top of page

Thought Leaders: Price Competition

Dudley Morris was featured in the July/August edition of MCOL Thought leaders newsletter. The question asked was:

“What are your current thoughts on healthcare price competition, and President Biden’s recent Executive Order in that regard which included provisions addressing prescription drug Canadian importation, further generic support, and drug pricing; OTC hearing aids; hospital mergers, price transparency and surprise billing; and health insurance marketplace standardization?”

President Biden’s recent Executive Order is a “whole-of-government effort” to promote competition in the marketplace. Healthcare is a major focus of the EO, challenging the benefits of mergers, promoting comparative shopping for health plans, and specifically instructing the Secretary of Health and Human Services to support existing price transparency initiatives for hospitals, other providers, and insurers—and strengthening them where necessary.

The new EO is a continuation of Biden’s campaign pledge to “tackle market concentration across our health care system… that’s driving up prices for consumers.” The EO signals a more aggressive posture toward industry consolidation, especially among hospitals. Health systems can expect that their accounting for promised benefits of horizontal and vertical integration will be in the FTC cross-hairs. And methodologies for calculating market concentration will be refreshed given the expanding role of digital health.

HHS Secretary Xavier Becerra put it forcefully in terms of pricing transparency:

“Concealing the cost of services and procedures will not be tolerated by this

administration.” According to industry surveys, currently approximately 30% of the nation’s acute care hospitals have not posted their rates, and another 10% have posted information that is not in useable form. Some hospitals have even embedded special coding in their web pages to prevent search engines such as Google from displaying price pages in search results. Newly proposed CMS Outpatient Prospective Payment System rules for 2022 include tougher penalties for non-compliance raising the penalties for large hospitals from $109,500 a year to slightly more than $2 million.

Increased pricing visibility will reveal substantial price variations among providers for similar services– even within the same hospital. This will create the need for health systems to focus on defining and communicating their consumer value proposition to justify their pricing strategy. Managed Care contract negotiations will intensify. There will be an increasing need to develop product line pricing plans to maintain and strengthen market position for specialty services, and to address issues of pricing variability.

Depending on their market position, systems with charges below the market average may have the ability to negotiate improvement in their rates, and to grow market share if they are lower cost providers.

Download PDF • 120KB


bottom of page