Will price transparency destroy emergency medicine’s funding mechanism?

Also: Sound’s debt, Team’s new funding, AMA blasts CMS, expanding PA autonomy, physician unionization, hospitals back in the black, and queso on the streets.

Top of the Week

Walmart prides itself on negotiating the lowest possible prices for everything. Except when it pays for employees’ healthcare. 

An August 2023 study in Health Affairs concluded: “We found that commercial plans pay more than twice what [Medicare Advantage] plans pay for the same service when prices are negotiated by the same insurer with the same hospital. In many cases, an insurer’s commercial plans pay more than five times as much for the same service as their MA plans.”

Massive cost-shifting from employer-based private insurance to cover underpayments by Medicare, Medicaid, and uninsured patients has long been a fixture of the US healthcare system. A 2022 RAND study showed that “employers and private insurers paid 224% of what Medicare would pay for the same services at the same facilities across all hospital inpatient and outpatient services on average.” A 2022 Congressional Budget Office analysis found a similar 208% higher average rate paid by commercial insurance compared with Medicare. 

Pines et al’s recent article, “The Cost Shifting Economics of United States Emergency Department Professional Services (2016–2019)”, showed the extent of emergency medicine’s reliance on employer-based insurance. In 2019, though only 28.2% of US ED patient visits were among patients with commercial insurance, those visits generated over half (59.7%) of all emergency medicine revenue. 

Why would Walmart and other large employers pay so much more than Medicare? Part of the answer has been that negotiated rates were hidden. The 2022 RAND report noted, “Although price transparency programs and tools have increased the availability of information about procedure-level prices available to patients, employers do not commonly have usable information about the prices negotiated on their behalf—for example, the aggregate price levels of competing hospitals.” Hospital pricing’s notorious opacity is highlighted in a recent satirical ad.

Ominously for emergency medicine, negotiated insurance rates for medical services are being rapidly uncovered.

This month’s Health Affairs article about hospital-insurance rate-setting negotiations is based on Turquise Health data. Per the article’s methods section, “These data comprise current hospital facility prices disclosed by hospitals under the hospital price transparency rule. They include negotiated prices, at the hospital insurer plan level, for individual procedures in commercial, MA, and Medicaid managed care markets, as well as identifiers for specific insurers and hospitals; they have been used in prior empirical work. We extracted negotiated commercial and MA prices at general acute care hospitals for seventy shoppable services, as defined by the Centers for Medicare and Medicaid Services and for five ED visit codes.”

Turquoise Health promises to empower employers to “shop healthcare just like anything else.” Employers can use their massive data set to not only find the least expensive carrier, but also to drive better-informed pricing negotiations with healthcare providers.

Turquoise has amassed data on commercial insurance negotiated rates with impressive speed. Per their April 2023 update, “Turquoise cites 183 payers publishing data as of March 2023 compared to just 68 payers in July 2022. The payer data now represents over 95% of commercially insured lives in the United States. Turquoise also notes over 84% of hospitals have posted pricing data as of Q1 in 2023, compared to just 65% in Q4 of 2022.”

An editorial in this month’s Annals of Emergency Medicine sounds the alarm about the weakness of EM’s cost-shifting payment model. McNaughton and Poon conclude, “Barring systemic changes in funding models, higher negotiated revenue from patients with commercial insurance appears to be an important lynchpin on which the financial viability of American emergency medicine currently precariously hangs… The degree to which professional costs exceed revenue for ED visits for Medicaid, Medicare, and self-pay patients raises concerns about the long-term financial viability of the current funding model for emergency care in the United States.”

If employers, armed with Turquoise data, negotiate lower commercial rates, where will emergency medicine employers find enough revenue to pay physician salaries? The US uninsurance rate is rising. Medicaid payment rates are approximately half that of Medicare, with little room in state budgets for reimbursement increases. CMS has proposed further Medicare payment cuts to physicians in 2024. These combined forces will likely turn emergency medicine’s 3.9% average operating margin, calculated by Pines for 2019, into negative margins in the near future. 

As Drs. McNaughton and Poon write, “Funding commensurate with the value emergency medicine provides is not guaranteed.”

EM Practice

Sound Physicians, owned by Optum and private equity firm Summit Partners, faces the same financial challenges as its highly leveraged peers. “Sound’s first-lien term loan due 2025 has sunk to around 57 cents on the dollar, from around 80 cents at the start of the year, according to data compiled by Bloomberg. Its second-lien term loan due 2026 has also plummeted, and now changes hands for around 27 cents on the dollar.”

TeamHealth received over $1 billion in fresh funding through a pair of loans. 

Analysis of the impact of a judge’s stay on AAEM’s corporate practice of medicine lawsuit against Envision. 

A small rural Tennessee town, which lost its only hospital four years ago, is opening a new freestanding emergency department.

House of Medicine

The AMA “blasted” CMS for its proposed 3.34% pay reduction for physician services in 2024. “Jesse Ehrenfeld, president of the AMA, said that adjusted for inflation, Medicare physician payments have dropped 26% from 2001 to 2023, and that’s before the proposed cuts. ‘This is almost biblical in its impact,’ Ehrenfeld said. ‘Seven lean years that include a pandemic and rampaging inflation. Physicians need relief from this unsustainable journey.’”

The US Department of Health & Human Services lost yet another lawsuit to the Texas Medical Association over the feds’ mishandling of the No Surprises Act.

Colorado expanded PAs’ practice autonomy. 

Nurse practitioners are the fastest-growing profession in the United States. 

Physicians at Minnesota’s Allina Health filed a petition to unionize. If successful, it would “create the largest group of private-sector clinicians in the entire country”.

The Washington Post published an inflammatory article about physician pay. 

“The 3 things that make people love their work (and why medicine falls short)”: 1) Autonomy: Control over how you fill your time; 2) Competence: Progressive skill development and ability to effect change; 3) Relatedness: Feeling of connection to others.

Hospitals & Health Systems

Axios: “Hospitals and clinics are now among America's most dangerous workplaces.”

Essentia Health and Marshfield Clinic plan to merge. 

Q2 2023 financial results at for-profit US hospital systems, compiled by Hospitalogy.

Nursing & Allied Health

The Dispo

Punniest article of the week: “Oh, grate! Nacho cheese spill stops traffic on I-30 near Prescott Tuesday”. 

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