Trump administration rule would compel
hospitals to reveal prices for services in effort to boost transparency,
competition
Stephanie Armour Updated July 29, 2019 6:53 pm ET
Hospitals would
have to disclose the discounted prices they negotiate with insurance companies
under a Trump administration rule that could upend the $1 trillion hospital
industry by revealing rates long guarded as trade secrets.
Hospitals that fail
to share the discounted prices in an online form could be fined up to $300 a
day, according to the proposal. The price-disclosure requirements would cover
all the more than 6,000 hospitals that accept Medicare, as well as some others,
and is likely to face fierce industry opposition.
Comments on the
proposal would be due in September and, if completed, the rule would take
effect in January.
The initiative
represents the Trump administration’s growing effort to shift away from rolling
back the Affordable Care Act and put its own stamp on health care instead.
Central to that strategy is the notion that more price transparency will inject greater competition into
the market and lower costs.
Industry groups
have argued the requirement goes beyond the executive branch’s statutory
authority and could backfire by causing prices to rise if hospitals see their
competitors are getting higher insurer payments. The White House has lost in
court before: A rule requiring drug makers to post list prices in television
ads was blocked in June by a federal judge who said the administration
overstepped its regulatory authority.
Some Republicans
praised the administration’s focus. Sen. Lamar Alexander (R., Tenn.) said the
proposal complements provisions in legislation he sponsored with Sen. Patty
Murray (D., Wash.) to lower health costs.
“We will carefully
review how the proposed rule and our legislation interact,” he said.
The Trump
administration’s move contrasts sharply with proposals by some leading
Democratic presidential contenders who say Medicare for All will drive down costs
by lowering administrative overhead, curbing spending and leveraging the
federal government’s negotiating clout to drive down prices. It lands on the
eve of the second Democratic presidential debate Tuesday and Wednesday that is
expected to focus on health care, which polls show is a top issue for voters in
the 2020 election.
Hospitals would
have to disclose the rates for services and treatment that they have negotiated
with individual insurance companies such Cigna Corp. , Anthem Inc. and CVS Health Corp. ’s Aetna under the proposal released Monday. The
Trump administration is also working on initiatives that could compel insurers
to disclose their rates, part of a push to publicize costs that is likely to
spur lawsuits and sharp resistance from the industry.
“It’s very
significant. It’s a turning point in health care and a turning point to the
free market in health care,” Seema Verma, administrator of the Centers for
Medicare and Medicaid Services, said in an interview. “It hasn’t been a
competitive free-market system.”
Tom Nickels,
executive vice president of the American Hospital Association, said it is “a
radical approach.”
“This really is an
extreme proposal in terms of what we all expected,” he said. “It raises a
number of legal issues we’ll have to work through. It takes the concept to the
extreme.
“Publicly
disclosing competitively negotiated, proprietary rates will push prices and
premiums higher—not lower—for consumers, patients and taxpayers,” said Matt
Eyles, president and CEO of America’s Health Insurance Plans, an industry trade
group.
The proposed rule
is estimated to cost hospitals around $6 million total. It would affect
hospitals as well as their subsidiaries, including outpatient health clinics.
Hospitals must already post their list prices for services.
The
administration’s proposal would expand that requirement to include not only
gross charges before discounts but also the insurer-specific negotiated charges
for all items and services. The charges would have to be linked to the name of
the insurer and would have to be updated annually. The data would have to be
displayed in a machine-readable format so it could be processed by a computer,
and listed by common billing or accounting codes to create a framework for
comparing standard charges among hospitals.
The proposal would
also require hospitals to disclose insurer-specific negotiated charges for
about 300 services consumers are likely to shop for before obtaining care, such
as X-rays, outpatient visits, lab tests or childbirth. That price data would
have to be made public in a prominent location online or in written form on
request.
The Trump
administration said Monday that it is also seeking comment for price
information that would be useful for consumers, as well as comment on the type
of services that should be included.
The rule would
reveal how widely costs vary in the U.S. for care. A magnetic-resonance image
of the lower back costs $141 at an imaging center in Jefferson, La., but runs
$7,646 at a hospital in Torrance, Calif., according to data from Clear Health
Costs, a company that publishes information about health-care costs.
“I would hope this
drive on transparency would unify the left and right,” Health and Human
Services Secretary Alex Azar said in an interview. “The opponents here are the
proponents of the status quo who will attack us.”
Technology
companies will use the information to make it available for consumers and
patients, he said. “Just imagine having that information out there, how
powerful it will be,” he said.
Data on the effect
of increasing price transparency in health care shows mixed results. In some
cases, consumers equate higher cost with higher quality and can be attracted to
higher-priced treatments and services. Other studies show that only a fraction
of people who have price data actually use the information to shop around for
care. Many are already shielded from the full costs because insurance covers
the bulk of their treatments.
The proposal
wouldn’t affect hospitals run by Veterans Affairs, Indian Health Services and
Defense Department military treatment centers. State-licensed hospitals would
also be covered by the proposal.
The administration
is also proposing several policies aimed at reducing payment differences
between certain outpatient service sites and expanding the types and number of
services, such as total knee replacements, that can be performed outpatient or
in ambulatory surgical centers. Those tend to cost less when done as outpatient
procedures.
Write to Stephanie Armour
at stephanie.armour@wsj.com
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