Hospitals were swift to condemn the Trump administration's plans to force secret negotiated rates with payers out into the open, vowing to challenge the policy in court. Insurers also rebuked the plan announced Friday that also puts the squeeze on payers to unveil prices.
Experts told Healthcare Dive the government clearly foresaw a legal challenge from the industry, but questioned whether its authority is adequate to force hospitals and insurers to publicly disclose their rates.
In a Friday afternoon press conference at the White House, President Donald Trump said patients have "been getting ripped off for years" and HHS Secretary Alex Azar called the requirements a "revolutionary" change for the industry.
But the event also touched on the difficult road ahead. Rick Shultz, chief medical officer at Texas Free Market Surgery, told reporters more price transparency will fuel innovation in the sector, but won't be welcome. "This is going to be a fight. This is very disruptive," he said.
Under a new proposed rule, insurers would be required to make public the negotiated rates for in-network providers and out-of-network services as well as make real-time cost-sharing information easily available to members.
A separate hospital payment final rule carries forward a previously announced plan to force hospitals to reveal negotiated rates. They will be required to share information about gross charges, payer-specific rates, minimum and maximum negotiated charges and the amount the hospital is willing to accept in cash from a patient.
A quartet of hospital groups, including the American Hospital Association and Federation of American Hospitals, said in a statement they will be joining member hospitals to file a lawsuit charging that the price transparency rules exceed the administration's authority.
"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," they wrote. "America's hospitals and health systems have repeatedly urged CMS to work with hospitals, doctors, insurers, patients, and other stakeholders to identify solutions to provide patients with the information they need to make informed health care decisions and know what their expected out-of-pocket costs will be."
Payer lobbies were also not pleased. They focused on the most controversial part of the plan — public posting of negotiated rates with providers. America's Health Insurance Plans argued the new rules will confuse patients, not empower them.
The Blue Cross Blue Shield Association and the Alliance of Community Health Plans sent out similar views.
"Unfortunately, the rules the administration released today will not help consumers better understand what health services will cost them and may not advance the broader goal of lowering health care costs," BCBSA CEO Scott Serota said in a statement.
No payer group has explicitly and publicly said it will sue over the rules.
Question of authority
Administration officials point to a section in the Public Health Service Act and claim it gives them authority to force standard charges — which they argue include negotiated rates — out into the open.
Thomas Bulleit, a partner at Ropes and Gray, told Healthcare Dive the administration is clearly anticipating a fight as officials have devoted many pages of the final rule to explain its legal authority.
"I am dubious that this gives them authority to define that term [standard charges] as broadly as that," Bulleit said.
In an interesting wrinkle, the pertinent section in the Public Health Service Act was added by the Affordable Care Act.
"So if the administration is successful in its lawsuit to overturn the ACA, their authority for this rule would evaporate," he said.
Some argue the release of rates would violate the First Amendment, making the rules unconstitutional. But attorney Jonathan Emord, president of Emord and Associates, disagrees.
"Like nutrient content, alcohol content and manufacturing location information, negotiated rate information is factual data the disclosure of which supports more fully informed consumer choice," he told Healthcare Dive.
Economists weigh in
Forcing rates into the open may shame some providers into lowering their prices, but the reality is that many hospitals have monopoly power in their markets. Transparency is not going to work where there is no competition, Emily Gee, a health economist at the left-leaning Center for American Progress, told Healthcare Dive.
"The rule is a gesture in the right direction, but transparency needs to be accompanied by much stronger policies in order to rein in hospital costs," Gee said.
In markets with limited competition, the data could promote "tacit collusion," Chris Garmon, a former economist for the Federal Trade Commission, previously told Healthcare Dive. Garmon is now a professor at the University of Missouri-Kansas City.
"For instance, it could allow one provider to follow and match the prices of the other provider (like two gas stations across the street from one another who face no other competition)," Garmon said.
Speaking at an industry event in D.C. over the weekend, Molly Smith, vice president of coverage and state issues forum for AHA, also cited her concerns about the risk of rising prices due to payer-provider collusion.
"I think the government has very much underestimated the very real challenges that exist," she said during U.S. News & World Report's annual Healthcare of Tomorrow conference.
Rebecca Pifer contributed reporting.