Will 'transparency' upset the marketplace?

October 6, 2006
Ken Terry
Ken Terry

The author is a former senior editor of <i>Medical Economics</i>.

President Bush's order could have unintended consequences for both doctors and plans.

By requiring federal agencies and the health plans that contract with them to report what they pay physicians and other providers, a recent presidential order has ignited a small brush fire among insurers and medical societies. The physician groups are concerned that the data may be presented in a misleading way and want to make sure that plans publish their negotiated rates. But some insurers fear that if this information became public knowledge, it could erode competition and reduce their negotiating clout with physicians.

In his Executive Order dated Aug. 22, President Bush told federal agencies involved in healthcare to start reporting provider cost and quality data to people enrolled in their programs and, if a particular agency wishes, to the general public. He also required those agencies and their contracting providers, when they acquire or upgrade health information systems, to choose ones that can communicate with one another.

Order will affect many doctors

First, the health programs of the affected agencies-CMS, the Department of Defense, the Department of Veterans Affairs, the Indian Health Service, and the Office of Personnel Management (OPM)-cover nearly 40 percent of insured Americans. While the order doesn't encompass Medicaid, the president urged states to follow the federal example in their own healthcare programs.

Second, the OPM's Federal Employees Health Benefits (FEHB) Program contracts with most major plans, and many insurers also have Medicare HMOs that contract with CMS. All of these carriers will have to give the federal government cost and quality information on the doctors and hospitals in their networks.

The big question is how this will be reported to the public. The AQA Alliance, which includes health plans and medical societies and is supported by CMS, is working on a pilot project to aggregate public and private-sector physician quality data for reporting purposes; and, by the end of the year, the AMA-led Physician Consortium for Performance Improvement is expected to deliver a set of 140 quality measures under an agreement with Congress. Erica Drazen, an analyst at First Consulting Group in Boston, predicts that these measures, once adopted by federal agencies, will become the national standard.

On the cost side, CMS already disseminates selected data on Medicare payments to hospitals and ambulatory surgery centers, and it'll begin to do the same with physician payments this fall. But, while CMS presents this information as county-by-county averages, private insurers will be expected to show what they pay individual providers.

If these prices were published, a doctor could see what a particular plan was paying other physicians in his area for a specific procedure or service. If the others were receiving more money, he'd naturally want the same level of reimbursement.

America's Health Insurance Plans, the industry trade association, says that some of its members worry that this kind of price "transparency" could undermine competition by setting a "floor" for payments in particular markets. While AHIP applauds President Bush's Executive Order and favors the principles of transparency and consumer-directed care, AHIP spokesman Mohit Ghose says his organization hopes that the government will work with the private sector to devise a method of publishing price information that doesn't hurt competition among health plans.

HHS says it wants to work with AHIP and other healthcare stakeholders to promote transparency. But an HHS spokesperson says her agency's long-term goal is to publish cost and quality information on individual providers. OPM has proposed having FEHB Program carriers do the same in 2007.

Will insurers publish negotiated rates?

The American College of Physicians supports the idea of transparency but is concerned about how price information will be presented. In a letter the ACP sent to a presidential adviser last May, the society said that to help patients make an informed choice of provider, "private insurers must make consumers aware of the actual negotiated rates it pays its physicians for individual services." The ACP also pointed out that, for consumers to use this information, they'd need to know how much their particular plan required them to pay out of pocket.