Hospitals will have to make negotiated rates available
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Senior Manager, Health Research Institute, PwC USNovember 19, 2019
Hospitals will have to publish their negotiated charges with payers for 300 “shoppable” services, all in a consumer-friendly way, under a final rule the Trump administration released on Nov. 15. Hospitals also will be required to make available a variety of charges on all services and items under the new rule.
The American Hospital Association, the Federation of American Hospitals, the Association of American Medical Colleges and the Children’s Hospital Association issued a statement within hours of the rule’s publication that they would challenge it in the courts. “Instead of helping patients know their out-of-pocket costs, this rule will introduce widespread confusion, accelerate anticompetitive behavior among health insurers, and stymie innovations in value-based care delivery,” the groups said.
Matt Eyles, president and CEO of America’s Health Insurance Plans, said in a statement that the rules would undermine competitive negotiations to lower costs and premiums.
“Shoppable services” are defined in the rule as services that can be scheduled in advance. CMS has identified 70 that must be included on every provider’s list, such as blood tests, psychotherapy, joint replacements and sleep studies. Hospitals are free to choose the 230 other services.
Hospitals also must make standard charges for all hospital items and services available in a machine-readable file. CMS defined standard charges as gross charges, payer-specific negotiated charges, de-identified minimum and maximum negotiated charges and discounted charges for cash-paying payers. The rule, which gives hospitals until Jan. 1, 2021 to comply, permits penalties of up to $300 a day for failing to fulfil the rule’s requirements.
Also on Nov. 15, the administration released a proposed rule that would require insurers in the individual and group markets to disclose, on a web-based tool, members’ out-of-pocket costs for all covered healthcare items and services. It also would require insurers to make public in regularly updated, machine-readable files the negotiated rates for in-network providers as well as historical payments to those outside the network. (The proposal would not apply to grandfathered plans.)
Under the proposed rule, insurers are encouraged to introduce plans that allow consumers to share in the savings that may result from patients shopping for services from lower-cost providers. There is a 60-day comment period for the proposed rule.
HRI impact analysis
Both regulations push forward a key part of the Trump administration’s healthcare platform: to make prices to consumers and the system as a whole more transparent. The administration’s position is that more information is better for consumers and that they should be able to know what they will owe before they receive care. This knowledge, the administration asserts, will insert competition into the industry and help drive down prices and overall spending.
Hospitals and insurers likely should reconsider their pricing strategies, as leverage could shift if the changes are enacted in 2021. They should consider how the regulations could affect patient experience strategies and billing and payment operations, and whether public pricing could become a market differentiator. They also should consider how new entrants may make use of the information.
Employers, who are taking a more active role in trying to manage healthcare costs, may find that the new information arms them better for choosing insurers and pressing them to negotiate harder on the employers’ behalf.
The regulations are likely to wind up at the center of court battles, much like other key administration policy initiatives, such as reducing payments to 340B hospitals, instituting a religious “conscience” rule or adding Medicaid work requirements. Still, many Democratic and Republican lawmakers support greater transparency for the industry; even regulations struck down by the courts in the short term may be revived in legislation down the road.
While CMS said the rules would make healthcare more “shoppable” once plan beneficiaries are aware of the differences in prices by provider, it remains unclear whether or when masses of consumers will shop for care. This is especially true if the services patients are seeking, such as a vaginal delivery or joint replacement, mean they are likely to exceed their deductibles no matter where they go.
Also, while patients would know the prices of the hospital items and services under the rule, non-hospital services such as those of another physician could present a significant wild card in the overall bill to the patient for a particular care episode.