Since health care doesn’t operate under normal market mechanics, advocates say the new rule is necessary to help balance the scales. The industry relies on third-party payers, rather than consumers, to determine reasonable costs and utilization. Regulatory requirements—such as one requiring that hospitals treat all patients in need of emergency care regardless of ability to pay—add more complexity.
Critics warn of unintended consequences. For example, hospitals with lower prices could raise their rates to match competitors. But giving payers more information about rates could lead to lower prices across the board, altering a process that has long been shrouded in secrecy.
“We’re going to see use of the data by research groups and others who can shine a bright light for payers,” Rosenbaum says. “That’s what the hospitals are really scared of.”
That bright light illuminates hospitals’ most lucrative revenue streams. Private insurers pay an estimated 51 percent to 122 percent more than the federal Medicare program, according to a recent Health Care Cost Institute analysis.
Experts say more information is needed to truly make sense of the price variation. For example, higher patient volumes could help explain why NorthShore charges Aetna $166,995 for heart surgery (with catheterization and major complications), but Humana pays $204,176.
There are a number of possible reasons why some insurers get charged more than others. Insurers that send more patients to a hospital might get lower prices. Hospitals also may take into account how fast a payer is, as well as prior-authorization requirements and other red tape they say can delay patient care, experts say.
Pricing is becoming even more controversial as hospitals continue consolidating, giving them more leverage over insurers. And while research shows mergers have little impact on quality of care, they’ve been known to drive up prices. Likewise, insurance industry consolidation gives payers more power to negotiate lower rates, which don’t necessarily equate to lower premiums for enrollees.
“Prices ultimately rest on the indispensability of each party to the other,” says Alan Sager, a professor at Boston University’s school of public health. “This isn’t competition. This is the smoke screen behind which hospitals and doctors and insurance companies can continue to play games in a $4 trillion U.S. health care world without the ability for cost containment, appropriate care or affordable coverage for everybody.”