January 27, 2014

After requesting comments from the public in August 2013 and receiving more than 130 letters, CMS is going forward with modification of its policy on disclosure of physician payment information.

Starting in late March of this year, CMS will evaluate requests for individual physician payment information (or requests for information that combined with other publicly available information could be used to determine total Medicare payments to a physician) on a case-by-case basis under the Freedom of Information Act.  In addition, CMS will generate and make available aggregate data sets regarding Medicare physician services for public consumption.

The notice that CMS posted to its official blog on January 14th represents a reversal of policy going back to 1980.  The original policy was based on an injunction issued by a federal district court in Florida that barred the government from disclosing identifiable annual Medicare payments to individual physicians.  When the district court vacated its injunction because of a supervening decision by the appellate court, CMS announced its intention to reconsider its policy.

The new policy of case-by-case disclosure, which will weigh physicians’ privacy rights against the public’s interest in price transparency, is a continuation of the direction in which U.S. health policy has been heading for the last few years.  There is widespread agreement that greater competition will lead to reduced prices and improvements in quality, especially as more and more patients have high-deductible health coverage, and that competition requires reliable comparative information on price and quality.  As stated in Health Care Price Transparency:  A Strategic Perspective for State Government Leaders by the Deloitte Center for Health Solutions, “Price transparency—in tandem with quality transparency—is a key building block of a more responsive and accountable health care system.”  The Deloitte report defined “price transparency” as “The availability to consumers of precise total costs for specific services provided by health care service providers (doctors, hospitals, labs, outpatient facilities, other service providers) and noted that:

Providers, health plans, employers and policy-makers agree on one important point: Engaging individuals to be more responsible in managing their health and purchasing health care services is a necessary remedy to the health system’s woes. How it’s done, and the role each stakeholder might play is a source of debate. Transparency in pricing and quality is seen as a useful first step.

Truven Health Analytics’ 2012 white paper Save $36 Billion in U.S. Health Care Spending Through Price Transparency argued that extreme price variation—as much as 100-fold or even more for the same services in the same geographic market—is made possible by the lack of transparency and helps to drive the high cost of healthcare. The $36 billion figure of potential savings comes from a model that would reduce prices for 300 high-volume common procedures to their median, extrapolated across the 108 million Americans under 65 who receive insurance through their employer.

Section 2178 of the Affordable Care Act makes the point succinctly through the title of the provision mandating that “Each hospital operating within the United States shall for each year establish (and update) and make public . . . a list of the hospital’s standard charges for items and services provided by the hospital, including for diagnosis-related groups:”  “Bringing Down the Cost of Health Care Coverage.”

As discussed in our August 19 Alert, CMS released information, in May 2013, on the average charges for the 100 most common inpatient services at more than 3,000 hospitals nationwide (http://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/Medicare-Provider-Charge-Data/Inpatient.html).  In June, it published average charges for 30 selected outpatient procedures (http://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/Medicare-Provider-Charge-Data/Outpatient.html).  

In addition to the federal efforts to create health care price transparency, there has been significant activity on the state level over the last decade.  Some 40 states have laws requiring or encouraging price disclosure (albeit lacking enforcement mechanisms in many cases).  California’s healthcare transparency law prevents any provider contract with a health plan from including a clause that limits price transparency.  One of the most recent, and strongest, state statutes is North Carolina’s “Health Care Cost Reduction and Transparency Act of 2013,”  which requires hospitals and ambulatory surgical facilities to report pricing for some 140 commonly performed procedures to the state Department of Health and Human Services, who will be required to make the information available on the Department website.  The passage of the legislation followed the publication of a series of newspaper articles describing how the growing market power of consolidated hospital giants had driven up prices.  According to an article in CivSource (August 21, 2013),

New measures are cropping up all over the US to force more pricing transparency among health care providers, although their passage has only seen mixed success.

Essentially these bills require providers to release some information about the general cost of a procedure ahead of time so that patients can put together a ballpark figure of cost. However, once these prices are out in the open, the wild disparities between health care providers are too. This can create a tough situation for providers, who then have to justify elevated price tags.

Some providers and health plans have been disclosing their prices and payments voluntarily, and others have created price-comparison tools.  Aetna, for example, began making physician-specific cost information available to plan members on its secure website in 2005.  Not all health plans are forthcoming, however, since many of them consider prices to be trade secrets.  One academic medical center, Mount Sinai Medical Center in Miami Beach, announced in May 2013 that it would publish the prices it negotiated with private insurers, but it was forced to abandon the attempt because of non-disclosure stipulations in its contracts—which the insurers refused to waive.  “No hospitals currently are known to publish their prices, and consumer groups report it's often difficult for patients to find out in advance what they will have to pay,” according to Joe Carlson in his article “Revealing Times” published in Modern Healthcare on January 18, 2014.

The six-O.R. Surgery Center of Oklahoma in Oklahoma City, founded and managed by two anesthesiologists, lists more than 100 procedures on its website, each with an all-inclusive price covering the facility fee, the surgeon’s fee and anesthesia (but not hardware and implants).  The Center keeps its prices relatively low in part by requiring up-front payments from self-pay patients, and by not participating with Medicare or most private payers.  The 47 surgeons who perform between 600 and 700 cases per month are all financially invested in the facility and thus have a shared interest in maintaining high quality.  The Center has attracted the attention not just of patients with no insurance or with high deductibles, but also of self-insured employers, and even of a neighboring full-service hospital, to which the Center sends patients who “need another day or 2 to sleep it off after their surgery” for a predetermined per-day price (Burger J. Is Surgery Ready for Price Transparency?  Outpatient Surgery Magazine Online 2013 (9); 46-63). 

In contrast to the Surgery Center of Oklahoma’s embrace of price transparency, CMS’ announcement that it plans to make individual physician payment information available on a case-by-case basis is a baby step.  CMS is of course subject to different constraints, beginning with the fact that the data it will release involves the privacy of others, i.e. the physicians on whom it will report.  Physicians’ privacy interests, however, are clearly not the decisive factor that they were in 1979 when the Florida federal district court barred CMS from disclosing identifiable Medicare payments to individual physicians.  Objections to disclosure of payments for physicians’ services tend to be based more on the accuracy and reliability of price information and on the need to avoid harm to patients who might misinterpret superficially simple but fundamentally complex data.  As stated in the Mayo Clinic’s letter commenting on CMS’ proposal last year, “If quality information is not available, cost and price information should be presented in a context that raises the importance of considering quality in decisions about providers, treatments, and health care services.”  The bottom line is still value and not price alone.  Defining and demonstrating value is the ongoing challenge for us all.

With best wishes,

Tony Mira
President and CEO