Value in Anesthesia and Price Transparency

Two recent Alerts focused on the growing movement toward transparency of medical prices.  (How Much Did Medicare Pay Each of 32,641 Anesthesiologists in 2012?, April 21, 2014 and Private Payer Information on Anesthesia and Other Services: Claims Data to Be Available Next Year, May 19, 2014.)  The first of these discussed CMS’ April 9th release of a massive database with information on the approximately $77 billion that Medicare paid out to more than 800,000 physicians and other non-hospital providers in 2012.  The May Alert examined three large insurers’ announcement that they were establishing an online database of paid claims that would provide public information about the price and quality of healthcare services.

Also evolving very rapidly are state-level All-Payer Claims Databases (APCDs).  APDCs are large databases that systematically collect medical claims, pharmacy claims and provider files from private and governmental payers to meet demands for multipayer data that allow states and other stakeholders to understand the cost, quality, and utilization of health care in their region.  Maine launched the first statewide APCD in 2003.  By the time that the APCD Council, a collaboration between the University of New Hampshire and the National Association of Health Data Organizations, published its white paper The Basics of All-Payer Claims Databases: A Primer for States in January 2014, more than 30 had established, were implementing or had shown strong interest in APCDs.  The only states with no current activity were NV, ND, SD, OK, MO, MS, IN, AL, GA and NC.  Most of the newer APCDs are legally mandated initiatives in which payers are required to participate by law.  Among the older APCDs is a small number of voluntary systems.

According to the APCD, the information typically collected in an APCD includes:

• Encrypted social security or member identification number
• Patient demographics (date of birth, gender, zip code)
• Type of insurance product (HMO, PPO, POS, etc.)
• Type of contract (single person, family, etc.)
• Diagnosis, procedure, and National Drug Codes
• Information on service provider
• Prescribing physician
• Health plan payments
• Member payment responsibility
• Type and date of bill paid
• Facility type
• Revenue codes
• Service dates

For States that mandate payer reporting, the threshold for required participation is based on factors such as the number of covered lives, the total revenue from premiums, or the payer’s market share.  The minimum number of covered lives ranges from 50 (Maine) to the thousands (e.g., Utah).  Payers in Maryland risk penalties for failure to report if their annual premium revenues exceed $1 million.  The number of commercial payers ranges between 10 in Vermont to nearly 200 in Minnesota.  Millions and millions of claims are added to the APCDs each year.

Thus the APCDs inevitably contain a good deal of information on anesthesia practice in their jurisdictions—and anesthesiologists, along with other specialists, might be more disturbed about the existence of these databases if they were disseminating information on individual non-primary care providers the way that the Medicare Physician Payment Public Use File is doing.  It does not appear that many, if any, APCDs are providing the public with access to the underlying data.  Most are producing reports that show utilization patterns or cost variations for the treatment of common conditions between health care systems, payers or geographic regions.

The Wisconsin Health Information Organization (WHIO), one of the early and voluntary APCDs, has released a “data mart” every six months since 2008.  The latest release contains a rolling 27 months of claims data and a total of 23.7 million episodes of care.  An episode of care is defined as the series of treatments and follow-up related to a single medical event such as a broken leg or heart surgery, or the year-long treatment of a diabetic patient.  The data represent claims information on over 3.8 million patients from 16 major health care payers in Wisconsin including Medicare HMOs and Medicare Advantage programs.

Collecting raw data is one thing.  Aggregation is another, and in this context it has many technical and political challenges.  Then, in order to turn data into information, users must have sophisticated analytic capabilities.  Most anesthesia practices do not have those capabilities.  Some state medical societies have data analysts and systems that allow them to use the APCDs for business intelligence and strategic initiatives, but their product is typically a standardized report that answers population health questions such as “which health system had the highest rate of breast cancer screening.”  The Medical Society of Wisconsin goes farther than most in offering custom data analytics services to assist systems and individual physicians in their understanding and use of the WHIO data.”

The concern for anesthesiologists, and others, is that APCDs and multiplying implementations of healthcare price transparency are going to drive margins down.  Employers, health plans and patients have barely begun to use comparative cost information for provider selection.  The momentum is there, however.

Philip Betbeze concluded his article Healthcare Pricing Transparency is Going to Sting in the June 6th issue of Health Leaders Media with the following warning to hospitals:

There are ways to prepare, but in many cases, unless you already provide relatively high quality at a competitive price, the preparation may be painful. What hurts hospital leaders is that they don't necessarily know in detail how their offerings stack up against their competitors.

And competitors aren't just local anymore. They're national and in some cases, even international, which belies the old saying, "all healthcare is local." Hospital leaders owe it to their organization to look at some of these comparisons themselves, and understand how they stack up against the competition.

Some hospitals and health systems, finding they can't compete well under their current cost structure, will be forced to lower prices, and that will impact their ability to continue to fund services that already lose money, or curtail their activities on community benefit, or even lower their charity care, both activities which produce little, or even negative financial return for the organization.

Tough decisions will be required as hospitals and health systems with higher relative prices find they have to adjust to retain business. 

Betbeze’s final words were:  “Those adjustments, for some, will be extremely painful.”  We hope that our readers, duly alerted, will not be among the suffering.