| To: | Hospital Chief Executive Officers and Government Affairs Staff |
| From: | Sarah Chicoine | Legal Intern | SarahC@wsha.org |
| Staff Contact: | Zosia Stanley, JD, MHA, Associate General Counsel ZosiaS@wsha.org | (206) 216-2511 |
| Subject: | Washington State Health Care Cost Transparency Board Formation |
Purpose
The purpose of this bulletin is to inform hospital and hospital systems about Substitute House Bill 2457, which creates the state Health Care Cost Transparency Board (“Board”). The Board’s objective is to determine the annual total health care expenditures and growth in Washington state and establish a health care cost growth benchmark (“Benchmark”). The Board will compare health care provider’s expenditures to the Benchmark and release reports that identify those that exceed the Benchmark. Due to WSHA’s advocacy, when determining the Benchmark, the Board will include and consider the cost drivers of health care.
Applicability/Scope
Eventually, the health care cost growth of all health care providers and payers will be compared to the state Benchmark.
The law establishing the Board was effective June 11, 2021. The Board’s first deliverables are due August 1, 2021, when the Board is required to submit a preliminary report to the governor and both chambers of the state legislature, which will discuss the Board’s data collection plan and challenges it may face. Once the Board determines the types and sources of data necessary to calculate the total health care expenditures and health care cost growth, health care providers and payers may be required to provide the requested data to the state. The first full report, and establishment of the Benchmark, will occur August 1, 2022.
Recommendation
Health care providers, including hospitals and health care systems, do not currently have new obligations related to the new transparency law. The Board must first be created and determine data collection and analysis methods. In other states that have established similar cost transparency boards, the boards’ reports have had significant influence on state health care policy decisions. WSHA recommends hospitals and health systems remain engaged as the Board’s work moves forward.
Overview
SHB 2457 requires the Washington Health Authority to create a Health Care Cost Transparency Board. The Board’s primary objective is to understand and curb the state’s health care costs growth. The Board aims to achieve this objective by (1) analyzing the state’s total health care expenditures; (2) identifying drivers in health care cost growth; and (3) establishing a health care cost growth benchmark. The total health cost expenditures for each health care provider and payer will be measured against the Benchmark, and the Board will identify providers and payers whose cost growth exceeds the Benchmark. WSHA’s advocacy ensured the Board uses already available data when possible and considers a broad range of factors when collating information and creating the Benchmark.
Board Members and Advisory Committees
The Board will consist of fourteen members from a variety of specified agencies and industries, including one nonvoting member of the health care provider and carrier advisory committee. The Board will also create advisory committees to help direct the Board’s data collection and Benchmark creation. One advisory committee will be comprised of health care providers and carriers, including one member representing hospital and hospital systems.
Annual Total Health Care Expenditures
Once the Board and advisory committee members are established, the Board is charged with collecting data on annual total health care expenditures. The annual total health care expenditures will then be used to calculate yearly cost growth—the annual percentage change in total health care expenditures.
The Board will determine the types and sources of data to be used when calculating the total expenditures. Because of WSHA’s advocacy, the Board must first rely on existing data sources, including the statewide health care claims database and state-collected prescription drug data. WSHA’s advocacy also ensures the Board considers the provider’s payer mix; the health status of patients; utilization by the patients of health care providers; intensity of services provided to the patients; and regional differences in input prices.
The Board must calculate total health care expenditure and health care cost growth for the following categories:
- For each health care provider, provider system and payer (taking into account patient health status, utilization, service intensity, and regional differences in input prices);
- Geographically: statewide and by geographic rating area;
- By market segment;
- Per capita; and
- Other categories as recommended by advisory committee.
Health Care Cost Growth Benchmark
The Board will annually establish the health care cost growth benchmark—the target percentage growth of total health expenditures. In determining the Benchmark, the Board will consider and analyze the impacts of cost drivers on health care. Initially, the Board will consider the highest cost drivers to establish the Benchmark.
Based on WSHA’s advocacy, beginning in 2023, the Board will consider a variety of crucial cost drivers to obtain a more complete understanding of the cost of health care when determining the Benchmark. While analysis of cost drivers is contingent on the availability of data, the consideration of cost drivers is an important improvement to the Board’s work. The cost drivers to be considered include (but are not limited to):
- Cost of labor, including wages, benefits, salaries;
- Capital costs, including new technology;
- Supply costs, including prescription drug costs;
- Uncompensated care;
- Administrative and compliance costs;
- Federal, state and local taxes;
- Capacity, funding, access to post-acute care, long-term services and support and housing; and
- Regional differences in input prices.
Identify Providers that Exceed Benchmark
Once the Board has established a means to collect annual total costs and established the Benchmark, the Board will identify health care providers whose annual expenditures exceed the established Benchmark. The Board is required to review and consult with providers and payers identified as exceeding the Benchmark before identifying these entities. There is currently no enforcement mechanism or penalty for providers or payers that exceed the Benchmark.
Release Report
By August 1, 2021, the Board must create a preliminary report that addresses the progress made toward establishing the Board and advisory committees.
By August 1, 2022, the Board must provide its first report, which will include the total expenditures for the most recent year for which data is available and establish a Benchmark for the following year.
WSHA’s 2020 New Law Implementation Guide
Please visit WSHA’s 2020 implementation guide online, where you will find a list of the high priority laws that WSHA is preparing resources and information on to help members implement the new laws, as well as links to resources such as this bulletin. In addition, you will find the Government Affairs team’s schedule for release of upcoming resources on other laws and additional resources for implementation.
Background
SHB 2457 and the Health Care Cost Transparency Board was influenced by other states that have already created similar boards to better understand and curb the growth of health care expenditures, including Massachusetts and Oregon. Additional states are considering similar legislation.
Two bills pertaining to health care transparency were proposed in the 2020 legislative session: this law, SHB 2457, which the chair of the house health committee proposed; and HB 2036. The second bill, HB 2036, required hospitals to publicly report much more extensive financial and patient information. While HB 2036 did not pass, WSHA expects similar bills will be proposed in the future.
References
Substitute House Bill 2457—Cost Transparency Board Law
Engrossed Substitute House Bill 2036—Health System Transparency Bill
RCW 43.371—Statewide Health Care Claims Data
RCW 43.71C—Prescription Drug Costs
Press Release; Senate Bill 889—Oregon Health Care Transparency Board
Overview; M.G.L. ch 224—Massachusetts Health Care Transparency Board
