Sunday, June 28, 2020

Federal Judge Upholds HHS’ Hospital Transparency Rule as U.S. Healthcare Moves One Step Closer Real Price Disclosure

Judge Rejects Argument That Patients Will Be "Confused" & "Frustrated" by Having Access to Real Price of Care

On June 23, 2020, a Federal District Judge ruled in favor of the Trump administration’s final rule requiring hospitals to disclose the "secret" negotiated prices they are paid by insurers. The rule was released on Nov. 15, 2019 (after being originally proposed in March of 2019), and is set to take effect Jan. 1, 2021.

In December 2019, the American Hospital Association (AHA) filed a lawsuit attempting to block the rule’s implementation, stating that a requirement to disclose negotiated prices violated their First Amendment rights.  The AHA further contended that, "the Rule is unjustified because the publication of hundreds of prices will 'confuse' patients and 'frustrate . . . [their] decisionmaking.' Pls.’ Mot. at 27. They further contend that the regulation is unduly burdensome." Civil Action No. 1:19-cv-03619 (CJN), page 33.

Does anyone else find it peculiar that it is not too burdensome to negotiate thousands of different reimbursements from tens of different carriers every couple of years and memorialize those understandings in hundreds of pages of contracts - but it is too burdensome to publish those prices to the public?   The Court ruled that it was within the Department of Health and Human Services’ (HHS) scope to require the disclosure of these negotiated rates, rejecting the AHA’s claims.

What is in the Final Rule?

Hospitals will be required to provide easily accessible billing information to patients. This means having all standard charges available online and in one single data file that can be “read by other computer systems,” according to a Centers for Medicare & Medicaid Services (CMS) press release.  Current federal rules and regulations mandate that hospitals make their retail or "chargemaster" rates available to the public.  But these rates are entirely fictional and capricious.  As the court noted, in this decision on page 16, "chargemaster rates are rarely demanded for payment—again, chargemaster rates are paid for only about 10% of hospital patients, making them anything but the 'standard' price demanded for a hospital’s services."

The charges listed would include “the gross charges, payer-specific negotiated charges, the amount the hospital is willing to accept in cash from a patient, and the minimum and maximum negotiated charges,” according to the initial press release about the final rule.  As part of the final rule, CMS was granted more authority over enforcement. Specifically, the department has greater capability to audit hospitals and issue fines of $300 per day to those who are noncompliant.

This rule, more than any other we've seen in the modern era of American healthcare, actually has the potential to rein in costs.  In the end, Obamacare expanded healthcare access, but it did nothing to rein in costs.  In fact, on the whole, it increased costs by adding bureaucracy, mandatory benefits (even for those who didn't want them) and decreasing consumerism by increasing government payment.  This regulation would actually do more to unleash free-market consumerism in healthcare than any other federal law or regulation since the creation of the Health Savings Account in 2003. 

Next Steps

The rule won’t be effective until Jan. 1, 2021. In that time, hospitals will be working to make the applicable data available online. The AHA is almost certain to appeal the ruling, which could delay the rule’s effective date.

I fully expect the ultimate implementation of this rule to supercharge the use of Referenced Based Pricing, Health Savings Accounts and Individual Coverage Health Reimbursement Accounts, largely explained in my recent article here.  The bottom line is that American healthcare will continue to escalate at two to three times the general inflation rate and become less accessible for greater numbers of people until we minimize the economic impacts of third-party-payment, shine a light on real pricing and place consumers in greater control of healthcare expenditures.  This regulation is a powerful first step in healing an incredibly ill system. 

We will continue to monitor developments and provide updates as necessary.  I sat with Armstrong and Getty in March of 2019 to discuss the initial formulation of this regulation and its potential impact on U.S. healthcare.  That entire post is here and the audio is below.