Healthcare Price Transparency: Implications for Providers and Payers

Health Update

On June 24, 2019, President Donald Trump issued an “Executive Order on Improving Price and Quality Transparency in American Healthcare to Put Patients First.” The stated purpose of the Order is to “enhance the ability of patients to choose the healthcare that is best for them” by increasing access to meaningful price and quality data, including rates that hospitals negotiate with commercial payers for services. According to the Order, “opaque pricing structures may benefit powerful special interest groups, such as large hospital systems and insurance companies, but they generally leave patients and taxpayers worse off than would a more transparent system.” This core premise of the Order will likely be the subject of significant commentary submitted to the Secretary of Health and Human Services (HHS) during the rulemaking process that the Order requires the Secretary to initiate within 60 days. 

The Order’s Price Transparency Provisions

The Order requires several federal agencies to propose regulations and take other actions making price information more broadly available to patients. The Order includes three primary mandates to increase access to price data: 

  1. Publication of Negotiated Rate Information: Within 60 days of the Order (August 23, 2019), the Secretary of Health and Human Services (HHS) is required to propose a regulation to require hospitals to publicly post standard charge information, including charges based on rates privately negotiated with commercial payers.
  2. Proposed Rule Requiring Providers and Payers to Provide Cost Information: Within 90 days of the Order (September 22, 2019), the Secretaries of HHS, the Department of the Treasury and the Department of Labor are required to issue an advance notice of proposed rulemaking and to solicit comments on a proposal to require providers and insurers to provide (or facilitate access to) information about anticipated out-of-pocket costs of care to patients.
  3. HHS Report on Transparency and Private Sector Impediments: Within 180 days (December 21, 2019), the Secretary of HHS is to consult with the Attorney General and Federal Trade Commission, issue a report that describes the manner in which the private sector and the federal government impede price and quality transparency, and provide recommendations to eliminate those impediments.

The Order also directs the Secretaries, in consultation with other federal agencies, to develop common healthcare quality measurements, increase access to claims data, expand the ability of consumers to select high-deductible plans, and prepare a report to the President on additional steps the administration can take to implement standards to combat surprise medical billing.  

Background

The Order is another development in a recent trend to increase price transparency through federal legislative and executive action. Section 2718(e) of the Public Health Service Act, enacted in 2010 as part of the Patient Protection and Affordable Care Act (ACA), requires hospitals to annually publish a list of their standard charges for items and services. In 2018, the Centers for Medicare & Medicaid Services (CMS) promulgated a Final Rule requiring hospitals to make those charges available online beginning January 1, 2019.

Although consumers have been able to access hospital chargemasters for at least the past six months, those documents can include tens of thousands of items, are often difficult to read (even by healthcare professionals) and may bear little relation to the amount a provider actually accepts as payment. The Order attempts to resolve these issues by requiring HHS to propose a new regulation that requires charges to be posted not only in a machine-readable format, but also in an “easy-to-understand” and “consumer-friendly” format.

Implications for Providers and Payers

The implications of the Order are difficult to assess until the regulations that the Order requires are prepared, subjected to public comment and finalized. Industry groups were nevertheless swift to respond to the Order’s call for a requirement that privately negotiated rates be made public. The American Hospital Association’s (AHA) statement on the Order cautioned that “hospitals already provide consumers with information on pricing, but publicly posting privately negotiated rates could, in fact, undermine the competitive forces of private market dynamics, and result in increased prices.” America’s Health Insurance Plans’ (AHIP) statement similarly criticized the requirement: “Requiring price disclosure for thousands of hospital items, services and procedures perpetuates the old days of the American healthcare system paying for volume over value. We know that is a formula for higher costs and worse care for everyone.”

Providers and payers alike guard their privately negotiated rate information from competitors. Stakeholders are also concerned that disclosing privately negotiated rates will reduce incentives to offer lower rates and will drive costs up rather than ensuring that providers receive a fair market or reasonable value for their services. On the other hand, wide publication of private rate information may empower stakeholders to negotiate lower rates, while also serving as a valuable litigation tool in provider–payer reimbursement disputes in which courts must assess market value.  

Hospitals and payers should closely monitor the agency actions called for in the Order. Depending on the final rules and regulations promulgated, the Order is likely to have a significant impact on the healthcare industry, including the price that hospitals can charge (and accept as payment) for services.