Hospitals Take Aim at Healthcare Price Transparency Proposal

October 01, 2019 - A healthcare price transparency rule proposed earlier this year by CMS aims to empower patients by requiring the public disclosure of rates negotiated by hospitals and payers. But hospitals and other industry leaders are looking to strike down the requirement before it goes into effect next year.

In comments on the proposal, which were due Friday, hospitals and their advocates argued that mandatory disclosure of negotiated rates would not reduce healthcare costs as intended, but would in fact harm competition and impose an administrative burden on hospitals.

Others also suggested that finalizing the healthcare price transparency requirement would spark a legal battle.

“While we support increased transparency for patients around their out-of-pocket cost expectations, this proposal misses the mark, exceeds the Administration's legal authority and should be abandoned,” the American Hospital Association (AHA) said in a comment letter. “Rather, we urge CMS to work cooperatively with providers, health plans, patients and other stakeholders to identify approaches that can better meet patient needs.”

Similarly, the Federation of American Hospitals (FAH) called on CMS to scrap the requirement and work with providers, health plans, employers, and consumers to identify opportunities to provide accurate and actionable cost-sharing information.

READ MORE: Going Above and Beyond the CMS Hospital Price Transparency Rule

“HHS lacks the statutory authority to implement this proposal, the disclosure of competitively negotiated rates does not support the interests of consumers, and the proposal relies on operational assumptions that are untrue, resulting in a gross underestimation of the costs and unrealistic assessment of the feasibility of compliance with the Proposed Rule,” the group said in its comment letter.

Hospital CEOs doubt the rule will be finalized as is

The healthcare price transparency requirement, which was included in the 2020 hospital outpatient payment proposed rule, is slated to start on Jan. 1, 2020.

By that date, hospitals would have to post their negotiated rates for certain “shoppable” services in a “consumer-friendly” format or face financial penalties, the proposed rule stated.

But according to hospital advocates, CMS does not have the legal authority to penalize hospitals for failing to comply with the requirement and many hospital leaders are skeptical that the requirement will go into effect as proposed.

A survey recently conducted by the healthcare consulting firm Advis found that 64 percent of healthcare CEOs do not think the healthcare price transparency requirement will be finalized as it currently stands. An equal number of CEOs also do not believe the proposed requirement will have a meaningful impact on the consumer’s ability to shop for healthcare services.

READ MORE: Price Transparency, Consumerism Top Issues for Healthcare Execs

As a result, 44 percent of respondents said their organization is doing nothing to prepare for the proposed healthcare price transparency requirement. Instead, the leaders are waiting to see the final rule, which 57 percent believe will be challenged in court.

Plans to challenge the requirement in court

The AHA suggested in its comment letter that hospitals could legally fight the requirement based on their First Amendment rights.

“Government regulation of non-misleading commercial speech is unlawful unless it “directly advances” a ‘substantial’ governmental interest, and is no ‘more extensive than is necessary to serve that interest,’” the association explained.

The Public Health Service Act (PHSA) also does not give CMS the authority to make anything beyond standard charges public, the CEO of Okeene Municipal hospital in Oklahoma stated in a comment letter.

“CMS’s proposal is contrary to the plain language of the statute, as negotiated charges are not ‘standard charges,”’ she wrote. “By definition, a ‘standard charge’ is not privately negotiated and does not contemplate different charges for different payers. ‘Standard charges’ has long been understood to be a technical term that means a hospital’s usual or customary chargemaster charge.”

READ MORE: How Healthcare Price Transparency Can Cuts Costs, Improve Value

Other commenters also indicated that the proposed healthcare price transparency requirement violates other laws and regulations, including the Administrative Procedure Act.

Furthermore, hospitals expressed concerns about the administrative burden of complying with the proposed requirement.

Complying with the requirement to create administrative burden

Hospitals could have to spend far more than CMS’ estimate of 12 hours to meet the demands of the healthcare price transparency rule, AHA stated. Hospitals already spent more than 100 hours to comply with a skinnier version of the proposed hospital price transparency requirement earlier this year.

Complying with the proposed healthcare price transparency requirement would take months, suggested Trinity Health’s vice president of public policy and advocacy Tina Weatherwax Grant, JD.

“Our hospitals do not have a systematic way to pull the proposed information; we would need to do this manually in order to compile reimbursement rate information by payer, product, and hospital. As an order of magnitude, the industry-wide average of codes in chargemasters is 20,000-50,000. In addition, we do not have a way to show reimbursement by HCPCS, CPT or CDM code level as a one-to-one match,” she wrote in a comment letter.

Hospitals and other industry groups said this is reason enough to abandon the proposed healthcare price transparency requirement. The stakeholders urged CMS to instead work with others in the industry to give consumers the information they really need to shop for healthcare services: out-of-pocket cost estimates.

“It is widely acknowledged that consumers’ interests in provider prices is focused on the consumer’s out-of-pocket costs, not the cost to their health plan,” the FAH stated. “The disclosure of payer-specific negotiated rates thus does not serve this consumer interest identified by HHS. Instead, the disclosure of negotiated rates is more likely to confuse consumers because their cost-sharing obligations will often be markedly different from the disclosed rates and the disclosed rates shown may by necessity reflect inconsistent assumptions necessary to reduce payment methodologies to set dollar amounts.”

The AHA pushed CMS to “focus on the role it could play in convening stakeholders to identify best practices for providing patients with out-of-pocket cost estimates, recommend parameters for cost-estimator tools, and develop solutions to common technical barriers.”