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Price transparency in healthcare: A movement takes hold

April 17, 2014
by Alison Knopf
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Thanks to a movement for transparent pricing taking hold in 11 states, patients are closer to being able to shop for medical procedures. We looked at Colorado, where officials are in the midst of amassing claims data serve as a foundation for a consumer-friendly website where patients can shop around for procedures and services.

The Denver-based Center for Value in Improving Healthcare (CVIHC) is providing cost and quality insights by analyzing claims data for various medical procedures. CIVHC uses the all payer claims database, which includes claims from insurers, Medicaid, and Medicare, to help make healthcare prices public. .

Starting with medical procedures, which have high and extremely variable costs, such as knee replacements, MRIs, and colonoscopies, organizations like CVIHC are beginning to analyze claims data to make it easier to know how much someone really has to pay for care. One example in Denver is colonoscopy costs, which range from $400 to $2,800.

Typically, hospitals and doctors have kept this information secret – and it really didn’t matter to patients, as long as insurance companies were paying the bill.

Led by the increasing deductibles and copayments that leave patients responsible for a growing share of costs, as well as by a pressing need to bring healthcare costs down, pricing transparency may for the first time let prospective patients know how much a hospital stay or procedure will cost in advance. In general, people without insurance pay the “rack rate,” or the highest charge, which no insurance company or public payer pays. In addition, every insurance contract is different, and the exact same procedure may cost thousands more in one part of a state than another.

Right now the all payers claims database has fully insured commercial lives and Medicaid, says Edie Sonn, CIVHC vice president for strategic initiatives and acting CEO. “We’ll be bringing in Medicare and managed Medicaid,” she adds. Self-insured lives still need to be brought into the database.

Although CIVHC has the data from managed behavioral health organizations (MBHOs), it’s encounter data and not in the warehouse with other all payer claims, says Sonn. However, she adds that most commercially insured patients have health plans that have their own behavioral health unit that don’t contract with outside MBHOs.

Pricing is difficult for the Medicaid HMOs because they are capitated, notes Sonn. In the commercial market, if it is fee-for-service, where it’s easier to determine prices. “The vast majority of those plans have their own behavioral health unit,” she adds.

CIVHC plans to have a price comparison available later this year for common medical procedures for Colorado consumers, said Jonathan Mathieu, director of data and research for CIVHC. “The consumer can enter a search code, and find providers and costs in their area.” For uninsured patients, the metrics will include median charges, what Mathieu terms “a starting point for negotiation.” Contract terms between payers and providers will be masked. “We’re focusing on what is actually paid.”

Mental health services

CIVHC has kept the behavioral health community in the loop, says Sonn. But it’s not likely that there’s as much variation in behavioral health as there is in medical/surgical, especially in the Medicaid system. Furthermore, private practice psychiatrists for the most part don’t even take insurance, so no claims would be coming in from them.

The community mental health centers, on the other hand, have contracts with commercial payers in Colorado, and that means they are an important piece of claims data.

“There’s definitely a desire to put behavioral health claims in there,” said George DelGrosso, executive director of the Colorado Behavioral Healthcare Council. “They’re starting with the basic physical claims,” he adds, but it’sonly the beginning of a process. “They started by identifying low-hanging fruit, like knee replacements,” he notes. “That gives them a start to see if this works.”

Since 1995, Medicaid services in Colorado have been full risk, meaning providers are paid a per-member fee and must provide all needed services. On average, Medicaid represents about 58 percent of payments for behavioral healthcare in Colorado. Commercial insurance also covers patients in the state, which had parity even before the federal law.

One of the values of the all claims payer database in Colorado is that consumers can shop, says DelGrosso. And while behavioral healthcare has been put on notice that it will be included at some point, it’s not in the queue yet, he said.

The real benefit of including behavioral health may not be in allowing customers to shop for the best buy, but in providing clear data illustrating that treating mental illness and SUDs (substance abuse disorders) reduces costs for the medical/surgical sector, suggests DelGrosso. “This would lead to the analytical information supporting how treatment drives down overall costs,” he said.

42 CFR Part 2

Apparently, insurance companies didn’t bother to delete patient-identified claims for SUDs, so CIVHC is scrubbing all of that data to avoid running afoul of 42 CFR Part 2, the federal regulation that bans sharing information about patients in treatment for substance use disorders unless the patient has agreed to such sharing. The agreement must be in writing, and directed specifically at each disclosure.

“When the data started coming in, we found out we were getting a lot of substance abuse claims, even though we weren’t supposed to be,” says Mathieu. Even though all of the personal health information is encrypted, the patient is identified, so the data has to go.