Tuesday, May 1, 2018

The Biggest Impediment to Healthcare Price Transparency?

Gag Clauses masquerading as trade secrets.

The Uniform Trade Secrets Act suggests that to qualify as a trade secret, the secret information must provide a competitive advantage to its owners. While concealing negotiated price information could, in certain circumstances, provide a payer or a provider with a competitive advantage (for example, because the negotiated prices are lower than the competition’s and could enable the payer or provider to gain additional market share), the majority of that practice today is nothing more than rent-seeking behavior.

However, the trade secrets claim is asserted to prevent any communication of provider prices to health plan members or any other third party. Some payers are forbidden to use pricing information in any way that could potentially lead to patients voting with their feet, which is the exact goal of price transparency.

In other words, these clauses are nothing more than gag clauses designed specifically to counter the movement toward greater price transparency.

Some states, such as Maine, are countering by adopting new legislation, known as “right to shop laws” that compels all health plans to provide price transparency to certain categories of its members. Others can follow suit. More broadly, Congress could investigate the abuse of the Uniform Trade Secrets Act to forcefully prevent transparency and stifle market competition.

Source: Health Affairs, April 19, 2018

  • In economics, “Rent-seeking” is an attempt to maximize economic return by manipulating the social or political environment in which economic activities occur, rather than by creating new wealth.
  • A “Gag Clause” is a provision often included in a physician’s contract with insurers, preventing he/she from being open with his patients about the terms of the patient’s payment and specific procedure costs.