High and rising health care costs in the United States make it hard for many families to access care. Half of adults say it is difficult to afford care, and a third say they or a family member have skipped treatments due to cost.
A major driver of rising costs is health care consolidation. One problem is big hospital systems are buying up physician practices and charging higher rates that can make routine procedures cost two to three times more than they would at an independent doctor’s office. This increases spending for Medicare beneficiaries and the privately insured.
This year, bipartisan legislation in Congress aims to establish “site-neutral payments” — that is, to align payments for services across hospitals and doctors’ offices in order to reduce costs for patients, consumers, employers, and taxpayers. The legislation is focused on equalizing payments for routine services safely provided in a doctor’s office. Site-neutral payments, combined with greater billing transparency over where care is delivered, could reduce health care costs. Additionally, the legislation aims to strengthen hospital and insurance price transparency.
On Wednesday, POLITICO hosted a discussion, presented by Arnold Ventures (AV), on reducing health care spending through site-neutral payments. A conversation with John Arnold, co-founder of AV, explored the potential for a more fair health care billing policy. The audience heard perspectives from Natalie Davis, CEO and co-founder of United States of Care; Stacey Hughes, executive vice president of government relations and public policy for the American Hospital Association; and Ilyse Schuman, senior vice president of health policy for the American Benefits Council. Finally, Rep. Cathy McMorris Rodgers (R‑WA), chair of the House Energy and Commerce Committee, discussed federal legislation on site-neutrality and billing transparency.
Here are five takeaways from the discussion, which is available to view here.
1. Consolidation by large health systems is driving up prices.
Today, most American physicians are employed by hospitals and health systems rather than working out of independent practices. Arnold discussed the logic behind this shift in clear terms.
“Hospitals are clever, and they’re business people,” he explained. “They say, ‘Hey, wait, we can go buy some doctors’ practices, put them under our billing code, have the same procedure done off site, and get a higher reimbursement for it.’”
More consolidation and less competition means that hospitals can charge more. But increased costs don’t mean better care: It’s the same service for a higher price tag.
“We have seen the impact of that consolidation on costs without improving measurably access to quality,” Schuman said.
2. It’s possible to have quality health care access and lower costs at the same time.
Hospital industry insiders like Hughes claim that health care systems are struggling financially. Driving down health care costs through regulation, they say, will reduce hospitals’ ability to provide access to care.
Hospitals provide a critical service, but their bottom line shouldn’t come at the expense of families.
“Patients are shouldering the burden,” Davis said. “That’s not where we should be making up for losses or finding ways to support our health care system.”
In the end, greater health care access and lower costs are linked, Davis explained. Having more hospitals and providers is only helpful if people can afford to visit them.
“We shouldn’t pretend like we can have one or the other,” she said. “We need to tackle both so people can have better health and we can save money down the line both for the patient and the system.”
In addition, while some hospitals are facing financial hardship that should be addressed, many of the large hospitals that are acquiring smaller providers and consolidating the industry are not facing those challenges.
3. We need a “same service, same price” policy when it comes to health services
Different prices for routine services at different facilities have the potential to wreak havoc on the financial lives of patients and their families, not to mention the Medicare program and employers.
Several panelists pointed to an NPR story of a patient whose routine arthritis treatment went from costing $30 at a physician’s office to $350 after that office was bought by a large hospital system.
“It doesn’t seem right,” Arnold said. “Nobody thinks that buying doctors’ practices and jacking up the rates is the right policy.”
Pointing to new legislation in congress that would establish site-neutrality for some services, he said, “This fix has a lot of appeal.”
4. Increasing transparency in the health care system is crucial
As hospital systems have grown, they have become increasingly opaque. This lack of transparency makes it impossible for patients to know the price in advance and make decisions about affordable care. At a larger scale, lawmakers and payers such as employers struggle to understand the prices being charged and how they vary based on where care is delivered.
Davis explained that the new legislation moving through Congress will help address these issues.
“The policy pillars,” she said, are “protecting people from harmful billing, collecting data to understand the scope of the problem, analyzing that data, understanding where do we need compliance, and then giving patients information so they can make the right choice for their pocketbook and their health.”
5. A new bipartisan bill in Congress is a “first step” toward health care pricing reform
The Lower Costs, More Transparency Act, introduced by three House committees and soon up for a floor vote, could begin to address rising health care costs. The bill — which would increase billing transparency, establish site-neutral payments for drug administration services in Medicare, and lower overall costs for patients and employers — passed out of the House Energy and Commerce committee, which Rep. Rodgers chairs, unanimously.
The legislation also codifies requirements to make hospital and insurer prices more transparent.
“It’s a very important first step when we talk about price transparency,” said Rep. Rodgers. She noted that 95% of Americans support the measure.
As Chairwoman Rodgers notes, these policies are initial, important steps to making health care more affordable for patients, consumers, employers, and taxpayers.
In the meantime, prospects for the current bill’s passage are good, Rep. Rodgers said.
“In America, we know the price for everything that we buy, and as consumers, we’re able to go out and make those value decisions based upon what the prices are,” she said. “In health care, we need that, too.”