Time is running short on the opportunity to comment on a proposed rule further increasing transparency in hospital pricing.  The rule was released July 29 and was quickly panned by providers and insurers over provisions requiring hospitals to publicly disclose the negotiated rates they have with third-party payers.

Comments on the rule are due September 27, 2019.

Action by the federal government to increase price transparency in health care is not new, of course.  Section 2718(e) of the Public Health Service Act (PHS) was added by the Affordable Care Act to require all hospitals to make public, upon request, the standard charges for the items and services they provide.  

In a rule published in August of 2018 and effective January 1, 2019, the Centers for Medicare and Medicaid Services (CMS) required hospitals to post their current charges online in a machine-readable format.  The definition of “charges” did not include privately negotiated rates.

More recently, in June of this year, President Donald Trump built on prior Executive Orders encouraging consumer choice and market competition in healthcare with a broad “Executive Order on Improving Price and Quality Transparency in American Healthcare to Put Patients First.” The Order led to the provisions in the latest CMS rule.

With each of these developments, CMS and other administration officials cited the same reasoning:  healthcare markets work better, and consumers receive higher value care, when there is a greater degree of choice and competition.  In such an environment, CMS reasons, transparency in health care pricing will enable patients to become active consumers who drive higher value.

The provisions of the new rule receiving the most attention and backlash expand the initial hospital charges disclosure requirements of Section 2718(e) of the PHS Act to include privately negotiated rates for 70 “shoppable services.”  The shoppable services, which are generally not the most urgent services and allow for scheduling in advance, must be displayed in a consumer-friendly way.  That’s in addition to making public all standard charge information for all hospital items and services in a machine-readable file.  Plus, hospitals must make public additional shoppable services—selected based on utilization or billing rates—to present the prices of at least 300 shoppable items and services.

These provisions of the proposed rule will be contained in a new section of title 45 of the federal code, Part 180—Hospital Price Transparency.  The section will include a definition of “hospitals” that looks to state licensing laws to determine which facilities must comply with the expanded pricing disclosure requirements.  Ambulatory surgery centers and federally run facilities such as Veterans Affairs facilities, among others, would be exempt.

In response, hospitals contend the requirement to disclose privately negotiated rates—which some argue should be considered trade secrets—exceeds CMS’ legal authority and would undermine payer-provider negotiations.  Further, hospital and insurer groups say such disclosure would actually cause rates to increase, as the public price becomes the floor, not the ceiling, as is now the case under existing regulations.

Additionally, insurers have pointed out that negotiated hospital rates will not drive consumer behavior as desired.  The payers argue the real value driver for consumers is their out-of-pocket cost based on the terms of their coverage, not negotiated rates, which they may never see.  Many hospitals and insurers already provide consumers with estimates of out-of-pocket costs.

Given the implications for both health care revenue cycle management and rate setting, legal challenges to CMS’ proposal are expected.  Moreover, because the proposed rule would allow CMS to commence enforcement actions and fine noncompliant hospitals up to $300 per day, there are likely to be separate challenges relating to CMS’ ability to implement the enforcement provisions scattered among the more than 819 pages of the proposed rule.

For more information on the recent provisions requiring public disclosure of standard hospital charges and the July 29 CMS rule, contact a member of the Husch Blackwell Healthcare Law team.