In South Florida And The Nation, Health Care Costs Often Are Shrouded In Secrecy

At a hearing to discuss the rising costs of healthcare benefits for Miami-Dade County, Fla., employees this year, a labor union consultant raised his hand to ask what seemed like a basic question.

Could the committee charged with reducing Miami-Dade labor’s healthcare expenses look at the spreadsheet showing the rates that the county pays local hospitals and doctors for medical services to employees?

“We really need to understand where the money is being spent in order to be insightful about benefit design changes,’’ said Duane Fitch, a healthcare consultant for SEIU Local 1991, which represents physicians and nurses at the county-owned Jackson Health System.

But the answer to Fitch’s question at that inaugural meeting of the Miami-Dade Labor Healthcare Committee last March was the same response he would receive every time he repeated the question during the panel’s next six meetings through July.

Essentially, no.

“Contracts are proprietary,” said Patricia Nelson, regional head of strategic accounts for AvMed Health Plans, the county’s health benefits administrator that negotiated the payment rates for medical services for county employees. She noted that both the insurance company and the healthcare providers agree to keep such payment rates confidential.

Fitch and others who asked for the information never got to see precisely how Miami-Dade spends more than $400 million a year to pay healthcare claims for nearly 60,000 employees, retirees and dependents in the health plan.

That’s because Miami-Dade — like many employers across the country — isn’t allowed to know the prices their own insurance plan administrators negotiate with healthcare providers, even when they’re self-insured, like Miami-Dade County, and the claims are paid with taxpayer dollars.

And that means that the mayor’s healthcare committee has no more insight than the average Florida consumer on how to lower costs for their employees or themselves — frustrating everyone from union leaders to county commissioners who are trying to push down prices.

Because when county officials claim they are doing everything they can to reduce employee healthcare costs, they actually don’t know how and where the public’s money is being spent.

“You need the data in order to do the proper plan design that drives your outcomes,’’ said Miami-Dade Commissioner Juan C. Zapata, whose requests for AvMed’s contracted rates also have been rejected. “Without that, you’re just shooting in the dark, basically.’’

No Disclosure

The lack of disclosure of a most basic fact — how much does it cost? — has prompted a movement around the country toward greater price transparency, even as insurance companies and hospitals say revealing those rates will put them at a financial disadvantage with competitors.

A local hospital CEO, Steve Sonenreich of Mount Sinai Medical Center on Miami Beach, even made a public pledge on WLRN-91.3 FM radio last year that he would reveal the contractual rates the hospital charges private insurers — only to learn that he was barred under the non-disclosure agreement in the contract.

Sonenreich said in a written statement this week that he believes one of the problems with pricing secrecy is that it allows large hospital systems to leverage their “geographic dominance” to run up rates on insurers, who pass on the increases to employers and consumers through higher premiums, deductibles and other costs.

“If we make health care pricing information available to consumers, particularly employers,’’ he said, “they will be able to make better decisions.’’

But the push for price transparency has had an uneven impact across the country.

Some states, such as Colorado, New Hampshire and Massachusetts, have adopted legislation that requires insurance companies and health care providers to report reimbursement rates and payments for use in what they call an “all-payer claims database” — a repository of comprehensive information on health care use and payments for all medical services by Medicaid, Medicare and commercial insurers, among others.

Florida has enacted or amended statutes and regulations more than a dozen times since 1985 requiring some level of transparency and disclosure from hospitals and physicians, but not insurers.

A state-mandated website managed by the Florida Agency for Healthcare Administration at floridahealthfinder.gov gives consumers average and total charges for a variety of medical services by hospitals — but not specific reimbursement rates.

In the bewildering world of healthcare pricing, charges are not the same as prices — because almost every payer gets a discount on hospital charges, and usually by double-digit percentages.

While Florida’s price transparency efforts are not as robust as other states, AHCA officials did request about $5 million in annual funding this year to build and maintain an all-payer claims database. The request was ignored by state lawmakers.

By keeping prices secret, health care providers and insurers leave employers with little choice for managing their benefits costs as they go up. Most choose to shift more financial burden onto employees, said Francois de Brantes, executive director of Health Care Incentives Improvement Institute, a Connecticut nonprofit that advocates for payment reform.

“If you’re an employer,’’ de Brantes said, “and you don’t have access to your underlying claims data, even though you’re self-insured, there’s absolutely no way for you to make decisions on benefit design — other than using the brute force of across-the-board premium increases.’’

And that’s what Miami-Dade County’s health care committee recommended in its final report: Require a biweekly premium for employees who currently pay none for single coverage in the county’s HMO plan, and increase existing premiums for those in the POS plan. Employees also will be offered a new plan with no premiums for individual coverage, but a limited choice of hospitals and doctors.

Need For Transparency

For most people with employer-provided health insurance, rising premiums are not unusual. Insured consumers across the country are shouldering more financial responsibility for their medical care through high deductibles, co-insurance rates and health savings accounts — fueling momentum for price transparency.

“The consumer is going to basically have to take responsibility for their own healthcare,’’ said Frank Sacco, chief executive of Memorial Healthcare System, the public hospital network in South Broward County, “and look not only at costs but quality outcomes, the safety metrics. All of that has to be transparent, and then they’ll have to make informed decisions.”

But translating healthcare pricing to into useful information for consumers is complicated because every patient’s experience can be different, even for similar procedures, said Linda Quick, president of the South Florida Hospital and Healthcare Association, a trade group for regional providers.

Then there’s the variety of payers, from government programs such as Medicaid and Medicare, to private commercial insurers — all paying a different rate.

Adding to the complexity: a procedure such as a knee replacement may require that an insurer pay a number of different providers, from the lab and physician to the hospital and home health agency.

“So if the hospital told you that their cost is $27,000,’’ Quick said, “it’s still not a true representation of the cost of knee surgery, because the surgeon’s bill is going to be separate, and the anesthesiologist is going to bill separately.

“It’s very hard,’’ she said, “to make it totally transparent.”

AvMed, the county’s health insurance administrator, declined to discuss healthcare pricing with the Herald and WLRN, canceling two interviews with Jim Repp, vice president of marketing. The company also declined to discuss its management of Miami-Dade’s employee health plan while the county’s labor unions and administrators negotiate new collective bargaining agreements in the coming months.

But when Repp addressed the mayor’s health care committee in June, he said AvMed had secured average discounts of 65 percent with South Florida hospitals and physicians, helping to save the county what he estimated was about $56 million on expected claims from 2010 through 2013.

Private Sector

For employers, having access to data on actual payments would be much more useful than knowing the average discount negotiated by a plan administrator, de Brantes said.

When he worked as a program leader for General Electric Corporate Health Care Programs in the mid-1990s, de Brantes said, GE required its health plan administrator to deliver the data — or lose the company’s business.

“We would use those data constantly to figure out: What do we need to do as an employer to improve cost and quality? Where are there problems? And even to do accurate modeling of what would be the impact of, say, increasing our co-pay on ER visits,’’ de Brantes said. “How many people would that impact? And who’s going there more often? Is it people who have chronic illness, or those seeking routine service?

“You wouldn’t even know that,’’ he said, “if you didn’t have the claims data.’’

Miami-Dade could also take a cue from other large private employers, such as aerospace giant Boeing, and negotiate contracts directly with hospitals and other health care providers, said Joe Smith, a physician and engineer who chairs the board of West Health Policy Center, a Washington, D.C.-based nonprofit that studies healthcare reform.

“Health care has enough middlemen,’’ Smith said of plan administrators. “The employers are not ignorant at this. They’re good at negotiating contracts, and can also use market power to gain information.’’

De Brantes questioned AvMed’s incentive to reduce Miami-Dade’s annual health care costs since the insurance company pays claims with the county’s money, and receives an administrative fee of $31 per employee per month — regardless of the rates it negotiates with providers.

“They don’t care because it’s not their money,’’ de Brantes said. “That’s the bottom line.’’

For 2014, AvMed’s fee is estimated to be $16 million, about 4 percent of annual claims, according to county reports.

In The Dark

Without price transparency — and a review of AvMed’s negotiated rates — there’s no way for Miami-Dade to evaluate AvMed’s job performance, said Fitch, the health care consultant to SEIU 1991.

Fitch expressed concern that AvMed could be giving preferable treatment to Baptist Health South Florida, the largest hospital system in the region and the top-paid provider in the county’s employee health plan.

AvMed is the administrator for both Baptist Health’s employee health plan and Miami-Dade’s, Fitch pointed out, creating “a perception that there is unfair dealing.’’

At a meeting of the county health care committee, Fitch asked Repp how AvMed manages to negotiate rates on behalf of Miami-Dade with a hospital system that is also AvMed’s client.

“Very delicately,’’ Repp said. “We do have clients who are also providers. We keep those two divisions of the organization separate from each other.’’

Christine Kotler, a Baptist Health spokeswoman, declined to address price variances between the system’s hospitals and others in Miami-Dade’s plan. She said Baptist Health hospitals score high marks in clinical safety and consumer satisfaction surveys.

“In discussions about cost and price,’’ she said in a written statement, “it’s important to also talk about quality.’’

Miami-Dade employees do express a preference for Baptist Health centers when using a hospital, according to analyses by Gallagher Benefits Services, a county consultant. Consequently, most of Miami-Dade’s healthcare dollars go to Baptist Health hospitals — more than $61 million in claims for 2013, Gallagher reported, well above the second-highest paid provider, the University of Miami Health System, which received $24.3 million in payments.

But county officials have lacked the specific payment rate data they need to properly evaluate plan changes that could save Miami-Dade taxpayers money, according to a Gallagher analysis of all medical claims for the year ending June 30, 2012.

For example, the report noted that county employees have “unusually high” rates of emergency room use, likely because their copays for the service are low. But county administrators didn’t have the payment data to determine whether raising the copays to steer employees toward cheaper “urgent care” centers would save enough money to be worthwhile.

Instead of payment rates and claims data, county officials were given average costs per member, showing that Baptist Health facilities cost an average of $12,988 per overnight admission.

Baptist wasn’t the most expensive by that metric. Aventura Hospital and Medical Center, owned by Hospital Corporation of America, cost the county plan $14,975 per admission.

But Gallagher’s analysis showed that visits to Baptist ERs that year cost Miami-Dade more per encounter, an average $2,427, higher than any of the top 14 providers in the plan network.

Gallagher noted another interesting figure during recent meetings of the county health care committee.

In 2013, Miami-Dade’s plan paid Jackson Health hospitals an average of $9,380 per overnight admission. The average paid to all other hospital systems: $15,513 per patient — a difference of $6,133.

Gallagher projected that if all hospitals in the county employees’ network were paid at the same level as Jackson, Miami-Dade could have saved nearly $77 million in claims.

“We think there’s a lot of room for savings because of this price variation,” said Martha Baker, president of Jackson’s labor union for physicians and nurses.

Repp and others, including Jackson Health’s chief financial officer, Mark Knight, disputed that number.

“We don’t know the mix of the patients,” Knight said. “That $15,000 average could have been based on a bunch of really bad, train wreck patients who were in a bad motor vehicle accident and intensive care for a month. You can’t tell.”

Drawbacks

But Knight did illustrate one potential drawback for the consumer when it comes to price transparency: When Jackson officials read the Gallagher report showing the health system was being paid the lower rate in 2012, they went back to AvMed and renegotiated prices — higher.

The result? It now costs Miami-Dade more for its employees to use Jackson Health, though the plan still saves money when its members choose Jackson over a higher-priced competitor.

Unless consumers and employers know beforehand how much a medical service costs, they’ll never be able to make informed — and cost-saving — choices.

“Just like the individual needs choice,’’ said Smith, of the West Health Policy Center, “Miami-Dade County needs choice as it thinks about who it’s going to contract with. Otherwise, there’s just too much risk of hiding the ball.’’

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