Price Transparency Efforts Target Physicians

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Legislative Affairs Feature — July 2014

Tex Med. 2014;110(7):37-41. 

By Amy Lynn Sorrel
Associate Editor

As governments and employers look for ways to curb growing health care costs, and as patients bear a higher share of their medical bills, policymakers in Texas and beyond increasingly target physicians in their efforts to unveil health care prices. They couch such "price transparency" as a way to help patients make more informed health care decisions. 

But Texas Medical Association's Board of Trustees member Gary W. Floyd, MD, of Fort Worth, cautions that for a complex health care payment system, coupled with individual patients' complex needs, coming up with a so-called "sticker price" is not as simple as it seems. 

Gone are the days of his practice in 1980s' Oklahoma, when the pediatrician simply charged $12 for a new patient visit and $8 for a follow-up visit. "I dealt with my patients, and my patients dealt with their insurance company." 

Flash forward to a time when myriad insurance regulations, contract rates, deductibles, and CPT codes — not to mention any combination of patient conditions — increasingly cloud those numbers. Dr. Floyd acknowledges that even he has a hard time divining what his patients' costs are today. 

Helping patients assess their financial responsibilities before receiving care is an important part of transparency, and physicians can play a role in unshrouding that seeming mystery, he says. "But this is new territory, and this is far more complex than anyone's imagined."

To help find a solution, TMA's Council on Legislation formed a workgroup focused on price transparency. But TMA is poised to make sure that any approaches to transparency are meaningful for patients and feasible for physicians, Dr. Floyd says. "Our goal is to lead the discussion. But the bottom line is, it has to be patient-centered." 

The discussion has captured state capitols across the country, and TMA expects it to resurface during Texas' 2015 legislative session. 

Lawmakers are likely to pick up where they left off after introducing measures during the 2013 legislature that aimed to have physicians publicly post prices for their services. 

In February, Lt. Gov. David Dewhurst announced interim charges that task the Senate State Affairs Committee with studying and making recommendations on increasing medical price transparency in Texas. And the Texas Institute for Health Care Quality and Efficiency (IHCQE), which the 2011 legislature created under Senate Bill 7 (the state's own version of health system reform), continues to study the issue.

Lawmakers say that transparency is likely here to stay, and physicians are key players. 

Finding the Right Approach

Sen. Charles Schwertner, MD (R-Georgetown), says price disclosures have the potential to rein in costs and increase competition in health care — if done right. The orthopedic surgeon pointed to Medicare's unprecedented release in April of physician payments as an example of what could go wrong, however. (See "Medicare Discloses Physician Payments.")

"There's a distortion there that's not fully or easily understood by the general public," he said. For example, patients may see large payment amounts attributed to a single physician, but that physician's name may represent a large practice that employs other doctors, nurses, and physician assistants and that spends a significant amount of money up front on cancer drugs for their patients. 

When it comes to pricing, "it could get even more distorted if we just looked at one piece," such as physician billed charges, Senator Schwertner said. "Physicians can lead on this issue, and we shouldn't be afraid to lead on it. But if we [the state] take steps toward transparency, we must include all health care providers. And we need to move forward in a way that does not misrepresent to the public what health care pricing is all about. We do a disservice to our patients if we put forth information that is not full and complete."

Rep. Greg Bonnen, MD (R-Friendswood), whose bills sparked the conversation last session, says finding a solution may not be easy, but it is forthcoming. And physicians can help shape it. 

"This is not transparency for transparency's sake. This is motivated by an effort to understand where this money is going and why it's costing so much. Ultimately, there is going to be either a government-driven solution for this or a patient-driven solution, and we are better off with a patient-driven solution. And if patients are going to be empowered to make good choices financially, that means they are going to have to have an accurate understanding of what [care] they are going to receive, how much it's going to cost, and a vested interest in those decisions," he said. "The flip side is, if we [physicians] are not engaged and responsible in our allocation of resources and in empowering our patients to make good choices, what we end up with is out-of-control costs and a quarter of our state uninsured."

A recent report card from a pair of consumer advocacy organizations suggests the Lone Star State and the rest of the country have a long way to go to provide patients with meaningful price information. In their 2014 "Report Card on State Price Transparency Laws," the Health Care Incentives Improvement Institute (HCI3) and the Catalyst for Payment Reform handed out failing grades to 45 states, including Texas. 

When it comes to price transparency, "every other industry has figured it out," HCI3 Executive Director Francois de Brantes said. "Health care needs to figure it out." 

Price Check? 

But health care is not exactly like every other industry, says Patrick Carter, MD. The TMA Council on Legislation member and chief of family medicine at Kelsey-Seybold Clinic in Houston also serves on the IHCQE Board of Directors.

Physicians do have a set price for different services, known as their billed charge. (See "Know Your Price.") "And posting the billed charge is not really a problem for most physicians," he said. "The problem is almost nobody pays the billed charge, so it's not going to be meaningful for most patients."

That's because the billed charge does not take into account the fact that physicians individually negotiate different rates with different health insurers based on a host of factors, such as the number of patients in a particular plan. And because no two plans are alike, neither are patients' costs, even if Dr. Carter's fee is the same. 

Contracted rates are a different issue. 

"And physicians, like any other business, have the right to privately negotiate the best rates they can," he said. Opening up that information would not only confuse patients but "significantly change the way physicians do business."

Health plans also have objected to the idea because they consider that information to be proprietary, although insurers and physicians can share the information with individual enrollees or other parties to the contract. 

Yet another barrier to posting meaningful health care prices, however, is that just like health plans, no two patients are alike, Dr. Carter says. "In the course of providing care, as physicians, we build [a treatment plan] as we go along. When I see a patient in my office, I don't know what I'm going to wind up ordering or needing." 

Nor is it administratively simple, given the hundreds of CPT codes for physicians' services — even if he could predict what his patients need. 

He also warns against past proposals in the legislature and from IHCQE that would have required physicians to stick to their price estimates or face potential penalties, posing additional pitfalls for physicians and their ability to deliver the care their patients need. 

And even if physicians could come up with a simple "price tag" that accounts for all of the other variables, it still wouldn't give patients what they are looking for, Dr. Carter says. "Most patients only really care about what they are going to pay out of pocket, and that's very much dependent on health plans and employers, not physicians." 

Enhancing Transparency 

TMA leaders also pointed to existing legislative mandates that require physicians, hospitals, and health plans in Texas to help patients with cost estimates. And nothing prevents doctors from discussing their billed charges or other estimates and discounts with their patients now, Dr. Carter says.

In fact, TMA surveys show that even though physicians do not generally publish their charges, they routinely give patients individual fees or cost ranges when they ask, try to estimate insurance payments in advance, and provide fee information when planning future tests or procedures. 

The 2014 legislative interim charges also ask the Senate State Affairs Committee to study the impact of an existing, comprehensive transparency law "and make recommendations regarding potential changes designed to create a more open marketplace for enhanced consumer decisionmaking in Texas."

The Texas Legislature passed Senate Bill 1731 in 2007 as part of an effort to protect patients from surprise, out-of-network bills. The state phased in the law's implementation, which, among other things, requires: 

  • Insurers to give their members, upon request, an estimate of payments the plan will make, as well as any deductibles, copayments, or other amounts the patient is responsible for;
  • Physicians and hospitals to disclose their billing policies; 
  • Hospitals to provide patients with estimates of their charges, including discounts, when patients ask; and
  • Physicians to give cost estimates if the requesting patient seeks out-of-network care or is uninsured.  

The IHCQE board in a 2012 report recommended fully implementing and enhancing existing transparency initiatives like SB 1731 that encourage a wide range of players — physicians, hospitals, payers, employers, and consumer groups — to make quality and cost information more widely available and that encourage patients to seek it. 

The Texas Department of Insurance (TDI) meanwhile is looking for ways to improve a website it launched last year to provide consumers with average costs for various medical services. The online database, also mandated by SB 1731, combines claims data TDI collects from the state's private health plans and displays average billed charges and contracted and paid amounts for in- and out-of-network care in a particular region, like West Texas. 

TDI officials acknowledge certain shortcomings with the existing tool, such as a lack of market-specific costs and user-friendliness for patients who are likely to "shop" based on a treatment event versus a single billing code. 

TMA's transparency workgroup is investigating other states' experiences, as well. The interim legislative charges also ask the Senate State Affairs Committee to “analyze relevant reforms” beyond Texas' borders.

Dr. Carter points to a Maine law that requires physicians and other health care professionals there to publicly post an estimate of their fees for the most common procedures they perform and only for uninsured patients. The law passed in January with support from the Maine Medical Association (MMA). 

When it comes to calculating the impact of insurance copays, deductibles, and other cost-sharing on patients' medical bills, "that's the responsibility of the insurance company and the patient," MMA Executive Vice President Gordon Smith said. "We wanted to do this in a way that benefits the patient, without causing an undue burden on practices. This [law] is pegged to a nice simplicity, and it goes back to the physician and the patient. Physicians provide the service. They bill for it. And they have a price. All this legislation says is, let's encourage patients to know that price beforehand." 

On the other hand, Massachusetts Medical Society leaders expressed concern about the burden a new law places on physicians and hospitals in requiring them to give patients any information they request to calculate their out-of-pocket costs. That includes CPT codes for anticipated services, contracted amounts, and phone numbers for facilities involved. 

State law had already required health plans to provide patients with cost estimates. As of Jan. 1, the new law means physicians must provide any additional information to help insurers do that.

States Laws Get an "F"

Any laws that put the burden on patients to piece together their medical costs deserve failing grades, says HCI3's Mr. de Brantes. 

He likened the scenario to buying a car and assembling the cost from a list price of every component. "It's absurd. Clearly, the individual will never be able to assemble all of this without having an incredible amount of knowledge. So for the average person, it's virtually impossible to know the price [of health care] until after everything has happened," he said. "We have to think about this from the consumer's perspective, not the insiders who think it's too complicated, but the person who's making $30,000 a year and paying $3,000, on average, out of pocket on deductibles. That's 10 percent of that person's salary. Doesn't he or she have the right to be informed?"  

The transparency report card lauds states with robust transparency laws and regulations requiring them to create public websites with comprehensive price information based on actual paid claims. But the report card downgraded most states, including Texas, because the websites are poorly designed and patients cannot access the information. 

Only two states, Maine and Massachusetts, received an overall passing "B" grade. That's largely because they have so-called "all-payer claims databases," a single, public state repository of claims processed by public and private payers that includes information on charges, payments, and services across providers.

To lawmakers in those two states, however, such existing reforms — which date back to 2003 in Maine, for example — apparently weren't enough when they pursued newer 2014 laws, medical society officials said. The report card did not include the later measures.

The Texas IHCQE also explored all-payer claims databases and found they mostly benefitted employers and third-party administrators shopping for a bargain on payment rates among health practitioners, not patients shopping for individualized health care, Dr. Carter notes. 

TMA's Council on Legislation also wants to make sure any approaches to price transparency are compatible with future alternative payment models, like bundled payments, Dr. Floyd adds. 

The physicians also caution broad price disclosures, if not carefully crafted, could backfire and lead to higher costs. Again, they highlighted Medicare as an example of what could go wrong. 

"Medicare is the most transparent price system we have. It covers tens of millions of patients. Fees have gone down for years, and yet the total cost of Medicare is not going down," Dr. Carter said. "And do we really want patients and physicians to be arguing over whether a test is needed or not, based on cost? To me, that's a barrier in my ability to take care of my patients. What we want is a balanced approach."  

Amy Lynn Sorrel can be reached by telephone at (800) 880-1300, ext. 1392, or (512) 370-1392; by fax at (512) 370-1629; or by email.


Medicare Discloses Physician Payments

In early April, the Centers for Medicare & Medicaid Services (CMS) gave the public unprecedented access to physician payments and charges for services and procedures provided to Medicare beneficiaries. The online database contains information on more than 880,000 physicians and other health care professionals who collectively received $77 billion in Medicare Part B payments in 2012. 

Organized medicine, including TMA, has expressed concern that the data, as is, could mislead the public if presented without context. For example, the data don't account for physician expenses, such as drug and medical supply costs, investments in health information technology, and other expenses. 

Consumers accessing the data also likely don't realize Medicare pays on average 61 percent of physicians' overall costs. In Texas, Medicare covers about 3.2 million seniors and Texans with disabilities.

"Just looking at gross payments can be inflammatory and doesn't tell you what a doctor is really getting paid when all's said and done," TMA Immediate Past President Stephen L. Brotherton said.

CMS acknowledges the limitations of the data, but maintains the data will "assist the public's understanding of Medicare fraud, waste and abuse, as well as shed light on payments to physicians for services furnished to Medicare beneficiaries," officials wrote in April to the American Medical Association. 

The data come from claims physicians submit to Medicare for payment and include the number and type of health care services provided, a count of unique beneficiaries treated, the average submitted charges, and the average amount Medicare paid for those services.  

Organized medicine fought the physician data release in court for more than 30 years. But last May, a Florida federal district court lifted a 1979 permanent injunction blocking the disclosures.

TMA encourages physicians to seek out and review their claims information, and AMA released guidance outlining the primary limitations people need to consider when evaluating physicians' information. 

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Know Your Price

Price transparency is likely here to stay, and TMA's Council on Legislation is exploring options that ensure the state pursues only approaches that are meaningful for patients and feasible for physicians.

Still, "physicians should realize that it's very possible they could be required to post their billed charges for at least a subset of services they provide," council member Patrick Carter, MD, says.

Physicians also should understand that their standard charges are a "real" number, TMA officials say. "Your charge is your price, and there could be consequences for creating confusion around that number," said Donna Kinney, director of research and data analysis in TMA's Division of Medical Economics.

For example:  

  • State law prohibits physicians from using variations in charges to discriminate against payers; 
  • Insurers and government payers typically pay the lesser of physicians' billed charges or the payer's allowed amounts; and
  • State regulators often assess prompt-pay penalties based on those charges.  

And as long as physicians do not get together to discuss their fees or contract rates, antitrust rules do not prohibit physicians from posting their individual charges, TMA Vice President for Medical Economics Lee Spangler clarifies.

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Last Updated On

May 13, 2016

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