Competition and Transparency: The Pathway Forward for a Stronger Health Care Market

Testimony of Christine H. Monahan, J.D., before the U.S. House of Representatives Education & Workforce Health Subcommittee, June 21, 2023.

Good morning Chairman Good, Ranking Member DeSaulnier, and members of the Subcommittee on Health, Employment, Labor, and Pensions.

My name is Christine H. Monahan and I am an Assistant Research Professor at the Center on Health Insurance Reforms within Georgetown University’s McCourt School of Public Policy. I am honored to testify today regarding competition and transparency in our health care markets.

Consolidation in the U.S. health care system is growing, to the detriment of everyone who uses and pays for health care. In both the provider and insurer markets, we have seen significant horizontal and vertical consolidation over the past decade contributing to rising prices for health care.

The expansion of large health systems, with multiple hospitals, outpatient departments, and physician practices under the same ownership, has been significantly increasing what commercial insurers – and, ultimately consumers and employers – pay for care. One egregious example of this is the addition of outpatient facility fee charges to health care services that can be safely and effectively provided outside of a hospital. These charges often come as a surprise to patients who go in for a routine doctor’s visit and they can lead to significantly higher out-of-pocket costs than consumers have traditionally paid for such care.

Some states, from Connecticut, to Maine, to Indiana, have started to tackle this issue by prohibiting these charges in certain circumstances, and a handful of private insurers and at least one state employee health plan have also taken steps to limit these charges and protect consumers from these bills. One challenge to targeting and implementing these reforms, however, is a lack of transparency in the claims providers submit to insurers, which can obscure where care was actually provided.

For example, a state or insurer may want to end hospital facility fee charges for care provided in off-campus departments or physician offices, since this care inherently does not need to be provided in a hospital-setting. But all of the claims from a health system may look like they are coming from the main campus of the hospital.

There are simple reforms the federal government can take to address this issue, and set the stage for additional action to limit what commercial insurers pay for care in these circumstances and ultimately move towards site neutral payments, as we are seeing in Medicare. These reforms include requiring that each separate facility or office where care is provided, like a hospital off-campus department, acquire a unique national provider identifier or NPI and that both the hospital and all health care practitioners include this NPI on their claims for any care they provide there. This would give insurers, as well as regulators and policymakers relying on claims data, a much better sense of who is charging outpatient facility fees and when they’re charging them and take appropriate action. More broadly, it would also allow insurers to better tailor other reimbursement decisions based on the location of care, considering factors like quality and cost.

Let’s not be naïve about how far relying solely on private insurers to contain costs will get us, however. They, too, have consolidated horizontally and vertically, and it is often in their interest to not pushback strongly against provider prices. This may be because the providers charging the highest rates are considered “must-have” providers for their networks, or these providers have demanded that the insurer include anticompetitive clauses in their contracts. But the major insurers also have little incentive to use what negotiating power they do have.

This is a particular problem in the employer-sponsored insurance market, the majority of which is insured through self-funded health plans with the major insurers serving as third-party administrators (or TPAs). In this role, the insurers have little incentive to negotiate competitive provider reimbursement rates due to their relative market power and information monopoly vis-à-vis employers. What’s more, employer contracts with TPAs and pharmacy benefit managers (or PBMs) are often rife with hidden fees and overpayments, while the consultants and brokers employers hire to help arrange their contracts are taking in massive commissions.

This is all happening despite the fact that employers, as plan sponsors, have a legal duty under ERISA to act solely in the interest of plan members and to ensure they are paying reasonable compensation to service providers, and no more. Thankfully, the employer community is starting to awaken to these problems, due in large part to recent efforts by Congress and the Executive Branch to bring more transparency to our health care system.

But more still needs to be done to give employers the information they need to become more prudent purchasers in this system. This includes codifying and strengthening federal price transparency rules; revisiting the Consolidated Appropriation Act’s ban on gag clauses; and clarifying and expanding service provider disclosure requirements. Given their critical role and power in the system, it is also worth exploring whether entities like TPAs and PBMs themselves should be treated as plan fiduciaries when performing functions where it is more important that they act in the best interest of plan members than their own business interests. 

Thank you for your time. I welcome your questions.

You can read Ms. Monahan’s full testimony here. A webcast of her testimony is available here.