Healthcare Price Transparency, APMs Fail to Control Costs in MA

October 24, 2019 - Despite aiming to reduce costs and help consumers shop for quality, affordable medical services, healthcare price transparency tools in Massachusetts are not working as intended, according to a new report released by the state’s Attorney general Maura Healy.

The report found that inpatient spending has continued to drop at lower-priced hospitals compared to higher-priced hospitals. The share of expenditures at lower-priced hospitals either remained essentially the same or decreased at five out of the eight provider organizations analyzed

In contrast, spending at higher-priced hospitals increased during the period, with the share of expenditures rising from 61.1 percent to 63.6 percent.

The findings suggested that cost containment initiatives that have been implemented since 2014, including healthcare price transparency efforts and alternative payment models, have not uniformly led patients to move their care to lower-priced hospitals. 

“Massachusetts families bear incredibly high costs for health care,” Attorney General Healey stated in a press release. “We need real solutions to control escalating costs and cannot put the burden on patients. While price transparency for consumers is essential, we must get serious about establishing real incentives for the delivery of high-quality, low-care cost.”

Although Massachusetts payers have developed cost estimator tools to provide healthcare price transparency, the websites were used by only a tiny fraction of residents and they did not influence consumer decisions in a meaningful way, the report stated.

Similarly, alternative payment models did not shift care to lower cost providers, the report showed. Frequent plan-switching by patients and the administrative complexity of the arrangements limited the effectiveness of the models as cost containment tools. 

“Even if a provider is consistently managing his or her patient population, the variability among payers’ attribution methods and the lack of member persistency across payers suggest considerable unpredictability in how the provider will be  ‘scored’ under different APMs,” the press release explained.

The report spells trouble for the healthcare industry at large. Across the country, federal, state, and local agencies are implementing both price transparency policies and alternative payment models to encourage lower healthcare spending and better care quality.

CMS, for example, started earlier this year to require hospitals to publish their chargemasters online, and the agency is looking to expand those requirements to negotiate prices. At the same time, the industry has shifted over one-third of healthcare payments to alternative payment models, according to the Health Care Payment Learning and Action Network.

Current efforts to lower healthcare spending, which is slated to reach over 19 percent of gross domestic product by 2027, may need to be refined to achieve their goals, the study from Massachusetts indicated.

To control healthcare spending in Massachusetts, the Attorney General recommended that stakeholders, including payers, providers, consumer advocates, and policymakers, re-adjust expectations that consumer-driven healthcare price transparency tools will reduce overall medical cost growth. 

Rather than price transparency at the point-of-service, presenting it the point-of-enrollment will enable and incentivize consumers to select a primary care physician that is affiliated with a lower-cost system, Healy said.

Standardizing the methods used to assign patients to healthcare providers and aligning risk contracting terms so that even when patients switch health plans, provider incentives remain consistent, are also crucial steps to take towards reducing healthcare costs, the report stated.