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Secretary Azar Wants "Value-Based Transformation" of Health Care Industry

Secretary of Health and Human Services Alex Azar has put the health care industry on notice that he intends to seek what he terms a "value-based transformation" of the American health care system. The former pharmaceuticals executive wasted no time after his January 2018 confirmation in making price transparency one of his top priorities. In public remarks on March 5, 2018, Secretary Azar told the Federation of American Hospitals that "[P]roviders and insurers have to become more transparent about their pricing . . . . And if that doesn't happen, [CMS has] plenty of levers to pull that would help drive this change."

The Secretary went on to recount a personal experience, price-shopping for a stress echocardiogram, which involved multiple phone calls and quotes from different providers ranging from $550 to $5,500. He called it "simply wrong" that a consumer would have to expend so much effort to find out the cost of a service. Accordingly, Azar promises that HHS will "charge forward . . . and take bolder action" to encourage price transparency.

HHS already has broad power to require hospitals' publication of their prices. The ACA requires each hospital "operating within the United States [to] . . . establish . . . and make public (in accordance with guidelines developed by the Secretary) a list of the hospital's standard charges for items and services provided by the hospital, including for diagnosis-related groups" or DRGs. To date, HHS has not issued regulations to enforce this requirement and it has been more honored in the breach by hospitals.

The ACA also provided a more limited mandate for HHS to require price and cost disclosure by federally regulated health plans (e.g., participants in insurance exchanges and Medicare Advantage plans). The Secretary has the power to require health-benefit exchanges to gather and transmit to HHS their participating insurance plans' cost, payment and enrollment data. CMS also already gathers and to a limited degree, shares, such data with regard to Medicare Advantage plans.

In short, Azar's warning to the industry that he has "levers to pull" if providers and plans do not engage in voluntary self-regulation is well supported by existing law. Industry commentators have identified five potential steps HHS may take next, if health care providers are not responsive to the Secretary:

  • Issue a rule under the ACA requiring all hospitals to provide detailed and current price lists that are generally available to the public;
  • Add a Condition of Participation requiring participating hospitals to provide patients and plans with an estimated cost of care, prior to service;
  • Publish Medicare data on total cost-per-episode by provider (both hospitals and physicians), perhaps including outcome information as well;
  • Require federally regulated health plans to publish their cost and price data; and
  • Require Medicare Advantage and Part D plans to tell patients in advance the cost of prescription medications.

While health care market participants have generally been skeptical that increased transparency will "bend the cost curve," the Secretary's aggressive approach raises what is perhaps a more urgent question: Will it be less expensive for providers and plans to establish a voluntary, industry standard for publishing their own data, or to comply with a regulatory mandate that originates in a suspicion that plans and providers are benefiting from the concealment of price and cost data?

Thomas S. Dean

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