Metrics for Transformation -
Transparency

New Report Card on State Price Transparency Laws

What is transparency?

Markets cannot function without transparency. If a buyer cannot distinguish the differences in price and quality between suppliers, then there cannot be an efficient market. The asymmetries between buyer and seller are so significant that only the seller/supplier knows the value of the services provided/sold. The US health care industry is, by and large, completely opaque. As the number of consumers in high deductible/high co-insurance health insurance plans continues to grow, market opacity prevents consumer-patients from comparison shopping. And since fear of market loss is a significant concern for many providers, there has been a tendency to block attempts at greater transparency.

For example, many providers (or payers) have included “gag clauses” in their contracts, which prohibits a health plan or health care provider from divulging the true costs of services rendered during the management of a patient. In addition, while quality data is more readily available thanks to public sector efforts, the availability of easy to understand quality ratings on hospitals and physicians has been spotty, at best, with the notable exceptions of the Leapfrog Group’s recent publication of an aggregate hospital safety score, and the Bridges To Excellence Recognitions.

In an effort to increase price transparency, many states have enacted legislation with provisions for public reporting of pricing and quality information across providers and, in some cases, specific to certain payers operating in that state (e.g. NH Health Cost^ix). However, the scope and depth of transparency legislation varies significantly by state – some require that pricing be posted on a state website or published in a formal annual report; others require participation in an all payer claims database (APCD) and empower the APCD manager to publish detailed quality and cost of care reports, by provider.

This variation in state regulations (barring federal regulation) seems inevitable, and suggests a process for better understanding the strength of such legislation by state. That’s because until such time as all states have robust and comprehensive legislation that provides a right for individual consumer-patients to fully understand the price and quality of the services for a specific medical event, we cannot expect a functional market for health care services to be developed.
 

What We Are Doing To Impact This Measure

HCI3 has developed analytical tools that can calculate prices for various episodes of medical care, adjusted for the severity of a specific individual, and that price can be the officially negotiated price between a provider and a payer for the care of a specific individual. In turn, that price can be communicated, up front, to the plan member so that an individual can now ahead of time what they will have to pay out in deductibles, co-pays or co-insurance. That’s an essential element of a functioning market.

In addition, we’re developing a free app that can be downloaded on a tablet or a smartphone and enable the user to find a BTE Recognized physician in their local area. These physicians have demonstrated that they can manage patients with certain chronic conditions effectively and any patient with such a chronic condition should consider getting their care from such a physician.

Finally, we’re also working with specific community leaders in helping them understand the importance of transparency to improving the affordability and quality of health care, and providing them with analytic support to publish average costs of medical episodes.
 

Measures and Data Sources

Measures

The criteria by which health care transparency legislation in each state is graded

Four Levels of Price Transparency Legislation are scored against three “scope” categories to form a scoring matrix. Each level has a point subtotal and the sum of the level subtotals is the final score. The table below shows the total possible points a state could receive.

Grading criteria are as follows, in percentages:

A: 55 to 100
B: 40 to 54
C: 25 to 39
D: 10 to 24
F: 0 to 9
 

Data Sources

Data sources include the National Conference of State Legislatures and state-specific enacted legislation and state-specific sites devoted to public transparency of health care prices and quality. Special thanks to Catalyze Payment Reform for their support and robust research on state-specific legislation.