New price transparency regulations

Healthcare-related costs continue to soar. The number of patients who are surprised when they receive an astronomical bill for a covered service is also growing at an alarming rate. The patient cannot foot the bill; the provider writes the bill off as an uncollectible, bad debt and then decides to raise their arbitrarily created “fair and reasonable” rates to subsidize this rather novel, first-world problem. Where is the disconnect?

While it would take at least a dozen peer-reviewed journal articles to scratch the surface of this question, there is at least one major and widely accepted (save for the deep-pocketed and fiercely traditional provider lobby) solution: Price Transparency. This certainly is not the end-all-be-all boon to save the traditional model of healthcare. However, it is a step in the right direction. It is well documented a primary struggle with healthcare costs is the inability for a patient to “shop” and get accurate prices prior to purchase. When estimates are provided, they are so inaccurate and contain enough caveats that it is truly an “enter at your own risk” scenario.

Fortunately, the current administration has made it a clear goal to disrupt the unsustainable trajectory of healthcare costs and the severe impact of medical debt on patients through its Improving Price and Quality Transparency in American Healthcare Executive Order. In response to this, CMS promulgated the Hospital Price Transparency Rule, furthering the notion that clarity in pricing is necessary. This, of course, caught the attention of all hospitals and was quickly met by their fierce objections.

Taking a step back, pricing transparency made its first significant stride in January 2019 when CMS required hospitals to publicly disclose its chargemaster – a list of standard charges for each service and supply. Prior to this, most hospitals did not share standard charges and often refused price estimate requests; an anomaly not found in other industries. The new rule, effective January 2021, takes transparency a step further and requires hospitals to disclose gross charges and negotiated discounts. This includes publicly sharing discounted cash prices accepted by the hospital, payer-specific negotiated charges, and de-identified minimum and maximum negotiated charges. In addition, the final rule requires hospitals to create a “shoppable” list of 300 services that is more user-friendly for patients to access.

The American Hospital Association (“AHA”) and its affiliated State members have invested significant effort in pushing back on the final rule. A lawsuit brought by the AHA and several hospitals in the U.S. District Court for the District of Columbia attempted to dismantle the rule and lost. While this decision is on appeal, many pundits agree the appeal will not likely succeed in gaining an injunction to prevent the final rule from going into effect.

In June, Senate Republicans presented the PRICE Transparency Act, codifying the administration’s Executive Order. The bill proposes the same requirements of transparency from hospitals, as well as additional transparency requirements of insurers. It should be no surprise the AHA and its lobbyists are vehemently opposing PRICE.

Moving forward, in support of PRICE, Senators Chuck Grassley (R-IA) and Mike Braun (R-IND) recently described the dire need for transparency in hospital charges, demanding accountability to these tax-exempt entities. They cited the astounding statistic that healthcare costs have roughly doubled since 2000 – adjusted for inflation – while other areas such as cosmetic surgery and Lasik, where prices are transparent, have remained the same or even decreased during this same time frame. The obvious goals of the transparency rule and PRICE Act will allow for consumers to perform the same “shopping” experience that they would for these comparable services.

However, how far will these current transparency requirements get us? Unfortunately, the value of transparency– at this stage– will end with the shoppable list and will not address the majority of inpatient services that represent the most significant claims. Following an inpatient stay at a hospital for a surgical procedure that is not listed on the “shoppable services,” your itemized bill may include hundreds of individual line items from the chargemaster for your total bill. No individual can anticipate precisely what services or supplies will end up on the bill, and in most scenarios, the hospital will tell you the same if questioned in advance of the stay. At best, you may receive an “estimate” that may or may not resemble the final bill. Further, these requirements are not binding to independent provider groups that are not employed by the hospital, the primary contributors to surprise billing.

Price transparency is but one piece of the puzzle and should really be viewed as a minimal requirement for cost containment. Much more is needed in ensuring the cost of healthcare does not continue to rapidly inflate. Many cost containment solutions, including uniformity in rates, are already occurring at the employer level and not through government intervention. Employers are becoming more sophisticated in their search for providing their employees fantastic benefits packages with reasonable price tags. Self-funding has historically been a cost containment solution for employers and, more recently, employers are utilizing their significant role in shaping these employee benefits to not only provide much more affordable plan options but also to specifically address issues of balance billing and pricing uniformity. While we are all watching closely to Washington’s next response to the public’s outcry for change, employers can demand and implement change now through plan-driven cost containment to ensure its employees are protected now.