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Court upholds new price transparency rules. What’s next?

A Washington D.C. district judge upheld new price transparency rules that would require hospitals to disclose negotiated rates with insurers, in addition to other price information. Could this be the first step toward patients getting more upfront information on healthcare costs?

“I don’t think this is going to revolutionize the industry overnight, but it’s a step in the right direction,” said Michael Abrams, managing partner of healthcare consulting firm Numerof and Associates.

If and when the new rule goes into effect, Abrams expects to see patients become more emboldened to haggle over healthcare prices.

“Given the amount of financial exposure consumers have now have by virtue of deductibles and copays, they have a very good reason to know what they’re in for. That shows no sign of going away,” he said. “I can’t see any response other than to start negotiating. Ultimately, that will lead to lower pricing.”

The rule, finalized by the Department of Health and Human Services last fall, would require hospitals to post negotiated rates with insurers and cash discounted prices for their services. They would also be required to disclose the minimum and maximum negotiated charge for 300 “shoppable” services.

Abrams expects the latter is “probably where the pressure will begin. Things like X-rays and lab tests. These are things that people understand, that they know what they are buying, and with good reason, they want to know before they walk in, what’s it going to cost me?”

Currently, hospitals are only required to disclose a list of standard charges, per the Affordable Care Act. These chargemaster prices typically have little bearing on the reality of what most patients pay, and are generally used as negotiating tools with insurers. For example, while the Medicare approved cost for an abdominal ultrasound is  $ 112, the actual listed price can be anywhere from $ 104 to $ 1,580, according to Healthcare Bluebook.

The new requirements by the Department of Health and Human Services are slated to go into effect in January. Of course, that could likely be delayed, as the American Hospital Association filed for appeal on Wednesday.

The legal argument

In its original argument, the American Hospital Association (AHA) claimed that HHS did not have the authority to interpret “standard charges” as anything beyond chargemaster prices. It also claimed that being required to disclose negotiated prices with insurers was a violation of commercial speech, and would result in higher costs.

In his decision, U.S. District Judge Carl Nichols pulled apart each of these claims, pointing out that patients can already see the negotiated adjustment in their explanation of benefits, but that hasn’t increased costs.

From a legal perspective, seeing the rule through to the finish line could take significantly longer. Amy Mackin, an attorney with Indianapolis-based firm Hall Render, said she expects to see hospitals continue to push against the disclosure of trade secrets, and continue the argument that “standard charges” unambiguously refers to the chargemaster prices.

“Both providers and payors have historically worked hard to keep rate information confidential for competitive and antitrust reasons, and now they would be forced to disclose it – which is particularly egregious when the information will not be directly meaningful to most patients (whose actual payment amounts are generally based on coinsurance calculations),” she wrote in an email.

She also expects for hospitals to push for the effective date to be moved back in light of the ongoing Covid-19 pandemic. Given that this is also an election year, that could affect the rule.

“It’s unusual for payors and providers to be so aligned in resisting a rule, and I think HHS has a pretty unrealistic view of how heavy the lift will be to compile all of this information and get it into the required formats so quickly,” she added.

What can patients do with it?

The AHA has said that even if patients had all of this information, they wouldn’t be able to put it to use in calculating their out-of-pocket costs, as much of that depends on plan design and whether they’ve met their deductible.

“In fact, the disclosure of negotiated charges between hospitals and health plans is more likely to confuse patients than to ameliorate any existing lack of information,” the AHA wrote in a letter to CMS Administrator Seema Verma last year disputing the proposed rule.

But others disagreed, saying patients could very well put this information to use, with the help of third parties.

“Once application developers believe that this requirement will be adhered to and is something they can count on, they will create consumer-friendly applications that make comparative price shopping that much easier,” Abrams said. “This will become easier for consumers to use over time.”

A company that does just that, Healthcare Bluebook, said it saw a big opportunity in pairing this data with outside information. For example, letting patients compare the cost of an MRI across hospitals as well as freestanding imaging centers.

Healthcare Bluebook Co-Founder and Senior Vice President of Analytics and Innovation Bill Kampine said it would also be important to include information on facility fees and other costs beyond the procedure itself. For instance, a joint replacement might be broken down into four separate fees: a hospital fee, a doctor fee, an anesthesia fee and a device fee.

“There is a challenge in putting all of the pieces together to understand the full service and make sense of the data,” he said. “While there is a challenge to that, to me that’s a great opportunity for third parties like Bluebook.”

He also recommended including a benchmark price, in the event that a patient lives in a location where prices at the closest facilities are all inflated.

“What if all three prices are outrageous? You choose what appears to be the best of the three prices without realizing there’s an alternative,” he said.

Bottom line, he saw the rule as a potential opportunity for patients, if it prevails.

“The way I characterize it is it’s a good, positive win for consumers, although we have to think this is a short-term win, because I imagine this will end up in appellate court,” he said.

Photo credit: zimmytws, Getty Images

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