The employer system is the backbone of America’s private health care system. Employers cover more than 80% of health care costs for over 155 million Americans. However, the rapid pace of cost increases is so alarming that 87% of large employers say they believe providing health benefits to employees will become unsustainable in the next five-to-10 years.
One significant cost driver that is increasingly under the microscope is the impact of hospital consolidation, which can simultaneously reduce choice while increasing costs. In the closing days of 2024, Congress should take two bold steps to mitigate consolidation’s impact and begin improving affordability for employers and families.
Stop hospitals from charging more just because it changed a logo on the door
When hospitals purchase physician practices and other outpatient facilities, the new “owners” reclassify the site as a “hospital setting.” This allows the hospital to charge more money – by simply changing the logo on the door.
This practice has real life consequences. One
news story highlights how an Ohio patient was charged ten times more for an arthritis treatment after her doctor’s practice was acquired by a hospital system, which reclassified the office visit as hospital care. She is not alone – everyday cancer patients receiving chemotherapy in a hospital-owned clinic pay
three times more for chemotherapy compared to a doctor’s office.
Patients should be charged the same price when they receive the same routine medical service, no matter where they get it.Congress is considering how to align the payment with the service, rather than the location – an approach known as site-neutral payment reform. Legislation in the House and Senate would create broad site neutral payment reform.
For instance, the House overwhelmingly passed a bipartisan health care transparency bill (the “Lower Costs, More Transparency (LCMT) Act,” H.R. 3417) that includes a targeted site-neutral policy for physician administered drugs in Medicare, along with “honest billing” provisions that require off-campus hospital outpatient departments to obtain and use a unique identifier for Medicare billing. Government scorekeepers estimate those policies in LCMT could save $4 billion over a decade.
Prioritize Costs and Competition over Consolidation
Additionally, contracting practices emerging from continued health care marketplace consolidation are amplifying affordability concerns. As of 2017, the FTC identified 90 percent of health care markets as “highly concentrated.” Dominant systems use market power to demand unethical and unfair contractual terms, which can raise costs for businesses, who have no choice but to pass costs on to employees and their families as higher health insurance premiums, deductibles, and copays. With health care costs expected to
rise 7% next year, consolidation is moving consumer costs in the wrong direction.
An example of these practices is Parkview Health, in Fort Wayne, Indiana.
Parkview Health systematically acquired several competing hospitals, physician practices, and other outpatient facilities within the region. Parkview demands higher prices for health care services due to the health system’s market dominance, forcing employer-sponsored plans to contract with facilities that are a part of the health system’s network.
Policymakers can crack down on the anti-competitive practices that stifle affordability by advancing the “Healthy Competition for Better Care Act” (H.R. 3120 and S. 1451).
The legislation promotes competition in two ways. First, it permits incentives for enrollees when they choose high-quality and low-cost providers. Second, it allows employers to contract with hospitals and providers that make sense for them and their workforce – rather than allowing employer plans to be held hostage by a single affiliate. The legislation is essential to helping employers and employees access the best care at the best prices.
The elections may be over, but concern over health costs remains high, and time is running short for the employers and families who bear those costs. Whether Congress chooses to tackle these important reforms in a year end package, or it continues its work into 2025, Americans cannot wait much longer for relief from rising health care costs.
James Gelfand is the President & CEO of the ERISA Industry Committee (ERIC). With member companies that are leaders in every economic sector, ERIC is the voice of large employer plan sponsors on federal, state, and local public policies impacting their ability to sponsor benefit plans.
