Healthcare Shoppers Led by Insurers’ Hands

Centers for Medicare and Medicaid Services (CMS) officials say the hospital transparency rule released by the agency on November 15, 2019 is all about “putting the patient first.”  This is the same goal held by hospitals.  However, there is little in this directive that will clarify price information and a lot that will further confuse patients.  Arming patients with price information about procedures and services charged at various hospitals is a lofty ideal, but the reality is this rule will not achieve that. Patients remain essentially powerless to effectively shop and compare prices because they are beholden, for the most part, to accessing care from their insurers’ in-network providers.  At any hospital, customers of each healthcare insurer pay different rates, including members of different plans from the same insurer.  If there is a bargain on appendectomies at hospital A, but your insurance plan does not include that hospital in its network then your price comparison shopping doesn’t mean much to you.

CMS’ asserts that this rule will foster higher-value healthcare by promoting competition and choice because it requires hospitals to make public privately negotiated payer-specific price information for all items and services in multiple formats.  In our market driven economy, this approach is riddled with legal implications and goes well beyond the level of regulation necessary to promote the stated government interest of “putting the patient first.”  Disclosure of prices negotiated with individual health plans would unduly burden hospitals’ ability to enter into competitive contracts, resulting in less choice and even higher prices for consumers.

Is Healthcare Shoppable?

Specifically, hospitals must post a list of five types of standard charges – now defined by CMS as gross charges, payer-specific negotiated rates, the de-identified minimum and maximum negotiated rates, and discounted cash price – for all items and services in a machine-readable format on their websites.  Hospitals must also post the negotiated rates, minimum and maximum negotiated rates, and discounted cash prices for 300 “shoppable” services in a consumer-friendly, searchable way.  CMS will select 70 of these services and 230 will be chosen by the hospital.

In September 2019, the Suburban Hospital Alliance supported the comments that our state and national hospital associations forwarded to CMS when the rule was in its proposed state.  We argued that the rule was more extensive than needed to advance CMS’ interest of putting consumers first.  CMS’ own research indicates that consumers are more interested in their out-of-pocket costs and not the prices agreed upon between payer and provider.  Hospital leaders hold fast to the fact that the best way for consumers to get information about real-time out-of-pocket costs, charges and in-network status is from their health plans.  Any other mechanism will introduce widespread confusion.

Legal Concerns

Further, such disclosure infringes upon intellectual property rights recognized by Congress and individual states. This rule also stymies competition and restrains efforts to widely adopt and implement value-based care contracts.  The disclosure of hospitals’ private insurance contract rates upends the market-based process, wherein hospitals secure competitive and reasonable rates for services.  Making this private contract information public will compromise market dynamics.  It also raises serious anti-trust concerns.  The Federal Trade Commission holds that price transparency be limited to “predicted out-of-pocket expenses, co-pays and quality and performance comparisons of plans and providers.”  This is the price information patients truly seek.

The rule goes into effect January 1, 2021.  Hospitals that do not comply will be fined $300 per day, or $109,500 per year, says CMS.  The hospital field has vowed to file a legal challenge to this rule on the grounds that it exceeds the Administration’s authority.

Hospitals want consumers to have all the information they need to make informed healthcare decisions.  That begins with timely, accurate insurer estimates of patients’ out-of-pocket costs, including estimates from the insurer that account for complexities that may arise during the course of treatment and/or procedure.

New Insurer Rules

CMS also issued a proposed rule on November 15th that would impose new requirements on private insurers in the individual and group markets to publicly disclose negotiated rates and real-time, personalized access to cost-sharing information.   Comments on this proposed rule are due January 15, 2020.

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