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New Transparency Rules Released, But Will They Last?

By: Brady Bizarro, Esq.

On Friday, November 15th, the Trump administration released two long-expected rules: one final rule on hospital price transparency and one proposed rule on “transparency in coverage.” The final rule on hospital pricing is set to go into effect on January 1, 2021. The proposed rule is currently in the notice and comment period in which the Centers for Medicare and Medicaid Services (“CMS”) is accepting comments from interested parties. Both rules are meant to deliver on a promise made by the administration; that consumers would receive “A+ healthcare transparency.” For a variety of reasons, however, the long-term fate of these rules is in question.

Currently, hospitals must post their “list prices” online, but those prices do not represent what consumers are likely to pay for services. The administration wants to force hospitals to publish negotiated rates; meaning, the rates that payers actually pay providers for services. It had hoped to implement its hospital pricing rule sooner, but hospitals and provider organizations insisted that they would need more time to prepare to implement the rule. The rule requires hospitals to publish their standard charges online in a machine-readable format. Specifically, hospitals must come up with at least 300 “shoppable” services, and they must disclose the rates they negotiate with payers. This last point is the source of much controversy and of a legal battle. Hospitals claims that forcing them to publish their secretive negotiated rates will increase prices and that the federal government has no authority to compel them to make this disclosure.

Under the “transparency in coverage” proposed rule, all health plans (including employer-sponsored plans) would be required to disclose price and cost-sharing information to plan participants ahead of time. CMS will require that most insurers, including self-funded employers, provide instant, online access to plan participants detailing their estimated out-of-pocket costs. In other words, insurers would have to provide an explanation of benefits (“EOB”) upfront. According  to CMS, this will incentivize patients to shop around for the best deal before they receive treatment for non-emergency medical services. Currently, the government is soliciting ideas about how to best deliver this information to consumers (i.e. through an app) and how to include quality metrics in the data.

The inevitable legal challenges to the final rule on hospital price transparency could sink the administration’s reform efforts. Recall that back in July, a federal judge blocked the Trump administration from requiring pharmaceutical companies to disclose drug prices in television ads. The legal arguments in that case are applicable here. Big Pharma successfully argued that the administration lacked the regulatory power to compel these companies to disclose prices and that the rule violated the companies’ First Amendment rights to free speech. Hospital systems are gearing up for a fight involving these same arguments. Armed with a federal court decision on a similar rule, the prospect of victory for the administration is relatively bleak. If this rule is blocked, it will further signal the need for congressional action in reigning in healthcare costs.