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Digging Deeper

This month, we explore the growing popularity of transparency regulation and social investments when it comes to lowering health spending. First, we unpack some of the unforeseen consequences of provider transparency rules and challenge the impact these efforts have on our entire spending ecosystem. We also highlight the need to ensure that programs that address social determinants of health are supported by evidence and lead to desired outcomes.

Transparency Regulation: Mixed Outcomes and Unintended Consequences

In an effort to empower consumers and lower health spending, last year, the Centers for Medicaid and Medicare Services (CMS) released a transparency rule mandating that hospitals publicly post payer negotiated rates for 70 “shoppable services.” The hypothesis? If consumers have clear cost information, they will choose the best-priced services among hospitals.

To evaluate this concept, researchers from the Health Care Cost Institute (HCCI) examined the selected services from CMS. They concluded that “shoppable” health care accounted for only 12% of 2017 medical spending. “Although the amount of total health care spending that is shoppable is not trivial,” they write, “our findings point out the potential limitations of consumer-focused initiatives.”

But the issue with transparency rules is not just that the potential benefits are narrow; there may be unintended consequences as well. In a second article, HCCI pointed out the growing concern that transparency regulations could lead to low-priced providers raising their prices to meet the benchmarks of more expensive health systems. Researchers tested how hypothetical public price changes in the market would affect overall spending. The outcomes for each potential pricing scenario were mixed, implying that the impact of this transparency effort has on lower costs for patients is unknown.

Why It Matters: There is broad consensus that opaque hospital pricing is a problem, making it hard for consumers – among others – to understand where their health dollars flow. On the surface, many people think that transparency will help consumers make better decisions about health care spending and potentially drive down costs. But the evidence continues to mount that transparency efforts are – at best – only one component of a solution that will require a broader approach.

Digging deeper, we find that transparency has its downsides. The HCCI analysis illustrates that transparency can fundamentally alter the market forces in ways that are not necessarily consistent, predictable or beneficial to patients. In fact, health care is not as “shoppable” as one would think, and transparency could actually lead to rising prices in certain instances.

When Popular Approaches Lack Evidence

Spending on social determinants of health (SDOH) is a growing area of focus among hospitals and health systems. According to a recent Health Affairs article, between 2017-2019, health systems spent approximately $2.5 billion on SDOH programming. This large investment, which included employment assistance, food security and affordable housing initiatives, was spent from only one sector of the health system – hospitals and health systems.

The majority of efforts to implement SDOH are often referral or screening programs as opposed to efforts that directly address SDOH. This complicates our ability to accurately measure direct SDOH program outcomes. Furthermore, individual initiative results are mixed, emphasizing the need to ensure new approaches are evidenced-based.

Why it Matters: Health care stakeholders are increasingly turning to investments in SDOH as a way to tackle long-term spending, and the research illustrates the importance of continuing to analyze SDOH efforts closely. On the surface, this large investment in SDOH seems sound, yet when we go below the surface, we discover there is a lack of evidence proving that these dollars will be productive. As we learned with the Camden Coalition, investments of this caliber must be backed by evidence to ensure we are not wasting valuable health dollars.

What We’re Reading

While we came across many journal articles that posed good questions and made us think more deeply about health spending, we didn’t have room to include them all. But we hope you’ll check out two from JAMA and one from the New England Journal of Medicine that examine drug pricing, personalized medicine and health system reforms.

  • Robinson JC, Whaley C, Brown TT, et al. Physician and Patient Adjustment to Reference Pricing for Drugs. Feb. 5, 2020, JAMA
    The authors wanted to learn whether “reference pricing in employment-based health insurance associated with prescribing lower-priced drugs, and is this prescribing practice is associated with reductions in cost sharing by patients?” Their findings: “Reference pricing was associated with a combination of lower prices paid by employers and lower cost sharing by employees but with a time lag in prescribing habits by physicians.”
  • Rosenbaum L. Costs, Benefits, and Sacred Values — Why Health Care Reform Is So Fraught.  Jan. 9, 2020, The New England Journal of Medicine
    All of the potential reforms under debate for the U.S. health care system—Medicare for All, some kind of public option or incremental changes – will require substantial tradeoffs that most Americans are unwilling to consider. These include choices such as higher taxes, government-mandated decisions on care and cost benefit analyses. The author explains why there is no simple solution to addressing America’s health care challenges.
  • Cutler DM, Early Returns From the Era of Precision Medicine. Jan. 14, 2020, JAMA
    Harvard’s David Cutler considers why “personalized medicine has had less effect on both health and medical spending than either its strongest backers hoped or its most apprehensive actuaries feared.” He explores how concerns such as high costs, limited coverage and the complexity of administering the treatments have slowed broader use of these treatments.

Dialogues on Health Spending

A number of Going Below The Surface (GBTS) partners and other organizations have been hosting meetings, developing studies or participating in webinars on health spending topics. Have an event or study to share? Drop us a line or tweet using #GoingBelowTheSurface.

  • Tradeoffs in Health Spending. Several GBTS partners and policy experts from Vanderbilt University and the Health Care Cost Institute gathered for a panel discussion at the AcademyHealth National Health Policy Conference on Feb. 11 to tackle how we can more effectively spend our health care dollars and understand possible tradeoffs. We’ve posted a summary of the conversation on the GBTS blog.
  • What Do Employers Think About Health Care Coverage Issues? The National Alliance of Healthcare Purchaser Coalitions, a GBTS partner, hosted regional roundtables with more than 80 employers “to open a dialogue about current employer perspectives and attitudes on drug pricing, contracting issues, benefit design and formulary decisions to define better value for health care strategies.” In a report detailing the roundtables, the National Alliance outlines employers’ key insights and recommendations to aid employers and their vendors in contracting negotiations. Read more.
  • For Whom the Bill Tolls. The Coalition for Affordable Health Care, also a GBTS partner, released a white paper, For Whom the Bill Tolls: Why Health Costs Are Too High and What to Do About It. The paper offers a history of health markets since the 1980s, a projection of costs going forward, and policy recommendations to make health coverage more affordable.
  • What’s Been the Bang for the Buck? How do medical advances in cardiovascular disease impact the health care spending picture? Find out during a Mar. 12 webinar with health policy experts from Harvard, Brigham and Women’s Hospital, RTI Health Services and the National Pharmaceutical Council.
  • Low-Value Care Roadmap. ICYMI, last month’s webinar, “Navigating Low-Value Care: A Roadmap for Stakeholders,” is now available on demand on GBTS partner AcademyHealth’s website. This webinar sought to define and deepen the understanding of low-value care and its importance to various stakeholders. Stay tuned for further details about the next webinar in this series on low-value care, scheduled for April 8.