Part 1 of this 2 part series on emerging markets for billing and price transparency delved into some of the sizing opportunities and challenges facing both the public and private sectors. In Part 2 Amith goes into greater detail about the four most influential pricing models in the market today.
Fair Market Pricing
Also known as averaged fair pricing, this model involves a scrub of multiple legacy payer claims across various CPT charges within defined zip codes and counties to arrive at median local rates for specific services. While not accurate to specific providers, it provides a generalized rate range view for consumers within tightly defined address indicators. This model invites participation from providers concerned about under-billing against locally competing services. Such services additionally span from simple scrubs to highly complex analytics engines that claim accuracy to within 10-20% of true cost. The most salient private market examples of this type of effort are Tennessee-based The Healthcare Blue Book and Truven Health Analytics.
Self-Insured Employer Mediator Pricing
Currently the most popular and most profitable of all the transparency model schemes, self-insured employer mediation takes advantage of high self-insurance rates and TPA billing among large employers (those with more than 1,000 employees, accounting for over approx. 60% of all U.S. employer covered lives). Companies such as Castlight Health have moved in to contract directly with employers to process, analyze and display data ranging from CPT charging by providers, reimbursed amounts, and provider data such as size, location, etc. Mediator models may face challenges penetrating accounts for the 40% of all consumers insured under third party private carriers, and self-insureds under state and federal healthcare exchange structures.
Payer Disclosure Pricing
Primarily a method to encourage some degree of member cost visibility for common services (usually higher priced single services), this pricing model serves insureds through self-publication of relevant, but generally limited, member portal content. Overall, this model is showing considerable promise as a means to scale up valuable member services while opening the door for rate publication as providers slowly warm up to the importance of transparency in overall cost control as the healthcare market slowly shifts toward employer defined contributions.
Legislative and Medicare Premium Pricing
Many states utilize legislation created under the Accountable Care Act to enforce annual claims histories to state/regional entities for the purpose of fair price regulation under what is known broadly as an All Payer Claims Database (APCD), but enacted differently state by state. Its impact, however is largely negligible, owing to 1) voluntary annual self-reporting requirements across many states, and 2) poor price normalization between uninsured and insured bill rates, which can reflect up to 700% difference in bill for identical services. Additionally, the Center for Medicaid and Medicare Services’ (CMS) April 2014 announcement of the public release of Medicare’s Outpatient Prospective Payment Services (OPPS) provider charge and reimbursement data across 49 states should help to normalize averaged bill rates.
Steadily eroding resistance to price publication, the increasing convergence of 360-degree personal wellness tools and the broader ten-year market shift toward employee self-management will likely create the integration of several successful market models.
Amith comes from over 13 years in the health technology industry and is a writer and market developer for new mobile health ventures in California.