiations continue. The issue concerns four New Jersey hospitals that Mehta says are “gravely underpaid” on the business side.
For its part, UnitedHealthcare said Prime had called for a 14% annual rate hike for its employer-sponsored and individual plans, which it called “unsustainable.”
But Mehta says even 14% would not bring hospitals closer to market rates because they have been underpaid for years.
Regardless of the effect of price transparency data, it will be mitigated as long as compliance is low. Less than 6% of hospitals are fully compliant, a fact that prompted the Biden administration to increase penalties to $ 2 million per year for large hospitals.
Once more data on price transparency becomes available, hospitals will be under pressure to prove that their quality and results justify the prices they get, said Rick Kes, senior healthcare analyst at RSM.
If they’re asking for more money than the hospital down the street, they’ll have to produce data showing that their average length of stay for a certain procedure is two days shorter, or that their patients are less likely to. needing home care after a knee. replacement, he said.
“This will create greater demand to support the hospital’s value proposition when it requests a specific rate increase for a procedure,” Kes said.
Ultimately, Kes said the focus on value would be good for everyone.
Michael Abrams, co-founder and managing partner of healthcare consulting firm Numerof & Associates, agreed that forcing providers to justify why they should be paid more is a good thing. It might even spark more adherence to alternative payment models in which they take more responsibility for controlling costs, he said.
“The transparency rule provides a compensatory force to market power that pushes back the idea ‘whatever the market will bear’ of what a supplier should be paid,” Abrams said. “Over time I think it will have an impact.”
It is impossible to predict what the final impact of the controversial rule will be. After the think tank RAND Corp. released a wealth of data on hospital-level pricing as part of a 2020 study, hospitals at the bottom of the reimbursement scale demanded more money from insurers, said Sabrina Corlette, professor of research at Georgetown University’s Center on Health Insurance Reforms.
The ultimate goal of the rule is to empower employers and policy makers to put pressure on high-priced suppliers, especially when there is no noticeable difference in quality. That’s what happened in Colorado, where the revelation that hospitals were getting much higher commercial rates over Medicare ultimately convinced lawmakers to approve a public option, Corlette said.
“I think the price transparency has had the intended effect on Colorado policymakers,” she said, “but there is a risk that these cheaper health systems will charge higher rates.”