Employers have a new tool to ensure they are paying fair prices for medical services. The Consolidated Appropriations Act of 2021 (CAA) established protections for consumers related to surprise billing and transparency in healthcare. It created a unique opportunity by establishing the Transparency in Coverage and No Surprises Act requirements, making available all negotiated prices from every healthcare payer to every medical provider for every service in the U.S., beginning in the latter half of 2022, updated monthly.
These rules provided unprecedented access to proprietary price information. The resulting data can transform how payers and providers negotiate, and it can result in the elimination of unwarranted price variability. However, the datasets are massive and messy, and the value is contingent upon making the data interpretable and actionable. Accessing this data requires transparent data sourcing, selection, cleaning and quality control, with considerable experience in working with large healthcare data.
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Plus, under CAA, employers have increasing fiduciary responsibility to their employees to ensure their healthcare prices are fair and reasonable. Fiduciaries need to consider how the CAA's 'covered service provider' compensation disclosures could inform generally applicable ERISA principles tied to ensuring those vendors are paid reasonable compensation. This responsibility also applies to how health plans or TPAs bargain for their employer clients.
Benchmark prices are now available in user-friendly tools for public use, starting on January 31, 2023, from all official U.S. Government mandated TiC data. Not only do these tools provide price transparency, but they also use a transparent process, unlike past healthcare pricing services, which may have been based on guesstimates or confidential sources. These tools can be used for negotiating a fair price. They cover all reimbursement codes, easily searchable: DRG (hospitals), HCPCS (doctors and other providers, including CPT and CDT), ICD codes and RC (revenue codes), based on tens of billions of U.S. negotiated prices, after thorough quality control checking, using over 50,000 health plan non-duplicate files.
With this data, employers or their agents can access what used to be highly confidential, undisclosed information, at their fingertips. And employers can achieve compliance with the CAA and the NSA. CAA will make fiduciaries of self-insured employers for healthcare services they purchase.
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In a recent study, one tool, the Official Healthcare Pricing Guide, was applied for a test case client, a typical mid-sized self-funded employer, and it was shown to result in a return on investment of one thousand to one. By spending $1,000 on HPG, the client saved $1 million per year in healthcare costs. The secret was to target services where they were substantially overpaying in contract negotiated rates relative to TiC benchmark rates. These services represented about 20% of total costs, where the client was overpaying by an average of 50% or more. After renegotiations, overpayments were cut by half on average.
Citing the TiC "Fair Price" was key in the renegotiations. These negotiations may be by benefits consultants or TPAs on behalf of the employer, and it was important not to renegotiate services where they were currently paying at or below TiC benchmark. For this typical employer with about 2,000 employees, the cost to access the data was $1,000, and the annual savings was $1 million. For other employers currently overpaying on over 20% of services, savings may be much higher. For all employers, they would have fulfilled their fiduciary responsibility under CAA to ensure they are not paying excessive rates.
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What does this mean for employers? The CAA transparency data release is one of the major breakthroughs of our time with respect to reducing U.S. healthcare costs. It has resulted in the development of a new standard in pricing. This new standard is available without having to resort to government price controls, as some have suggested, and the new pricing is not based on Medicare or the related Reference Based Pricing, which have their perceived disadvantages. This is a "Fair and Reasonable Price," based on actual prices. According to the Boston Consulting Group, the legal definition of a fair price is, "a price others pay for a good or service." Having this data allows "Evidence-Based" provider negotiations.
At the beginning of 2023, we now have a breakthrough opportunity to fix U.S. healthcare, thanks to the passage of the Consolidated Appropriations Act.
