Business Roundtable Should Demand Health Care Price Transparency

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by Cynthia A. Fisher • Founder and Board Member, Patient Rights Advocate

To reduce health care costs, private sector employers must demand that health care providers reveal their hidden pricing – all of it.

In October, Massachusetts Sen. Elizabeth Warren sent a letter to JP Morgan Chase CEO Jamie Dimon asking him how he plans to implement the Business Roundtable’s (BRT) new “stakeholder” mission. The BRT, which Dimon chairs, recently announced it is extending the focus of corporations from shareholders to employees, customers, suppliers and communities. Warren, a Democratic presidential candidate, asked that Dimon endorse her Accountable Capitalism Act, which places a slew of new corporate governance regulations on businesses.

While we think Warren’s legislation is flawed, her underlying request for tangible examples of the BRT’s updated corporate vision is welcome. Instead of playing more politics, however, the BRT should leverage its 181 members, who collectively employ 15 million workers, to fix the biggest problem facing American businesses and the public: health care costs.

According to a new report by Kaiser Health, the average employer-provided health care costs exceeded $20,000 per family this year – 54 percent more than in 2009. The U.S. now spends nearly 20% of its GDP on healthcare, about double the developed-world average. BRT members collectively spend hundreds of billions of dollars on employee health care expenses each year. Businesses nationwide spend nearly $1 trillion on health care to cover 181 million Americans.

To have the biggest impact on reducing health care prices, the BRT must require price transparency from health care providers, insurance companies and third-party administrators (TPAs). The Trump Administration recently issued an executive order requiring hospitals and insurers to reveal their hidden prices. But for this information to be transparent, widely available and patient-friendly, private sector employers must demand it.

Real price transparency, which can be achieved through existing laws, is the easiest and least controversial fix to the country’s health care cost crisis. Absent such transparency, businesses and their employees are blind to real health care prices. This leaves them with no negotiating leverage, essentially requiring them to pay with a blank check.

This can change. The BRT CEOs’ market clout gives them an unprecedented opportunity to take control of their health care expenses through transparent prices, which will spur competition and choice. By requiring that hospitals, providers, TPAs, insurers and drug-makers reveal their secret negotiated rates for in-network, out-of-network and cash prices, real prices can be posted online and accessed before treatment.

Such radical price transparency would lead to vigorous competition across state lines and create a free market in health care. Employees and employers could then shop for the best quality of care at the lowest possible price. Widely available posted prices would also eliminate the surprise billing scourge.

To have the biggest impact on reducing health care prices, the BRT must require price transparency from health care providers, insurance companies and third-party administrators (TPAs).

Consider what transparent prices have done for air travel. Since President Jimmy Carter deregulated the airlines in 1978, secretive pricing collusion has given way to widely available prices. Plane ticket prices, adjusted for inflation, have fallen by roughly 50 percent since then, while airline safety and quality have improved. Cheaper airfare has also vastly increased access to air travel. Transparent prices in health care would similarly increase health care access because patients wouldn’t avoid the doctor due to cost uncertainty.

To achieve price transparency system-wide, BRT employers must first demand that their TPAs provide their secretive claims information and negotiated rates with providers. This includes disclosing their fees, rebates, brokers and even hidden compensation. By understanding this data, employers can avoid price gougers and have the pricing information necessary to steer their employees to low-cost providers.

Employers must also ensure that their TPAs don’t sign contracts with hospital systems that forbid the construction of a benefit design that incorporates low-cost providers. Instead, contracts should allow for employer steering to such providers through employee incentives like no copay, no deductible and cash bonuses.

Some innovative employers already have reduced their cost of care by 30% to 50% by directly contracting with price transparent primary care providers, surgical centers, hospitals and telemedicine providers. The savings mean these employers are often able to offer these services to their employees for free.

Due to a lack of price transparency, health care is the only industry where there is a massive divergence of prices for the same service. On a recent episode of the HBO show “Real Time,” host Bill Maher highlighted how the cost of a knee replacement can vary from $17,000 to $61,000 in the same city. Dr. Keith Smith, who runs the price transparent Surgery Center of Oklahoma, highlights the story of a Georgia woman whose local hospital quoted her $40,000 for a procedure that was listed for $3,600 on the surgery center’s website. The patient used this online price as negotiating leverage with her hospital, which actually matched it.

Reducing health care costs by demanding real price transparency would help each of the BRT’s stakeholders. Employees would benefit from lower health care prices and faster wage growth. Shareholders would benefit from lower employee health care costs and higher profits. And customers, suppliers and communities would enjoy the externality of easily understood healthcare prices and healthcare price deflation.

For transparent prices to prevail against the vested interests profiting from the opaque status quo, the BRT CEOs can lead the way, providing tangible evidence of its expanded mission.

Cynthia A. Fisher is a life sciences entrepreneur, independent investor, and corporate board director. She founded WaterRev, LLC to invest in novel technologies that enable sustainable practices in water use. She serves on the public company boards of The Boston Beer Company (SAM) and Easterly Government Properties, Inc. (DEA).

Cynthia is best known for her pioneering work as Founder and CEO of ViaCord, Inc., a leading umbilical cord blood stem cell banking service which she started in 1993. In 2000, she co-founded and was President of the cellular medicines company, ViaCell, Inc. (VIAC) Previously to founding ViaCord, Cynthia ran the Blood Bank Division of Haemonetics Corporation, a medical equipment manufacturer. She began her career in sales at IBM focusing on healthcare IT, insurance, and defense industries. Cynthia holds an MBA from Harvard Business School, as well as an Honorary Doctorate of Science and BS in Biophysics from Ursinus College.