Hospitals Are On A Course to Failure, As They Flout Price Transparency

The topic of healthcare was finally broached at the most recent Republican presidential debate. It was, in some ways, a “hallelujah moment,” because in my last column, I explained why it is imperative that all of the 2024 GOP hopefuls address the critical condition of the U.S. healthcare delivery system. While the discussion wasn’t extensive, a response from one of the candidates touched on a fundamental, underlying problem that plagues the entire healthcare ecosystem–a lack of transparency across the board, which is a key ingredient to getting to a new market-based model. But as providers continue to resist reforms, such as the hospital price transparency rule, it is clear the sector continues on a collision course with its own failures.

On a stage at the Ronald Reagan Presidential Library, former South Carolina governor and UN Ambassador Nikki Haley was asked how she plans to protect Americans who get sick from bankruptcy and financial ruin resulting from skyrocketing healthcare costs.

She resolved to “break all of it, from the insurance company, to the hospitals, to the doctor’s offices, to the PBMs, to the pharmaceutical companies,” if elected. “We will make it all transparent,” she added, “we need to fix this on behalf of the American people.” Although she didn’t delve into the specifics of how that would be achieved, she did at least highlight an underlying issue that needs to be addressed—transparency is a major issue that cuts across the entire ecosystem.

For years, both in my columns and books, I have attempted to highlight the root problems that have long plagued a healthcare delivery system that is fragmented, confusing, opaque, expensive and sometimes downright dangerous. I’ve also offered a path forward in getting to a new market-based model. As I covered extensively in Bringing Value to Healthcare, at its core, the current system relies on a “test more, treat more” fee-for-service (FFS) payment model which, in turn, has created perverse incentives for all stakeholders-hospital and physician providers; drug, device and diagnostics manufacturers; payers (including the government) and consumers-to game the system for financial gain. To drive this point home, Haley recounted a personal experience.

“My mom was in the hospital. And when she was in the hospital, they tried to bring her a couple of Tylenol. And she said, ‘I don’t need it.’ And they said, ‘Honey, go ahead and take it because you’re paying for it anyway.’” Unfortunately, this scenario plays out every day in hospitals and doctor’s offices across the country. It will continue until everyone gets off the FFS hamster wheel, a task which has been exceptionally difficult.

Three requirements are crucial for getting to a new market-based solution in healthcare delivery. First, there needs to be transparency in cost and quality, Second, there must be accountability for care across the continuum, with payment connected to outcomes that matter for the patient-consumer as well as employers and payers. Finally, as downward economic pressures, coupled with sweeping industry-wide changes in competition, market expectations and the regulatory environment escalate, all stakeholders must make an economic clinical value argument for the way in which they operate. This holds especially true for providers, payers, medical device and pharmaceutical companies.

In an attempt to achieve these ends, the Centers for Medicare & Medicaid Services (CMS) has been trying for more than 40 years to bend the proverbial healthcare cost curve through much needed reforms. However, as the nation’s largest payer quickly learned, trying to impose change on an industry fiercely resistant to it has proven largely unsuccessful. The hospital price transparency rule is a classic case in point.

Two years ago, CMS mandated that hospitals publicly post their prices for hundreds of “shoppable services” that a healthcare consumer can schedule in advance, in an easy to understand format. The reform was met with immediate backlash from the American Hospital Association (AHA), as they fought the measure all the way to the Supreme Court. Thankfully, they failed in that effort, but the data shows that hospitals and health systems continue to blatantly disregard the rule of law.

According to one report, 64% of hospitals have failed to fully comply with the rule. But CMS has been far too slow in going after transgressors, as they fined only two hospitals all of last year, for noncompliance. While CMS announced they are now stepping up their enforcement, the agency’s efforts have sadly been more talk than action. To make matters worse, a report from the Foundation for Government Accountability (FGA) found that CMS’ enforcement timelines for hospitals in violation were “wildly inconsistent.” CMS even stonewalled in providing FGA with information it requested related to enforcement actions, until the court intervened.

It’s quite troubling that at a time when all healthcare delivery stakeholders say they want “better health outcomes at lower cost,” providers continue to drag their feet on complying with such a basic reform. The great irony here is that healthcare is so important to each and every one of us, and yet it’s the only sector of the economy where we typically have no idea about what a medical intervention or test is likely to cost, why we need it, or if we need it, and what the implications are if we get the services at some other place. This is precisely why I have argued that if people knew what their health care costs would be, they would start acting less like patients and more like consumers by asking questions and demanding better answers from their providers, in much the same way the Amish do today.

Fixing price transparency will not cure all of healthcare delivery’s ills, but at a time when healthcare spending and health insurance costs continue to spiral out of control, no entity should be allowed to challenge the courts and get away with it, especially when something so vital as people’s health is at stake.

There is no easy fix to get us to a new market-based model in healthcare but greater transparency must be the centerpiece of any reform. For years, government and legislators have either been trying to regulate a way out of the system’s problems or tinkering around the edges with piecemeal fixes so as not to offend entrenched healthcare constituencies. This is a losing game and until there is a fresh approach, all stakeholders will continue pointing the finger at each other to explain why we’re not in a better place. And, once again, patient-consumers will be caught in the middle, holding the bill and wondering in disbelief where it all went so wrong.