HHS Kicks Off Battle for More Price Transparency in Healthcare

Kerry Dooley Young

November 15, 2019

The Trump administration on Friday advanced its plans to compel hospitals and insurers to provide the public with more clear information about the costs of medical care. Powerful industry groups quickly challenged these initiatives, threatening legal action.

The Department of Health and Human Services (HHS) expanded the existing rules on price disclosure as part of the 2020 Medicare hospital outpatient payment rule, unveiled today in an HHS statement.

Starting on January 1, 2021, hospitals will need to post information in a "consumer-friendly manner" about "at least 300 'shoppable' services," 70 of which may be selected by the Centers for Medicare & Medicaid Services (CMS). Hospitals could then select the remaining 230.

In addition, CMS unveiled a proposed rule that would compel many insurance plans to provide personalized out-of-pocket cost information for medicines and services.

The rules are not meant to impose any new burdens on physicians, said CMS Administrator Seema Verma on a call with reporters.

"This administration wants doctors to be able to spend as much time with patients as possible, and their time shouldn't be spent at a computer screen, but face to face with their patients," Verma said. "So this does not impact doctors directly."

The final rule will also give CMS new enforcement tools, "including monitoring, auditing, corrective action plans, and the ability to impose civil monetary penalties of $300 per day," CMS said in the statement.

Legal Challenges

Major hospital associations on Friday said they planned to file a legal challenge to transparency provision in the outpatient rule, arguing HHS had exceeded its legal authority.

The American Hospital Association (AHA), Association of American Medical Colleges, Children's Hospital Association, and the Federation of American Hospitals issued a joint statement addressing the issue.

"Instead of helping patients know their out-of-pocket costs, this rule will introduce widespread confusion, accelerate anticompetitive behavior among health insurers, and stymie innovations in value-based care delivery," the AHA and three other groups said.

Separately, Matt Eyles, president and chief executive of America's Health Insurance Plans, issued a statement critical of both of the HHS proposals.

An increased release of information about medical costs should encourage competitive negotiations to lower consumers' expenses, Eyles said.

"Neither of these rules — together or separately — satisfies these principles," Eyles said.

It is unclear whether the Trump administration will be able to fully carry out its plans for transparency. Powerful lobbying groups often appeal to lawmakers to derail proposals from HHS. These organizations have scored many victories in terms of delaying and derailing CMS rules in both Republican and Democratic administrations.

But HHS officials on Friday had clearly anticipated the criticisms their transparency proposals would receive, and defended their plans.

"We may face litigation, but we feel we're on a very sound legal footing for what we're asking," said HHS Secretary Alex Azar on the call with reporters.  "And we certainly hope that America's hospitals will want to respect their patients' right to know what the price of the service is before they're asked to purchase it."

Azar emphasized how many businesses already traffic in sales of health-cost information that remains largely hidden from patients.

"There actually are vendors who collect that information to provide competitive market [intelligence] among hospitals and insurance companies," Azar said.  "The only people who don't know what the negotiated rates are and what they will owe out-of-pocket is the patient in our system."

Verma noted that healthcare organizations likely "will complain that price information is proprietary to their business."

"I will remind everyone that this information is already available to patients in their explanation of benefits," Verma said. "We are simply requiring that it be made available before they get their care, instead of after."

Cost Variations

The transparency initiative is meant to address wide ranges in the costs of medical care, CMS said in the proposed rule.

Consumers face a great range of costs for even a "relatively commoditized service such as a lower-back MRI," CMS said. It cited a study that found prices ranged from $500 to $10,246 in greater San Francisco for this service.

CMS also cited a study on reference pricing in the California Public Employees' Retirement System. This research found a range of $12,000 to $75,000 for the same joint replacement surgery, $1000 to $6500 for cataract removal, and $1250 to $15,500 for arthroscopy of the knee.

Verma said the final rule on hospital outpatient care had been delayed to ensure that it meshed with the proposal mandating disclosures from insurers. The final outpatient rule was due out on November 1.

As described by Verma and Azar, the transparency mandates should foster development of tools to help consumers compare costs, rather than leave that work for patients to attempt on their own.

Health plans would need to give firms and organizations that develop consumer tools information about in-network negotiated rates and historical payments of allowed amounts to out-of-network providers through standardized, regularly updated machine-readable files.

"We recognize that the data made available under the final and proposed rules issued today is a large set for consumers," Verma said. "Unleashing this data will unleash innovation. Employers, researchers, and developers can use this information to develop tools that will drive down costs and improve quality."

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