Forcing Change (Part 1)

22 years ago, in the year 2000, the then Institute of Medicine (now the Academy of Medicine) published "To Err is Human." In the very first chapter, the authors state:"Marketplace incentives direct the values, culture, and priorities of health care organizations and reward performance beyond the minimum. One way this can happen is by purchasers and consumers requesting and using information to direct their business to the best organizations and providers in a community." Put plainly, they were asking for transparency. Transparency in outcomes of care, and transparency in the price of care.

For 20 of the past 22 years, employers, non-profit groups, healthcare-focused Foundations, some state agencies and legislatures, as well as economists and policy makers have all been fighting for greater transparency. Some states instituted all-payer claims databases (and were sued). Employers demanded full access to their claims data (and were denied). Consumers asked for pricing information from providers (and were given useless charges or no information). Along with Catalyst for Payment Reform, my former non-profit, the Health Care Incentives Improvement Institute, published yearly reports on transparency to rate states on how well (or poorly) they were doing. The last version, published in late 2017, showed that few states were successful at making price information transparent.

The efforts of the incumbents to combat transparency has been unrelenting, and all of the valiant efforts of all the groups asking for the information that is required to make good decisions couldn't make enough of a dent. As a result, change was imposed on the industry through federal legislation -- and the industry sued to block it.

The transcripts of the court arguments by representatives of the American Hospital Association are laughable, but had it not been for the valiant efforts over two decades mentioned above, the judges may have been swayed by the industry. They weren't, and we've now entered into a new era thanks to forced change.

This new era was ushered in by the Consolidated Appropriations Act (CAA) of 2021, about which my colleagues Jeffrey Hogan and Chris Deacon have spoken and written a lot. The CAA had two titles that directly impact the industry -- Title 1 The No Surprise Act (NSA) and Title 2 Transparency. While the NSA is important because it stops the heretofore egregious acts by some providers of billing charges to patients because they are providing services out-of-network at an in-network facility (for example ED physicians billing charges after delivering care to patients in an ED that is in network), it's nothing compared to the current and future effects of the Transparency portion of the law.

Here are a just a few of the market-changing requirements built into the law:

1. No more gag clauses or other market-rigging stipulations in provider-payer contracts;
2. No more hidden provider fee schedules or price information blocking;
3. No more shopping in the dark for consumers;
4. No more guessing about a patient's expected cost-sharing for care they need;
5. No more guessing by providers about which facility is more expensive than another when they refer patients;
6. No more hiding direct and indirect fees or commissions by brokers or benefits consultants when the recommend an insurance plan to an employer.

You really need to pause and look at this list and reflect deeply on the way in which the business of healthcare has been run to-date. Simply remove the "No more" from each bullet. That's the difference between the old and the new eras of U.S. health care. It's truly a different day and here's one simple example of the effect this will have.

Until July 1 of this year, if an employer, a group of entrepreneurs, or anyone else in the industry wanted to identify high performing providers in a market, they were either limited to mining Medicare data (which doesn't always work for under 65 insured populations) or their own data, which was imperfect. If they wanted to compare the performance of the providers that were caring for their employees with the rest of the providers in a geography, they could leverage available commercial claims datasets such as Merative 's Marketscan. However, those datasets always masked provider identity because of #1 and #2 above. The system was designed to keep this information locked up so that no one could truly compete, because the incumbents all know that competition for value will erode the fat margins they have carefully built and protected over the years at our collective expense.

All those barriers, all that market opacity, all that information blocking were wiped away with one law. It took a little over 20 years, and it also took a law. The change was forced onto the industry because the industry refused to change by itself. And why would it when it so heftily benefited from it? After all, it's the incentives, stupid.

More change is needed, and in particular to get the industry to move much more aggressively from fee-for-service to advanced alternative payment models. That change also might very well have to be forced onto the system.

Next: Forcing Change (Part 2)