What Impact Will the Hospital Price Transparency EO Have?

July 02, 2019 - The Trump Administration touted a new executive order on hospital price transparency as a “historic action … fundamentally changing the nature of the healthcare marketplace.” But healthcare policy expert John Kelliher does not think the order is going to be revolutionary.

“First of all, it's going to take six to 18 months to get the regulations in place,” the managing director of BRG and former chief counsel of the House Committee on Ways and Means recently explained to RevCycleIntelligence.com. “The other half is that even in the executive order, the instructions on how to make cost-sharing or patient out-of-pocket costs transparent are hazy.”

Signed on June 24, “Executive Order on Improving Price and Quality Transparency in American Healthcare to Put Patients First” is a key part of the administration’s commitment to pulling back the veil on hospital prices, which consumers and employers want to know as they face higher out-of-pocket costs and high-deductible health plans.

The executive order builds on previous attempts to increase hospital price transparency, including a 2019 requirement mandating hospitals to publish their chargemasters online. The order specifically directs HHS and other federal agencies to create regulations requiring hospitals to publicly disclose pricing information such as negotiated rates and out-of-pocket cost estimates.

The hospital price transparency requirements described in the executive order are certainly bold reforms as CMS Administrator Seema Verma said following the signing.

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

Hospitals typically guard their negotiated rates as trade secrets, and most facilities cannot provide cost estimates to patients. Hospital groups have strongly opposed the price transparency efforts described in the executive order. They argued that disclosing negotiated rates will reduce competition and increase prices overall.

However, Kelliher is not buying into the hype surrounding the executive order. “It's an incremental positive, but not revolutionary,” he said.

Specifically, the healthcare policy expert pointed out that HHS is going to need time to dissect what the executive order truly wants hospitals to do to disclose negotiated rates and out-of-pocket costs in a consumer-friendly manner.

“There's going to have to be a pretty lengthy effort from HHS and other places to work out exactly what that means, how to calculate it, and how to implement it,” he explained. “And that's all good. I just don't know if the order will suddenly transform the healthcare system into a market in which everyone can shop online for care, like buying clothes on Amazon or picking out a flight on Kayak.”

Litigation may also slow the process down for HHS, he said.

READ MORE: HELP Plan to Cut Costs Tackles Surprise Medical Bills, Transparency

“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.

In that vein, hospital groups may have a legitimate business complaint, he stressed.

Even the Federal Trade Commission has expressed concerns that publicly disclosing negotiated contract rates would have negative, unintended consequences for patients.

“Such 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 healthcare costs and improve overall value in the delivery of health care services … This risk of such harm is especially great if this information is accessible to competing healthcare providers, and in highly concentrated markets where competition among providers is already limited,” the commission stated in 2015.

But Kelliher warned hospital leaders against jumping into litigation.

READ MORE: 92% of Providers Concerned About Hospital Price Transparency Rule

“The executive order is a very nice press release, but you have to actually implement it. You have to get into the weeds of the regulations,” he said. “It would be great to have some more transparency. I just don't want people to get overly excited.”

In the meantime, hospitals can prepare for increased hospital price transparency by bolstering their IT systems.

“It's yet another burden on their IT systems,” Kelliher stated. “Between value-based purchasing, electronic health records, and other demands from payers, hospitals are now going to have to collect a new set of information, potentially calculate all out-of-pocket costs, and post the estimates on a publicly available, machine-readable website.”

Leveraging health IT will be key to starting the hospital price transparency process if HHS does end up requiring additional disclosures. Hospitals will need to use their EHRs as well as tailored revenue cycle management technologies to release not only negotiated rates, but out-of-pocket cost estimates.

Fortunately, revenue cycle management vendors are increasingly developing and marketing tools that address the patient financial experience, which includes price transparency. Some hospitals are also building their own resources and using their websites to encourage patient use.

Preparing IT systems will help hospitals reduce the burden of complying with potentially new price transparency requirements.