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Price Transparency & Medicare Site Neutrality

Paragon Newsletter
President at Paragon Health Institute
Brian Blase, Ph.D., is the President of Paragon Health Institute. Brian was Special Assistant to the President for Economic Policy at the White House’s National Economic Council (NEC) from 2017-2019, where he coordinated the development and execution of numerous health policies and advised the President, NEC director, and senior officials. After leaving the White House, Brian founded Blase Policy Strategies and serves as its CEO.

This week, the House of Representatives is set to consider the Lower Costs, More Transparency Act which addresses two areas where Paragon experts have done significant work: 1) codifying and expanding rules requiring up-front health care pricing information and 2) a modest expansion of site neutral payments in Medicare. The legislation contains several other components, but this note pertains to these two areas in which the proposals align with reforms recommended by Paragon.

Advancing Upfront Prices in Health Care

In August, Theo Merkel authored a report on the progress made by both the Trump and Biden Administrations on health care price transparency and initial House committee action to report legislation that would improve upon it. In 2019, I authored a report on the general benefits of price transparency to consumers and employers, along with a New York Post op-ed that summarized my argument.

Industry compliance with the hospital and payer transparency rules continues to be the biggest hurdle preventing the availability of pricing information in advance of care. However, there were also limits of the previous administration’s regulatory action given statutory constraints. The legislation coming to the House floor would make significant progress in both areas.

The legislation would codify each of the major provisions of the price transparency regulations, providing certainty to stakeholders that the obligation for transparent pricing will not be undone by a future administration. It would enhance penalties for non-compliance and expand the reporting requirements to facilities such as ambulatory surgical centers, imaging centers, and labs. Doing so would enable a more complete picture of treatment options and their cost. The legislation also reinforces requirements for drug price transparency, a provision of the regulations delayed by the Biden administration.

Since the rules were first implemented, there has been a steady flow of research using the new price transparency data. This research demonstrates the significant opportunities available for patients, employers, and other payers to obtain better value through shopping. The legislation under consideration is a good example of how to build from what we have learned since the rules took effect, and it should make significant progress to ensure that information will be more readily accessible to a larger audience.

Advancing Site Neutral Payments in Medicare

In June, Joe Albanese authored a policy brief outlining the benefits of site neutral payments in Medicare. Under the provisions of this bill, Medicare would pay off-campus outpatient departments at the same rate as physician offices for drug administration services (which are separate from the payment for the drug itself), rather than the higher hospital rate. These rates will be phased in over four years starting in 2025 (2026 for rural facilities).

According to the Medicare Payment Advisory Commission, the payment differential between hospitals and physician practices has led certain outpatient services, including drug administration, to shift toward the higher-cost hospital setting. One cause of this is hospitals acquiring physician practices and converting them to off-campus outpatient departments to receive the higher rate. Such shifts increase Medicare spending and beneficiaries’ expenses. It also drives consolidation in the health care sector, which the bill also requires the government to study.

The Congressional Budget Office estimates that these provisions would save about $3.7 billion over ten years. Although these changes are relatively modest, they advance site neutral payments and reduce spending in Medicare Part B, which is on an unsustainable trajectory.

All the best,

Brian Blase
Paragon Health Institute

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