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A Dramatic Shift in Health Care Pricing Transparency

The Issue: On June 24, 2019, President Trump signed an executive order, which instructed the Department of Health and Human Services to publish rules requiring hospitals to publicly disclose their negotiated rates for services. On August 9, 2019, proposed rules were published by the Centers for Medicare and Medicaid Services (“CMS”).

The Situation: The proposed rules require hospitals to make public via the internet a description of each item and service the hospital provides with all corresponding payer specific negotiated charges in both “machine readable” and “user friendly” formats.

Looking Ahead: If adopted, the proposed rules will create significant compliance requirements for all hospitals, and impose civil monetary penalties for those found to be in noncompliance. CMS is currently seeking commentary on the proposed rules and the alternative proposals discussed below until September 27, 2019.

The proposed rules apply to all hospitals, regardless of whether they receive federal funding. Each hospital would be required to disclose:

  • A description of each item or service (both individual and service packages);
  • The corresponding payer-specific negotiated charge that applies to each item or service, with the name of the third-party payer being clearly identified;
  • Any code the hospital uses for billing or accounting for each item or service; and
  • Revenue codes associating each item and service to specific departments within the hospital where applicable.

This information would need to be posted in a single digital file that is in a machine readable format, such as .XML, .JSON or .CSV. A hospital would have the discretion to choose where on the internet the file is posted, but it must clearly identify the hospital location associated with the charges posted, and be easily accessible, publicly available, and displayed prominently.

Hospitals would also be required to post a list of at least 300 “shoppable” services. CMS has published a proposed list of 70 services that must be included in the list if offered by the hospital, and the hospitals would be allowed to self-select additional services to reach the 300 minimum. Services that are considered “shoppable” are service packages that can be scheduled by a consumer in advance such as MRI and CT scans, cataract removal surgery, cesarean section delivery, and spinal fusion.

Proposed monetary penalties for noncompliance with the rules or failure to meet or respond to a corrective action plan imposed by CMS are capped at $300 per day.

Given the uncertainty and the potentially provocative effects of the proposed rules, CMS is actively seeking commentary on the proposed rules and alternative interpretations which are being considered. Potential alternative interpretations include:

  • Should providing a consumer facing price tool be sufficient to qualify for an exemption from the overall disclosure requirements?
  • Should standard charges be interpreted as the “modal negotiated charge” (meaning the most frequently charged rate across all rates the hospital has negotiated with third-party payers for an item or service)?
  • Should standard charges be interpreted to include “all allowed charges” (meaning that hospitals would be required to disclose the charges for all items and services for all third-party payer plans and products, including non-negotiated rates such as Fee-for- service Medicare rates)?
  • Should the definition of standard charges be interpreted to include the “discounted cash price” (meaning the price the hospital would charge individuals who pay cash or cash equivalent for an item or service)?

Antitrust Concerns and Industry Reactions

CMS believes the cost of compliance with these proposed rules would be minor (approximately $1,000 per hospital) and would lead to lower and more uniform prices. However, prominent industry leaders view CMS’s approach with skepticism.

The American Hospital Association (“AHA”) and America’s Health Insurance Plans have each stated that increased transparency may lead to increased prices. In an AHA press release, president and CEO Rick Pollack states: “mandating the disclosure of negotiated rates between insurers and hospitals is the wrong approach. Instead, it could seriously limit the choices available to patients in the private market and fuel anticompetitive behavior among commercial health insurers in an already highly concentrated insurance industry.”

A 2015 Federal Trade Commission statement would seem to agree, noting that “While [transparency] laws can be procompetitive, … [s]uch disclosure may chill competition by facilitating or increasing the likelihood of unlawful collusion, and may also undermine the effectiveness of selective contracting by health plans, which serve to reduce health care costs and improve overall value in the delivery of health care services … .”

Three Key Takeaways

  1. CMS has published proposed rules which, if adopted, could have a significant impact on the health care market in the United States.
  2. The core requirement of the proposed rule is the public disclosure of privately negotiated rates for health care services.
  3. CMS is actively seeking comments through September 27, 2019.

Source: Jones Day

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