Hospitals will soon have to share price information they have long kept obscured — including how big a discount they offer cash-paying patients and rates negotiated with insurers — under a rule finalized by the Trump administration.
In a companion proposal, the administration announced it is also planning to require health insurers to spell out beforehand for all services just how much patients may owe in out-of-pocket costs. That measure is now open for public comment.
“What is more clear and sensible than Americans knowing what their care is going to cost before going to the doctor?” said Joe Grogan, director of the White House Domestic Policy Council.
The hospital rule is slated to go into effect in January 2021. It is part of an effort by the Trump administration to increase price transparency in hopes of lowering health care costs on everything from hospital services to prescription drugs. But it is controversial and likely to face court challenges.
When that rule was first proposed in July, hospitals and insurers objected. They argued it would require them to disclose propriety information, could hamper negotiations and could backfire if some medical providers see they are underpriced compared with peers and raise their charges.
Shortly after the final rule’s release, four major hospital organizations said they would challenge it in court.
“This rule will introduce widespread confusion, accelerate anticompetitive behavior among health insurers and stymie innovations,” according to a joint statement from these groups, which made clear their intent to soon “file a legal challenge to the rule on the grounds including that it exceeds the administration’s authority.” The statement was signed by the American Hospital Association, the Association of American Medical Colleges, the Children’s Hospital Association and the Federation of American Hospitals.
Insurers also pushed back. “The rules the administration released today will not help consumers better understand what health services will cost them and may not advance the broader goal of lowering health care costs,” said Scott Serota, president and CEO of the Blue Cross Blue Shield Association, in a statement.
Requiring disclosure of negotiated rates, he said, could lead to price increases “as clinicians and medical facilities could see in the negotiated payments a roadmap to bidding up prices rather than lowering rates.” The rule, he added, could confuse consumers.
It’s also a potentially crushing amount of data for a consumer to consider. However, the administration said it hopes the data will also spur researchers, employers or entrepreneurs to find additional ways of making the data accessible and useful.
The amount of information the rule requires to be disclosed will be massive — including gross charges, negotiated rates and cash prices — for every one of the thousands of services offered by every hospital, which they will be required to update annually.
In a nod to how hard it might be for a consumer to add up items from such an a la carte list of prices, the rule also requires each hospital to include a list of 300 “shoppable” services, described in plain language, with all the ancillary costs included. So, in effect, a patient could look up the total cost of a knee replacement, hernia repair or other treatment.
Insurers, under the proposed rule, would have to disclose the rates they negotiate with providers like hospitals. They would also be required to create online tools to calculate for individual consumers the amount of their estimated out-of-pocket costs for all services, including any deductible they may owe, and make that information available before the consumer heads to the hospital or doctor.
It would go into effect one year after it is finalized, although it is not known when that will occur.
Although consumer advocates say price information can help patients shop for lower-cost services, they also note that few consumers do, even when provided such information.
Earlier this year, the administration ordered drugmakers to include their prices in advertisements, but the industry sued and won a court ruling blocking the measure. The administration has appealed that ruling.
Nonetheless, Health and Human Services Secretary Alex Azar said the administration is confident.
“We may face litigation, but we feel we are on sound legal footing for what we are asking,” Azar said. “We hope hospitals respect patients’ right to know the prices of services and we’d hate to see them take a page out of Big Pharma’s playbook and oppose transparency.”
He and other officials on a call with reporters admitted they don’t have any estimates on how much the proposal would save in lowered costs because such a broad effort has never been tried in the U.S. before.
Still, “point me to one sector of the American economy where having pricing information actually leads to higher prices,” said Azar.
Azar cited some studies that show that when prices are disclosed, overall spending can go down because patients choose cheaper services. However, such efforts also generally require financial incentives for the patient, such as sharing in the cost savings.
The proposed rule for insurers urges them to create such incentives, said Seema Verma, who oversees the federal government’s Center for Medicare & Medicaid Services.
George Nation, a business professor at Lehigh University in Pennsylvania who studies hospital pricing, called the final rule and the insurer proposal “exactly a move in the right direction.”
Among other things, he said, the price information may prove useful to employers comparing whether their insurer or administrator is doing a good job in bargaining with local providers.
Today, “they just see a bill and a discount. But is it a good discount? This will now all be transparent,” said Nation.