Proposed Hospital Price Transparency Rule Faces Industry Criticism

August 05, 2019 - A proposal to increase hospital price transparency by requiring facilities to publish their negotiated rates with private payers is raising red flags among major industry groups, including the American Hospital Association (AHA) and the Federation of American Hospitals (FAH).

The recently proposed rule for the Medicare Outpatient Prospective Payment System (OPPS) in calendar year (CY) 2020 put forth a policy that would require all non-federal hospitals to post their gross and payer-specific negotiated charges for common, shoppable services.

The hospital price transparency proposal aims to empower patients by providing them with clear, accessible information about hospital prices, allowing them to shop for high-quality, low-cost care, CMS explained in the proposed rule.

However, major industry groups are saying the proposal could do the opposite by limiting patient choice, as well as increasing the administrative burden on hospitals and undermining their ability to negotiate competitive rates with private payers.

“Hospitals and health systems want to ensure that patients have access to information they need to choose their health care, including their out-of-pocket obligations. This rule, however, is a misguided attempt to improve price transparency for patients because it fails to give them the information they need,” AHA, FAH, America’s Essential Hospitals, Association of American Medical Colleges, and Children’s Hospital Association said in a joint statement.

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

“Disclosing the negotiated rate between insurers and hospitals will not help patients make decisions about their care. Instead, this disclosure could harm patients by reducing patient access to care. This is the wrong approach to price transparency, and the administration should reverse course on this provision,” the associations added.

AHA’s president and CEO, Rick Pollack, went on to state on the association’s website that “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,” he explained.

Healthcare improvement company Premier also opposed the hospital price transparency proposal.

“This policy fails to address consumers’ information needs to truly understand price, including information on copays and deductibles. Moreover, disclosing payer negotiated rates harms health systems’ negotiating power, creating anti-competitive market distortions,” Blair Childs, senior vice president of public affairs, wrote on the company’s website.

READ MORE: White House Announces New Healthcare Price Transparency Order

Disclosing privately negotiated rates can harm competition in certain markets, including healthcare markets, the Federal Trade Commission found in 2015.

“Too much transparency can harm competition in any industry, including health care,” experts from the Office of Policy Planning argued in an official blog post. “Typically, health care providers (hospitals, outpatient facilities, physician groups, or solo practitioners) compete against each other to be included on a health plan’s list of preferred providers. When networks are selective, providers are more likely to bid aggressively, offering lower prices to ensure their inclusion in the network. But when providers know who the other bidders are and what they have bid in the past, they may bid less aggressively, leading to higher overall prices.”

The experts advised policymakers to limit transparency to the types of information most useful to patients when they compare and select a provider and services. The types of information they said would benefit patients included actual or estimated out-of-pocket expenses, co-pays, and quality and performance comparisons.

In addition to limiting competition and therefore patient access to care, the proposal would also create significant administrative burden for hospitals, added Bruce Siegel, MD, MPH, president and CEO of America’s Essential Hospital.

“We also have serious concerns about the agency’s plan to require hospitals to post rates negotiated with insurers. This would create a heavy administrative burden for hospitals and undermine their ability to negotiate equitable payment, while giving consumers little actionable information with which to make informed care decisions,” he said on the group’s website.

READ MORE: How Practices Can Benefit from Healthcare Price Transparency

The overwhelming majority of providers have already expressed concerns about how their organization plans to disclose standard charges as required by a 2018 hospital price transparency rule from CMS. The 2018 poll conducted by PMMC and HBI also found that 43 percent of providers did not know how their organization would address the mandate by the requirement’s deadline.

Failing to comply with the new hospital price transparency rule could result in civil monetary penalties of $300 per day, according to the recently proposed rule. Hospitals could also face monitoring, auditing, and corrective action plans if they do not publicly disclose their negotiated rates.

However, hospitals should not worry too much about complying with the proposed rule just yet, healthcare policy expert John Kelliher recently explained to RevCycleIntelligence.com.

“It would be great to have some more transparency. I just don't want people to get overly excited,”  said the managing director of BRG and former chief counsel of the House Committee on Ways and Means.

“A major problem with transparency ideas is identifying proprietary business information and determining whether disclosing that information could have adverse effects in some instances. If somebody's getting a really good deal and that deal is made public, then they might actually lose the deal, causing prices to go up,” he explained.

CMS will have to address hospital concerns as the agency finalizes new hospital price transparency requirements. Stakeholders will be able to officially comment on the proposed rule until September 27, 2019.