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This Week in Health Care Reform: March 29th, 2019

A new report highlights patients’ financial exposure to exorbitant air emergency costs; a recent study examines the link between health care prices and provider consolidation; economists point out the important role that PBMs play in keeping drug prices down; and, transparency and clarity are found to be lacking in hospital pricing.

Week in Review

Air Emergency Costs: While no one’s disputing the fact that air ambulances can play a life-saving role for critically-ill patients, what’s only starting to come to light is the significant ‘financial risk’ that these emergency transport services often bring to those same patients.  According to a new report from the Government Accountability Office (GAO), the average cost for an air ambulance in 2017 was more than $36,000.  And, alarmingly, more than two-thirds (69 percent) of those emergency transports were outside of the patients’ insurance networks.  (Lest we think this issue is localized to just air ambulances, slightly more than half of non-flying, four-wheeled emergency transport services were also out-of-network.)  Given these astronomical charges, a rising tide of voices have urged lawmakers to do something to address these “unreasonably high and unregulated rates”.  As has been previously covered, regulators have responded, most recently, when last October’s Federal Aviation Reauthorization Act created a committee specifically to examine the problem.

Provider Consolidation: A recent study from the National Institute for Health Care Management (NIHCM) established a causal relationship between rising health care prices and the growing incidence of physician practice consolidation and integration with hospital systems.  According to the NIHCM analysis, an extensive body of research has shown that this type of consolidation is not only associated with significantly higher prices for hospital services, but also fails to delivery any beneficial impact to the quality of care delivered.  As has been acknowledged, the United States spends appreciably more on health care compared to other developed nations, yet performs no better on many health outcome measures.  What’s only starting to make its way into the evolving conversation surrounding health care costs is the recognition that hospital prices have become the main driver of health care spending inflation in this country.

PBMs: As lawmakers, regulators, and stakeholders work towards finding solutions for runaway drug prices, a lot of attention has been paid to the role of pharmacy benefit managers (PBMs) and their ability to negotiate directly with drugmakers to secure rebates on behalf of consumers, particularly in the Medicare and Medicaid space.  While detractors have attacked these arrangements, experts have countered that narrative, urging policymakers to, instead, focus their energies on finding market-based solutions, reminding them that, ultimately, it’s the pharmaceutical manufacturers who determine the list prices for their products.  Further, economists have been quick to point out the vital role that PBMs play in making drugs more affordable

Murky Hospital Pricing:
In seeking to inject greater consumerism into the patient experience, stakeholders have cited the importance of bringing greater quality and price transparency to our evolving health care delivery model.  That transparency, however, depends on the level of clarity that it imparts to consumers to allow them to make better-informed choices.  As mentioned above, hospital and physician expenditures have become the largest driver of health care cost growth in this country.  In fact, as a percentage of our overall spend, expenditures on hospitals and physicians account for nearly six times what we spend on prescription drugs – a trend that’s only been building since 2015.  Compounding the issue is the extreme variance in hospital costs across regions, and, even, within localities.  Policymakers and regulators, recognizing the need to address this issue, have taken steps to shine the light of transparency on these costs.  As to be expected, there have been some stumbles along the way, which have led to calls for consumers to play a role in helping to police hospitals’ pricing practices.      

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