government

Hospitals exchange of cost data clears antitrust hurdle

The California program to publicize how much care costs could help improve competition and health care decision-making, the Justice Dept. said.

By Amy Lynn Sorrel — Posted May 17, 2010

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A proposal to make public certain cost data on more than 300 California hospitals cleared an antitrust hurdle when the Dept. of Justice said it would not challenge the program.

The Hospital Value Initiative proposes to collect and analyze hospital claims data from five major payers that agreed to participate in the project, which aims to measure hospital care utilization and cost efficiency. The HVI is a coalition of three organizations that represent various employers and other group purchasers of health care services in California.

Under the proposal, health plans would submit participating hospitals' inpatient and outpatient claims data from the preceding year. The initiative would use an outside consulting firm to aggregate the information and develop a system that would allow participating health plans, hospitals and group purchasers to compare hospitals' relative costs and efficiency.

The Justice Dept. concluded in an April 26 letter that the proposed information exchange was unlikely to reduce hospital competition or encourage collusion.

Rather, "the HVI's goal of making relevant information available to purchasers of hospital services is procompetitive in nature," wrote Christine A. Varney, assistant attorney general in the Justice Dept.'s Antitrust Division. "To the extent that the HVI allows payers, employers and other group purchasers of hospital services to better evaluate differences in the costs and resources that hospitals use to treat comparable conditions, it could enhance competition and efficiency in hospital markets and permit more informed decisions to be made."

The goal of the program is to make health care more affordable, said David S.P. Hopkins, PhD. He is director of quality measurement at the Pacific Business Group on Health, an employer coalition that helped spearhead the project.

"There's such secrecy around cost and really no way a patient, an employer, or for that matter a referring physician, knows anything about what it costs to refer a patient to this hospital versus that hospital," Hopkins said. The Justice Dept. opinion "gives us the opportunity to regroup and think through our basic goal of increasing affordability through transparency in quality and cost."

The California Hospital Assn., however, still has concerns that the data-sharing initiative could harm competition. It noted that the Justice Dept. reserved the right to challenge the proposal once implemented if it produces anticompetitive effects.

"Every hospital's cost structure is different," CHA spokeswoman Jan Emerson said in a statement. For example, costs vary based on the number of uninsured, Medicare and Medicaid funding, and the availability of specialty services.

She also criticized the HVI proposal because it "focuses primarily on cost, and not quality information."

Part of a transparency trend

The government letter stated that the cost information exchange, as proposed, was intended as "a complement to ongoing hospital quality measurement initiatives." The Justice Dept. said the proposal was unlikely to produce anticompetitive effects for three reasons.

First, no participating hospital, payer or group purchaser would have access to raw claims data submitted by any other entity, or to any other disaggregated information collected.

Second, HVI reports would not disclose the actual prices a hospital charges for its services.

Third, and most important in the Justice Dept.'s assessment, it is unlikely that any recipient of the reports would be able to "reverse engineer" the aggregated statistics to determine payer rates to any particular hospital. Participants only would view benchmarks for how a given hospital's charges or utilization rates compared with average regional rates for the same service, and the claims data used would be at least 10 months old.

The California initiative is part of an ongoing effort at the state and national levels to improve transparency in health care costs, said Mike Cowie, a former assistant director in the Federal Trade Commission's Bureau of Competition. He testified before Congress in April on several bills proposing greater price disclosure by health plans, physicians and others. Colorado lawmakers are debating a similar measure.

"On one hand, we have seen broad initiatives to facilitate comparison shopping in health care," said Cowie, now an antitrust lawyer and partner in Howrey LLP's Washington, D.C., office. "But some of these proposals are overbroad in that they would require providers to post on the Internet proprietary pricing terms they have with health insurers. The FTC and DOJ in the past have opposed those kinds of requirements, and the concern is that it will lead to price standardization and increased prices."

In California, the government appeared assuaged by the fact that only aggregated data would be exchanged, Cowie noted. Still, he said such plans must be analyzed carefully based on the level of detail of the data being shared and what is being measured.

Quality-adjusted pricing also should be taken into account, he said. "From an antitrust perspective, when dealing with a service industry ... just looking at cost may say very little."

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ADDITIONAL INFORMATION

Seeking price transparency

The Hospital Value Initiative in California received a green light from the Justice Dept. to promote transparency in hospital cost data by making the information public to health plans, hospitals and group purchasers in the program. The project proposes to:

  • Collect and analyze hospital claims data from 5 major health plans.
  • Develop a system for comparing the cost and efficiency of a particular hospital service with the averages for a given region.
  • Share the comparison data with participants to help inform their health care purchasing decisions.
  • Preclude participants from seeing raw, disaggregated claims data for a particular hospital.

Source: Dept. of Justice

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