Michael Brady November 05, 2019
The CMS might not have the legal authority it
needs to force hospitals to reveal the prices they negotiate with insurers, a
shortcoming that could eventually sink the Trump administration's price
transparency push.
The administration delayed its price transparency proposal for
hospitals after significant backlash and questions over whether the CMS can
even implement the policy legally. While the CMS wanted to include the measure
as part of its update to the Outpatient Prospective Payment System, the
proposal didn't make it into last week's final rule.
In comments to the agency ahead of the final
rule, hospitals claimed the disclosures would violate their First Amendment
rights to free speech.
ongress gave the CMS the power to force
hospitals to publish "a list of the hospital's standard charges for items
and services provided by the hospital" under the Public Health Service
Act. But Congress didn't say anything about negotiated rates, according to
legal experts.
"I think one would be very challenged to
find evidence in the legislative history or the debate around the ACA that
Congress ever contemplated requiring the disclosure of privately negotiated
rates," said Philo Hall, senior counsel in Epstein Becker & Green's
healthcare and life sciences practice. "The burden would be on the
administration to prove that this is what the law and the statute
intended."
The CMS is trying to change the law by
redefining the words Congress wrote rather than interpreting and enforcing the
law as written, said the Federation of American Hospitals in its comments on
the original proposal.
The price transparency mandate would go beyond
current rules that require hospitals to publish retail prices for the medical services
that they provide. The new proposal would require hospitals to disclose and
update payer-negotiated rates—the costs that insurance companies negotiate with
providers. They would also have to create "shoppable services" so
that patients could shop around for medical care that they can schedule ahead
of time.
The agency hoped that the rule would drive down
healthcare costs and boost quality by creating more competition in the
healthcare market.
But there is mixed evidence over whether price
transparency initiatives lower healthcare spending significantly. Consumers
tend to pick less expensive providers when they have access to information
about healthcare prices and choose to use it. MRI costs dropped 5% for patients
and 4% for insurers when New Hampshire consumers had access to information
about prices, a University of Michigan study found last year.
The problem is that most consumers don't use the
information because health insurance shields them from the costs of medical
care, so they don't have much of an incentive to look into it. Healthcare
spending increased slightly for employers that offered a price transparency
tool because, in part, just 10% of employees used the tool over a year,
according to a 2016 study in the Journal of the American
Medical Association. That wasn't enough to constrain healthcare costs. A 2017
American Journal of Managed Care report found similar
results.
Still, the Trump administration and its allies
remain optimistic that price transparency will eventually lower healthcare
prices.
"Price transparency will help employers in
designing better health benefit structures for their employees and will help
patients in shopping for care," said Brian Blase, a consultant and former
special assistant to the president for the National Economic Council under
Trump. "It will also put downward pressure on prices and increase
competition between providers."
But providers think that price transparency for
negotiated rates could enable commercial insurers to conspire with each other
to fix prices. They also say the information doesn't benefit consumers since
much of the information doesn't address their out-of-pocket costs.
"Instead of helping patients know their
out-of-pocket costs, it would have introduced widespread confusion," said
Ashley Thompson, senior vice president of public policy analysis and
development for the American Hospital Association
The CMS might have also underestimated the
difficulty of implementing price transparency for negotiated rates, which is
far more complicated than posting retail prices. There is an endless number of
payer-specific rates that vary based on payer, year, plan and enrollee.
Creating an "apples to apples" comparison for negotiated pricing
becomes even more challenging when hospitals have negotiated different payment
bundles with each payer, according to Joel McElvain, a partner at King &
Spalding.
"Logistically, it would be a substantial
challenge for hospitals to comply with the law," he said.
Hospitals would need a lot of time to figure out
how to comply with any proposed rule on negotiated rates, according to
McElvain.
The Trump administration shouldn't assume that
the government can "magically make something happen," Hall said. Data
privacy concerns and technical issues could complicate the initiative. It would
be tough for the federal government to verify negotiated prices, even if
hospitals can figure out how to provide them, he said.
"There are practical limitations with the
implementation of this rule," said Lyndean Lenhoff Brick, president and
CEO of the consulting firm Advis. "They're not prepared to address it ...
right now."
But hospitals might be overstating the
implementation problem. They consider negotiated rates trade secrets. Hospitals
would likely figure out how to comply with a new transparency rule considering
that they already use and share negotiated rates in other parts of their
businesses.
The CMS submitted a separate rule on price
transparency for negotiated rates to the U.S. Office of Management and Budget
for approval last week. An updated rule should be coming next year.
"I think the administration is very serious
about price transparency as both a policy goal and a political goal," Hall
said. "I think they remain committed to being as ... aggressive on price
transparency as they can be in 2020."
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