By Beth Anne Jackson and Elizabeth H. Jepson, Brown & Fortunato, P.C.
On November 15, 2019, the U.S. Department of Health and Human Services (HHS) and the Centers for Medicare and Medicaid Services (CMS) issued two rules to increase pricing transparency and competition among hospitals, group health plans, and health insurance issuers. The first rule was issued in final form (the 2020 Pricing Transparency Requirements), and the second was released as a proposed rule (the Proposed Transparency in Coverage Rule) (collectively, the Rules). Both Rules, if the Proposed Transparency in Coverage Rule is finalized as is, are set to become effective January 1, 2021, and will compel the disclosure of cost information to consumers up-front.
The Rules were promulgated pursuant to President Trump’s June 24, 2019, Executive Order “Improving Price and Quality Transparency in American Healthcare to Put Patients First.” The 2020 Pricing Transparency Requirements Rule will require hospitals to disclose the prices negotiated with insurers for coverage of a number of services, as well as the cash price charged for the services and the amount the hospital receives if the services are performed for out-of-network patients. Hospitals must publicly disclose charges for 300 “shoppable” services, which are defined as commonly performed services that are frequently scheduled in advance, such as caesarean sections and x-rays. CMS will identify 70 shoppable services that must be included (to the extent such services are provided by a specific hospital). A hospital then must select additional services, based on the frequency that specific services are provided and billed, to meet the requirement that at least 300 shoppable services be included. The charges for these services must be organized in an easily accessible format for consumers online. Alternatively, hospitals may utilize an internet-based price estimator tool to meet these requirements, provided the tool meets the requirements detailed in the 2020 Pricing Transparency Requirements Rule.
The Proposed Transparency in Coverage Rule is directed at insurers, and, if finalized as proposed, would require insurance issuers and non-grandfathered group health plans to make personalized out-of-pocket cost estimates based on specific covered health care services and items available to consumers in real-time and via paper form upon a consumer’s request. This information would allow consumers to understand how costs and coverage are determined and to comparison shop among plans. Insurers would also be required to disclose negotiated rates for in-network providers and maximum amounts that may be paid, out-of-network providers.
As healthcare becomes an increasingly political issue, many supporters of the Rules call them necessary measures to allow Americans to find affordable healthcare. HHS Secretary Alex Azar stated, “American patients have been at the mercy of a shadowy system, with little access to the information they need to make decisions about their own care. . . . This shadowy system has to change.”
However, many trade groups and providers in the healthcare industry believe that the Rules will undermine hospitals’ and healthcare providers’ ability to negotiate with insurers to lower patient costs. Further, these groups and providers argue that the transparency will actually lead to increased costs as providers gain knowledge about what other providers are paid for services – and that providers will be unwilling to accept less reimbursement than their competitors.
While the amount of potential savings to patients as a result of the Rules is unknown, it appears that several trade groups anticipate filing legal actions to prevent the implementation of the Rules. Tom Nickels, an executive vice president with the American Hospital Association, stated that “[t]his is a very radical proposal.” While the HHSs has stated that it feels that “we are on a very solid legal footing” in issuing and implementing the Rules, the American Hospital Association, the Federation of American Hospitals, and two other major hospital groups anticipate filing legal challenges to the Rules. The basis for the challenge is likely to argue that the Rules “exceed the administration’s authority,” per a statement issued by the groups. Despite the likely challenge to the Rules, these groups are aware that they will probably receive significant pushback from patients who support the transparency and information that the Rules would provide. Per one healthcare consultant on the issue: “It’s not a good look for the industry to push back on transparency on prices.”
Regardless of consumer perception, the legal challenge may be viable: parts of the President’s agenda on increasing transparency in health care have already been blocked in court. A federal judge in Washington ruled earlier this year that the President did not have authority to require drug manufacturers to disclose drug pricing in television advertisements.
Nevertheless, hospitals and other healthcare providers should be cognizant of the trends in the industry to require disclosures of actual costs and reimbursements, as well as the public interest in having such information available at the tip of any patient’s fingers. Although the 2020 Pricing Transparency Requirements Rule was issued in final form, comments can still be made to the Proposed Transparency in Coverage Rule. Any comments must be received by January 14, 2020.