Price transparency, still up in the air, not likely to reduce costs
Healthcare consumers are often stuck with bills that are confusing and illuminate little about the actual out-of-pocket costs they’re required to pay. To address this, the Centers for Medicare and Medicaid Services put its weight behind a price transparency rule requiring hospitals to disclose to consumers their negotiated prices with payers.
The ruling has been challenged in court and is the focus of ongoing legal wrangling, and, even if passed, many expect that it won’t have its intended result.
Hospitals are especially skeptical that the disclosures will lead to lower costs or would benefit consumers, because the disclosed charges would not represent patients’ actual out-of-pocket costs. And hospitals expressed concern that the compliance burden could ultimately “get in the way of providers spending time with patients,” according to court documents.
Becky Greenfield, attorney with Miami-based boutique firm Wolfe Pincavage, said the final rule would ultimately reduce competition.
“When we negotiate rates, something that has a huge factor on what a rate would be is, ‘How much volume am I going to get from that particular payer?'” said Greenfield. “That is not disclosed to the public. If I were a hospital, I would not want to accept lower reimbursement from one plan because that might be the threshold. The other side of this is that insurers have ways to find out what other payers are paying already, even without this. It may not move the needle at all.
“If a hospital knows all eyes are on a specific negotiated rate, what’s their incentive to take a lower rate? The next payer will come in and say, ‘You’re taking X from this payer, why not from me?'”
All this has the potential to create even more confusion about out-of-pocket costs. If a hospital doesn’t create or use a price transparency tool and is disclosing the machine-readable data, putting aside the negotiated rates from payers, that has nothing to do with out-of-pocket costs. The concern is that patients will be confused trying to differentiate between their out-of-pocket costs and the negotiated rates.
In June, a federal judge ruled against the lawsuit brought by the AHA and other providers, which claimed the final rule requiring them to post their negotiated prices with payers violated their First Amendment rights, was arbitrary and capricious, and exceeded the statutory authority of the U.S. Department of Health and Human Services.
When the District Court made its ruling, it conceded the decision was a close call. Citing the Administrative Procedures Act – which governs the process by which federal agencies develop and issue regulations – the court found CMS had the proper authority, but left the door open for the AHA and other plaintiffs to take the matter back to the appellate court. They did.
“The question ultimately is, ‘Did CMS have the authority under the Procedures Act to interpret the word ‘standard charges’ as five different types of charges for different subsets of people?'” asked Greenfield. “The lower court found it did have authority, and we’ll figure out next year what the appellate court thinks about that.”
THE GRASSLEY FACTOR
One thing in particular may make the appellate court ruling not moot exactly, but less impactful.
When the AHA filed its appeal on June 2 – and 33 other state hospital associations requested an extension of time from HHS – Senator Chuck Grassley, R-Iowa, proposed his own price transparency act, which would essentially codify both the hospital price transparency rule and the sister price transparency rule. The goal is to include that language in a future COVID-19 relief bill.
“So the lawsuit might not even matter, because we would now have statutes on the books requiring these disclosures rather than the disputed issue, which is whether a regulatory agency can issue a statute the way that it did,” said Greenfield.
At this point, it’s too soon to determine the likelihood of the appellate court upholding the ruling, or of Grassley’s amendment passing. According to Greenfield, there have been rumblings from HHS that the two parties could reach a compromise prior to the ruling, which would rely heavily on the price transparency rule that applies to insurers. Negotiated rates would be disclosed through the insurer.
“That makes sense to me,” said Greenfield, “because there are the ones who, one, create the benefit plans, which establishes the out-of-pocket costs, but they also have access to a lot of different providers in a particular market. So they have all that in their hands. They would just need to put that in a tool that makes it readily accessible to the consumer. That’s been the compromise.”
Hospitals only have until January to prepare for the final rule’s implementation, and some may use the intervening months to determine what technologies, platforms and other resources they have internally to determine if they need to hire a third-party vendor to do the work. Based on the sheer amount of data that’s required to disclose comparable and user-friendly information, it can’t just be a data dump.
“Payers use different types of reimbursement methodologies,” said Greenfield. “Hospitals will have to look at historical data so they can disclose it in a consumer-friendly and comparable way to the public. That’s going to take likely many hours internally, and again, if they can afford it, it’s going to take effort on the part of the vendor partner.”
THE LARGER TREND
The final rule, issued in November 2019, requires hospitals, other healthcare providers and insurance companies to disclose their cash and negotiated contract prices to patients in an easy-to-access format.
The American Hospital Association has been one of the more vocal opponents of the rule. In late June, it appealed the decision handed up in federal court that put the final rule on price transparency on track to go into effect on January 1, 2021.
Hospitals, insurers and advocacy groups that joined in the lawsuit said the publication of payer-specific negotiated rates would chill negotiations between hospitals and insurers. They disputed the agency’s statutory authority to require disclosures of specific negotiated charges or to require the publication of information they believed constituted trade secrets.
ON THE RECORD
“The proposal does nothing to help patients understand their out-of-pockets costs,” the AHA said in June. “It also imposes significant burdens on hospitals at a time when resources are stretched thin and need to be devoted to patient care. Hospitals and health systems have consistently supported efforts to provide patients with information about the costs of their medical care. This is not the right way to achieve this important goal.”