How will shifting sites of care, greater price transparency, market competition affect U.S. health care?

Sites of care, price transparency, competition and consolidation all play a role in U.S. health care in 2025, and likely will in coming years.

There also could be changes in store — and there should be, if the nation wants to improve the value of a vital service now accounting for almost 20% of America’s gross domestic produce, according to health care economic analyst Trilliant Health.

The new report, “2025 Trends Shaping the Health Economy,” posits that the health care system is at a crossroads with a choice to make: find ways to improve outcomes and value from within, or face new external regulation that might not be what the sector wants.

Trilliant Health Vice President Chief Research Officer Allison Oakes, PhD, spoke with Medical Economics about the findings across six trends and what those indicate in the continuing evolution of health care.

This transcript has been edited for length and clarity.

Medical Economics: Given our audience and the current discussion and deliberation in the industry about site-neutral payment, have you analyzed any of those trends and what that could mean, especially if Medicare reverts to site-neutral payment?

Allison Oakes, PhD: We do a couple of analyses looking to that exact example, just playing things out in terms of the math. To the question of the ongoing migration from inpatient care to outpatient care, this is something that we're really focused on and is something that's really important for providers to be taking into consideration, especially as it relates to their bottom line, to be honest. So in the report, we run through an example related to a lumbar spinal fusion procedure. This is something that’s currently on the inpatient only list, but could potentially be removed from the IPO list as it relates to the Trump administration's proposal for phasing that out over the next couple of years. So, we run through an exercise where we say, okay, if there's 40,000 of these procedures performed in a given year. Today, 100% of them are done in the inpatient setting. That generates around $1.1 billion for providers across the country. But a couple of years down the road, if more and more of those are performed in the ambulatory surgical (ASC) space, say it ends up leveling out around 50, 50 — so, 50% of those procedures are done in hospital outpatient departments (HOPDs), 50% are done in ASCs. Doing the math and using information on Medicare negotiated rates, we think this would end up generating something like $760 million dollars of revenue. So we're talking about more than a 25% haircut that providers need to start thinking about and figuring out, one, how do they pivot their strategy to either get into the ASC and HOPD space so they can continue to generate some of that revenue. Maybe it's a matter of figuring out what partnerships they could establish in their existing community with outpatient providers that already exist. But this migration from inpatient to outpatient is a very real thing that providers need to be considering as it relates to their strategy and how it will impact their revenue and margins.

Related coverage:

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Health care prices: Americans pay more and more for less

U.S. health care must choose: market discipline or government regulation?

Medical Economics: When you talk about price transparency, and then those price discrepancies for different procedures and interventions around the country, that begs the question: Why the differences? And then maybe the next question: What can be done to level those out, hopefully in a way that is fair to physicians as well as patients?

Allison Oakes, PhD: That's a great question and we think that's one of the most important things in the report and one of the most important things going on within the health economy at this point in time. So, starting July of 2022, payers with the dawn of health plan price transparency, needed to start publishing public, machine-readable files that include information on their in-network rates, as well as out-of-network rates. And the key thing about health plan price transparency is that because the payers are posting this information, it includes information on both hospital care as well as nonhospital care. The other thing about this data, it's comprehensive, it is information for plans across the entire country. It also, very interestingly, allows us to identify providers as well. So in that data we're able to drill down to the actual hospital level to understand within a given market, what's the going negotiated rate for this plan at this hospital for this exact procedure? And how does that compare to other hospitals in the market as well as ambulatory surgical providers in the market as well? Historically, getting that information has been really challenging due to a combination of both federal antitrust law — ironically enough, which was worried about price-fixing issues — but then also gag clauses included in private contracts. Now that we have access to this information, we think that this has to change the competitive landscape within the health economy, and we can now really start to unpack the value of different providers. So combining information on price with available information on the quality of different hospitals and providers, we can understand the value that does or doesn't exist for different individuals, and we hope that’s something that different players start to compete on.
Another really important aspect of this is the employer. So employers fund about 30% of all national health expenditures — that's more than a trillion dollars per year. They insure more than half of the population. So we think employers are this huge under-leveraged stakeholder within this equation. The thing is, the availability of this data also implicates the fiduciary duty of employers. The way that those health benefits are provided, they're covered by ERISA (the federal Employee Retirement Income Security Act). Employers are mandated to be choosing health benefit plans that are in the best, fiduciary duty or financial interest of their employees. So we think the availability of this data has to start shifting the landscape. Employers need to start leveraging it. They need to start asking benefit brokers, the tough questions, and asking who, which providers, which plans, are going to provide the best value to their employees.

Medical Economics: One of the other trends that we pay attention to, and I think the sector as a whole has, is consolidation. Could you speak to trends or findings that might be showing up in markets where there is a still a lot of market competition, or maybe some trends that appear when there's relatively little competition?

Allison Oakes, PhD: It's a great question. The issue of competition is something that's really important within the health care industry. It's something that gets a lot of attention and is talked about a lot and is obviously a huge focus of the DOJ and the FTC (the U.S. Department of Justice and the Federal Trade Commission). But something I think that's really interesting within the health care space is that, it's the one industry where even monopoly hospitals are able to generate negative operating margins. And we have to ask ourselves what that means. So, just looking at hospital operating margin and then calculating market concentration using the HHI (Herfindahl-Hirschman Index), we find that the average operating margin of monopoly hospitals — so markets that are controlled by a single firm. The average operating margin is actually negative 1.7%. So a lot of those are likely to be rural hospitals, the only hospital operating in a market and serving a very small population. But that's to say that just because the hospital is a monopoly, it doesn't necessarily mean that they're out there price-gouging people. They’re just looking to provide care, and oftentimes they're the sole provider in the market. We also look at this more generally, and we see that when we look at hospital operating margin and market concentration and run a correlation on these two things, that there just isn't a strong correlation between the two.

So, in some sense, in terms of the amount of effort that's been put into this issue of consolidation and competition, it's certainly something to be keeping an eye on. But we do think it'd probably be a better use of time to be focusing on this issue of value, even within competitive markets. We know that prices vary within those markets by factors that just really don't make any sense. So, talking about your New Yorks and your Los Angeles sorts of cities, looking within those markets, we know that price is not correlated with quality, and we know that commercial negotiated rates vary in a way that just doesn't logically make sense. So, sure, competition is something to keep in mind, but we really think the bigger issue is just the variation that we see in these negotiated rates and the extent to which, again, they just don't seem to be correlated with measures of health care quality.