After multiple court challenges, hospitals must now publicize the cash prices for 300 “shoppable” services and, starting next year, the discounts negotiated with insurers.
The hospital transparency rule was opposed by the American Hospital Association, U.S. Chamber of Commerce, and other groups as a violation of the First Amendment rights of providers and insurers, and for requiring disclosure of trade secrets. A federal district court dismissed the AHA lawsuit seeking to overturn the rule on June 23, 2020. The U.S. Circuit Court of Appeals for the District of Columbia unanimously denied an appeal of the district court’s decision by AHA, on December 29.
The rule, put forward by the Trump Administration, goes beyond the so-called “chargemasters” hospitals use that bear little resemblance to what patients or insurance companies actually pay for a procedure. Hospitals must now post the out-of-pocket cash prices they charge people without insurance, such as Canadians who come to the United States for faster health care.
There is support for price transparency across the political spectrum.
Price transparency is also a feature of Health Care Choices 2020: A Vision for the Future, published by the Health Policy Consensus Group, a task force of free-market economists, policy analysts, and think tanks, on October 20.
Trump Transparency Initiative
Hospitals and ambulatory care centers must now post prices for services that can be scheduled in advance, such as diagnostic procedures and elective surgeries. Additionally, health care facilities must post prices for 230 of the providers’ most common procedures as well as 70 procedures specified by the Centers for Medicare and Medicaid Services, a division of the U.S. Department of Health and Human Services.
The Price Transparency Requirements for Hospitals to Make Standard Charges Public, published in the Federal Register on November 27, 2019, was part of a health care initiative that aimed to encourage competition, improve quality, and reduce costs under an Executive Order issued by President Donald Trump on June 24, 2019. For each service, the hospital must list the average price and the price charged to cash-paying patients.
Beginning January 1, 2022, a related rule will require hospitals to disclose the discounted minimum and maximum prices they have negotiated with health plans and insurers for shoppable services.
Winners: Privately Insured
Whereas the reimbursement rates providers are paid by Medicare are transparent, privately insured patients haven’t had a way to compare hospitals’ prices, Fisher says.
“Individuals and employers are shopping blind with little if any, knowledge of prices or the significant price variation across hospitals and providers,” Fisher said.
Consumers with employer-sponsored insurance will reap the biggest benefit. “According to the RAND Corporation’s recent survey, employer plans pay 2.5 times higher hospital prices than Medicare,” said Fisher. “Former National Economic Council member Brian Blase explains how abundant price information will help employers shop for and design health benefits. The subsequent savings will enable them to pay higher wages and increase the number of workers they employ. Patients will now be in charge of their own healthcare decisions and savings.”
A Surprise Bill Solution
The rule will also reduce the problem of “surprise billing” of patients by out-of-network specialists, such as anesthesiologists, Fisher says.
“Upfront price transparency will address the problem of surprise billing in non-emergency situations (90 percent of healthcare spending is non-emergent), as consumers will find price information much more easily,” Fisher said. “Congress also recently passed legislation prohibiting providers from balance-billing patients in in-network facilities and in emergency situations.”
Additionally, patients with high-deductible health plans and Health Savings Accounts (HSA) will also benefit from provider price transparency, Fisher says.
“More than half of such customers do not reach their annual deductible and thus face the full cost of healthcare services,” Fisher said. “There is nothing [in the rule] that precludes HSA holders or cash-paying customers from obtaining further discounts if they’re able to negotiate them.”
Caveat: Limited Competition
The transparency requirements may not achieve the goals of supporters, says Robert F. Graboyes, a senior research fellow with the Mercatus Center at George Mason University. “Price transparency in healthcare can be useful, but transparency mandates will often be ineffective or counterproductive,” Graboyes said.
An unintended consequence of price transparency in markets with limited competition could be “tacit collusion.”
“In a market with few sellers and high barriers to entry—quite common in hospital markets—common knowledge of competitors’ prices can induce different sellers (hospitals, in this case) to constrict supply and raise prices,” Graboyes said.
However, the lack of transparent pricing is less than ideal, Graboyes says.
“None of this means that today’s price opaqueness is good or necessary,” Graboyes said. “While I don’t claim that all mandatory price transparency is problematic, I’m not optimistic that these particular rules will bring prices down, and I have some concern that they will do the opposite.”
Biden Unlikely to Repeal
The rule will likely stand under the Biden Administration, Fisher says.
“We believe a repeal is unlikely: 90 percent of Americans support price transparency—[in] three separate surveys—as most Americans feel they should know prices before they receive healthcare services, as in every other industry,” Fisher said.
“We are encouraging CMS and the incoming Administration to stand strong, enforce the requirements, and ensure that hospitals are in compliance—allowing healthcare consumers to benefit from competition and choice through transparency in healthcare,” Fisher said.
Joe Barnett (firstname.lastname@example.org) writes from Arlington, Texas.