How New Regulations Will Change Healthcare Purchasing

Transparency in healthcare!

This has been the hue and cry from healthcare users nationwide for many, many, years and up until recently, true transparency has eluded us. We were told that transparency in healthcare is not attainable due to the myriad services and the way healthcare reimbursements are contracted and paid. We were told that it would not be in our best interests if both the providers and payors had to disclose their negotiated pricing as it would create an unfair market, and both depended on the secrecy of their negotiations to create a competitive marketplace. We were told that price was simply one face of a many sided “value cube”, that price alone was not sufficient when weighing quality of care metrics and health outcomes. We were told that giving us the information would comprise the privacy of users and we were being protected from ourselves.

We have been given reason after reason, and yet, after wandering a winding and circuitous road we are about to cross a bridge into the strange, scary and wonderful new world of healthcare transparency. But like any road and bridge, to make it safe and efficient, we have some new road rules to discuss, and it appears we have some heavy enforcement of the road rules ahead.

The New Road Map

To pave the way for transparency, the Federal Government is aiming new regulations at four primary targets:

1. Healthcare Providers
2. Health Insurance Companies, PBMs and TPAs
3. Employers who fund healthcare
4. Brokers and consultants who are paid for their recommendations and expertise

For healthcare providers, health insurers, PBMs and TPAs:

Back in 2020, the Federal Government enacted the Transparency in Coverage Rule which forced hospitals to report the cost of “shoppable services”. This was followed in 2021 by the Hospital Transparency Rule which demanded hospitals and providers begin publishing negotiated contract rates by payor (i.e., Medicare, large BUCA’s, commercial networks etc.).

These “readable” files were meant to encourage shoppable healthcare services so consumers could easily compare prices…sadly, it has been a nightmare to compare prices due to the nature of these “readable” files. This has however created an opportunity for data analytic companies to come to our rescue by decoding these files and creating usable reporting.

For employers, brokers, and consultants:

Concurrently in 2020, the Consolidated Appropriations Act (CAA) was enacted to spur the real payors of healthcare into action (the employers that fund commercial healthcare). The CAA has several significant changes and enforceable rules for employers.

The CAA stepped up its fiduciary obligations of employers in several ways. This regulation now makes you, as a decision maker in your company, personally responsible for your health plan decisions. 

Ultimately the CAA can be broken down into the following digestible parts:

1. You, as a plan sponsor, are responsible to remove any restrictions on retrieving your data (otherwise known as a Gag Clause). If you have not removed these restrictions on or before your 2022 renewal, your plan could be determined to be a “Prohibited Transaction” which is why you might get a visit from the Department of Treasury or the Department of Labor or both.  This was backed by a joint FAQ released in February 2023 by the Departments of Treasury, Labor and HHS.

2. You, the Plan Sponsor, must request form your broker/consultant all forms of compensation, both disclosed and undisclosed, and compare the total compensation to the services you received (not the services you were promised) to determine “reasonableness”. If not done correctly this again may create a prohibited transaction, which means your employees could sue you for mismanagement of your plan.

3. Employer health plans must prepare and provide a written analysis of how the plan complies with MENTAL HEALTH PARITY AND ADDICTION EQUITY ACT (MHPAEA’s) rules on nonquantitative treatment limitations (NQTLs) upon request.

4. Requires group health plans and health insurers to report detailed data about prescription drug pricing (including rebates) and healthcare spending to the DOL, Treasury and HHS. While this works resides primarily with the health payers and PBM’s, there is nothing in the rules releasing employers from their fiduciary responsibility to make certain this is completed. 

5. Employer health plans must cover emergency services provided by a non-participating provider/facility without prior authorization and at in-network rates. Patients generally receive protection against balance billing from the provider. Air ambulance bills will be subject to similar rules as the Surprise Billing section above. The intent is to protect plan enrollees for what can be significant air ambulance bills.

What this means to employers, providers, brokers and health insurers

For Employers:

If you are an employer sponsoring a health plan, remove your “Gag Clauses” and dive deeply into your data. While this is a primary provision of the Consolidated Appropriations Act, it also the fastest route to lowering your healthcare spend as an employer. With the passage of the Healthcare Transparency and No Surprises Acts, you can now actually compare what you have been spending on healthcare procedures to what other providers in the market are contractually charging, thus, with some strategic support you will regain control on healthcare spending. 

As an employer, you are the fiduciary – meaning how you measure and report your health plan efforts matter to both your employees and the Federal Government. In February of 2023, a joint FAQ was released by the Departments of Treasury, Labor, and Health and Human Services. It is clear that all three Departments are unified in their quest to reinforce transparency in all healthcare facets. This means having some difficult conversations with your brokers, consultants, and plan administrators; determining both their disclosed and undisclosed forms of payments and understanding not the services they offer, but the services you receive to make certain each are commensurate or reasonable. 

Look for alternative health care providers that can/will come along side you (as the employer) to manage your populations health and care. The cry of every midsize business is that they are not big enough to influence the healthcare market. In the emerging post transparency era, you will see and more providers are coming forward everyday with lower cost high touch programs aimed at employers. Whether it is onsite physical therapy, primary care, or mental health care, or it is alternative direct contracting aimed at steering an employers’ population to a specific provider who will share the risk of improving health, your fiduciary responsibility (and the fate of your bottom line) will be greatly impacted by your efforts.

Communicate with your population differently. Think about how you generally get your information; when something is broken, do you open up the manual that came with your product, or do you go to YouTube to watch a short video to learn to fix it? Do you collect flyers and product brochures before you buy a product, or do you simply go to Amazon and read the short comments from other users/buyers? Now, when it comes to communicating your employee benefits, do you expect your employees to retain the 80 page color benefit summary you printed and handed to them at open enrollment, or are you arming them with real-time videos and tutorials about their benefits? The goal is to get your people to the right place, for the right care at the right cost, and sadly your benefits book and self-built intranet will no longer suffice.

Determine your benchmarks to measure, create your ROI/OKR metrics and measure against them to see if your strategies are working. This is not going to be much different than managing your 401k or 403b once you have set up your fiduciary management process, but it is vital to helping you steer your health plan ship. ROI’s can and should be set on metrics to measure total cost, your populations health status, and your organizations risks. If you are an employee getting health coverage through your job, understand your employer is not out to get you. Health care can be expensive and employers have a bottom line to manage. The best way to get even with the health care system is to get healthy, live healthy and follow your provider’s orders. If we all did this, we would need less health care and our costs would decrease. If your employer offers you the olive branch of a lower premium for using a specific set of providers who offer better quality care at a lower cost, take them up on it. The money your employer saves on health care usually leads to other benefits like bigger paychecks or shiny new things to make your job easier.

For health care providers or hospital systems:

In the very near future, you will likely have a new master. The negotiating of pricing has forever been the backroom domain of the health plan payor and the health care provider. With the level of transparency being demanded by the Feds, and the growing number of data analytic companies finding methods from the reporting madness, the sooner you, as the provider embrace working directly with employers to capture populations the better off you will be in the long run.

If you are a “brick and mortar” health care provider, rethink how, where and for how much you provide care. Can you provide health care onsite at an employer’s worksite? Can you offer them specialty virtual visits? Have you considered an alternative financing structure? Maybe you could charge a “per employee per month” cost the employer can pay directly. Or, offer a bundled price so the employer understands exactly what they are paying for. CEOs and CFOs are fond of understanding what they are paying for— which is why, right now, they hate health care.

For brokers or consultants:

Stop thinking like a consultant and start thinking like a business person. Create a sound strategy based on objective data and benchmarks. Implement said sound strategy. Report the outcomes.

For healthcare payors or third-party administrators:

Get out of the way. Be prepared to relinquish the data, and for your negotiated prices to become reported.  

Note about the author:  Mick Hannafin is also the founder of Caveat Emptor Consulting. Caveat Emptor Consulting is a healthcare strategy firm created to help all healthcare constituents (employers, employees, payors, providers, brokers, and solution providers) become active managers and better stewards of their healthcare costs through innovative, actionable and accountable consulting solutions.  For more information, visit their website, caveatconsult.com/