Upheld Transparency Rule Is Slated to Reshape Payer-Provider Negotiations

by Leslie Small

In another blow to an industry already beleaguered by the COVID-19 pandemic, a federal judge recently upheld a federal rule that requires hospitals to engage in unprecedented price transparency measures.

The rule would require hospitals to disclose the rates they negotiate with payers for all items and services they offer. It is slated to go into effect on Jan. 1, 2021, but the American Hospital Association (AHA) and other trade groups and health systems sued to block it.

The crux of the plaintiffs' argument in American Hospital Association v. Azar is that CMS exceeded its authority by redefining the "standard charges" that hospitals must disclose under the Affordable Care Act to include negotiated rates. But in a decision issued June 23, U.S. District Court Judge Carl Nichols determined that CMS's interpretation of the statute was reasonable.

The AHA has already appealed the decision, and depending on how the D.C. Circuit Court rules on that appeal, the case could make it to the Supreme Court, says David Kaufman, a partner at Laurus Law Group LLC.

"Insurers today actually do have a pretty good sense of how hospitals are charging, but this is going to be a quantum leap forward for them in understanding the strategy that hospitals take in negotiating across insurance markets," Dan Mendelson, founder of Avalere Health says regarding what will happen if the rule does take effect.

However, "the insurer will have more information, but I question whether they will have more leverage," Mendelson says. "I think over time what this [rule] is likely to do is to drive more consistency in pricing — not necessarily lower prices across the board."

Kaufman observes that the disclosure of hospitals' negotiated rates may not have a uniform impact across different types of insurers.

"In certain ways, it's a procompetitive kind of rule by providing more transparency," he says. "However, large established insurers that have the advantage of broad networks with lower prices based on their large membership benefit by keeping their prices confidential. It helps them with providing better prices to large employers, etc. So by making those prices more transparent, it might ease barriers to entry [for] other insurers."

From Health Plan Weekly