Originally published on Healthcare Business Today: https://www.healthcarebusinesstoday.com/have-healthcare-networks-outlived-their-usefulness/

It’s become clear that traditional health insurance networks don’t always provide the best price. Simply skim the New York Times or Wall Street Journal and you’ll see yet another major story about the inexplicable nature of healthcare pricing.

Sarah Kliff’s recent exposé, “Hospitals and Insurers Didn’t Want You to See These Prices. Here’s Why” in the New York Times showed the inconsistencies in hospital pricing again and again.

“At the University of Mississippi Medical Center, a colonoscopy costs $1,463 with a Cigna plan. $2,144 with an Aetna plan. $782 with no insurance at all.”

It’s the same song, second verse with Anna Wilde Mathews and Tom McGinty’s Wall Street Journal feature story where they found all networks are not created equally. At one hospital in Las Vegas, they found a CT scan cost $7,066 for the cash pay price.

“If that patient’s bill were being paid under the PHCS network, it would be $13,425. Under the MultiPlan network, it would be $14,132. For a plan using the First Health network, the rate would be $13,249.”

This story of huge variation in price depending on who is “paying” repeats over and over. But who’s hurt by this?

The patient and employers.

How? For patients, the average American who thinks they have a great insurance network and unsuspectingly goes to their in-network hospital only to pay a price two to four times higher than if they didn’t have insurance. Why pay a high premium for the privilege of paying a higher price? Many people have asked themselves that question, and as a result, many Americans are leaving their traditional health insurance plans for one of the dozens of new, more affordable health coverage options that have formed over the last few years.

How does huge variation in price hurt employers? Employers are essentially handing out blank checks to their employees, who hand them over to network providers who in turn fill them out after the procedure for amounts previously and secretly agreed upon with the insurer. That amount may be multiples of the price at other networks and even non-network providers. Employers are beginning to wonder: how is this controlling my healthcare costs?

Price variability in healthcare.

Healthcare, and especially pricing in healthcare, is a mess because of cross-purposed incentives at every level. Health systems play a role, especially those that are owned by private equity firms. Our own data shows wide price ranges for the same procedures between different hospitals and facilities.

One charges $4,646 for a colonoscopy while the other charges $1,385, yet they are only 367 feet apart. (For more on that, download our Price Transparency Brief published with the Affordable Care Learning Collaborative.)

So, why the big price difference? The frustrating answer is that there is little reason other than perverse incentives that drive up costs in healthcare. Between the prices hospitals create, the negotiations between hospitals and payers that stick many patients with expensive out-of-pocket bills, and the multitude of more affordable options now available, it begs the question “why do healthcare networks still exist?”

Healthcare spending in the U.S. grew by one trillion dollars between 2009 and 2019, which equates to $11,582 per person. By some estimates, almost two-thirds of personal bankruptcies are due to medical bills. Noticeably, healthcare costs and increases are unsustainable for individuals and the U.S., and mandating price transparency is but one policy lever to help slow cost increases.

Will transparency rules work?

Remember when high-deductible plans were introduced? The purpose – we were told – was to make Americans better consumers of healthcare, i.e, to get them to shop for healthcare the way they shop for anything else (and Americans are great shoppers). Do you ever hear about that advantage of high deductible plans anymore? If you haven’t, it could be because shopping for healthcare has only gotten harder, not easier.

Anyone who has tried to get comparable prices to make an informed shopping decision for a healthcare procedure has likely been very frustrated with that task. They definitely now have “skin in the game” due to high deductibles (up to $7,050 under Federal regulation for individuals as of 2022). So they are wondering: if the high deductible plan set up by the insurer is supposed to make me shop, and they negotiate the pricing with all the providers, why don’t they just list all that pricing so I can shop?  But they don’t. In reality, shopping for pricing – even inside the network you are paying for – is extraordinarily difficult.  And time-consuming; the average healthcare call is over 32 minutes and it takes several calls to comparison shop.

The frustration has gotten so intense that the government responded with new rules requiring SOME healthcare providers to reveal all their pricing from all the networks in which they participate. However, you may not be surprised that there is some resistance. The American Hospital Association, The Federation of American Hospitals, and others filed lawsuits to slow down or stop these regulations from being implemented (but failed). Even in compliance, the results so far are extremely spotty and difficult to access. Could it be that some hospitals don’t want to lose the privilege of charging four times the amount other facilities charge for the same procedure without their customer being aware?

We are looking at at least 2-3 years before pricing is posted in a way that’s easy to understand and useable. The government has promised to check to make sure pricing is available. At what point after that will the government have the resources to confirm the accuracy of what is posted?

If patients can get better prices as a cash pay patient, why are insurers still using networks? The cat’s out of the bag on this absurdity and it’s only a matter of time before real change comes. We are already seeing unrest in the market and certain camps are calling for a revolution in U.S. healthcare insurance. In the U.S. healthcare multiverse, one possible timeline may reveal a networkless healthcare world where, wait for it — we all get to see the price before we undergo the procedure.

Are you ready for this change?

Price transparency might not totally eliminate networks, but it will change them if networks want to stay in business. Are you ready for that change? If you are like most people, you are still coming to terms with this reality. But you need to be ready. Just like wired telecommunications networks gave way to “the cloud”,  we think the future of healthcare could be networkless as well.