Hospitals and insurers question legality, need for CMS price transparency rule

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Hospitals and insurers want the Centers for Medicare & Medicaid Services to get rid of a proposal for facilities to post payer-negotiated rates in a searchable, online format. (Getty/PraewBlackWhile)

Hospitals and insurers are making a last-ditch effort to convince the Trump administration to withdraw a proposal requiring facilities to post payer-negotiated rates online.

Numerous comments on the proposal, which were due Friday, say the Centers for Medicare & Medicaid Services (CMS) will not drive down healthcare costs and will be a pricey burden on facilities. The comments also hint at a likely legal battle that will erupt if CMS goes through with the proposal.

The proposal, included in the 2020 hospital payment rule, would require hospitals starting on Jan. 1, 2020, to post payer-negotiated rates for certain shoppable hospital services. The rates must be available online in a searchable format.

Hospital groups highlighted the sheer cost of the proposed requirement, which CMS pegs at $1,000 a year, and the American Hospital Association commented that the requirement would “impose a substantial burden on hospitals without a corresponding benefit for patients.”

The Rural Hospital Coalition, a group of small rural, Medicare dependent and sole community hospitals, commented it was concerned about “the additional cost to comply burden for rural providers.”

The coalition also added that the transparency of payer-negotiated rates could “negatively impact the availability of health insurance in rural areas and would put further financial pressure on rural hospitals that are already financially fragile.”

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The American Hospital Association was also worried that the rule could fuel “anticompetitive behavior among commercial insurers in an already highly concentrated insurance industry, seriously limiting the choices available to patients.”

The rule, if finalized, would create an extreme burden for facilities to meet, because they not only have to post negotiated charges for packages of services but also for individual items.

“This means that for any one item or service the provider would be required to post charges for every item and service and each payer with whom the provider has a negotiated rate,” commented the American Academy of Medical Colleges (AAMC).

The academy said that during a recent forum some facilities complained they don’t negotiate with payers for each item related to a hospital service but a rate that encompasses everything related to that service.

“This means that items and services would be reflected as $0.00, indicating that no cost can be attached to them,” the AAMC said. “Beneficiaries are likely to find this to be more confusing than elucidating.”

The Federation of American Hospitals (FAH) added that the requirement would be confusing to patients as the prices aren't linked to any quality data. 

This could mislead patients to perceive that higher cost leads to higher quality, the association said.

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Other hospitals questioned the legality of the proposed rule.

Indiana-based Schneck Medical Center commented that the Public Health Service Act doesn’t give CMS the authority to require hospitals post payer-negotiated rates. The hospital said that the statute only requires hospitals to post “standard charges,” which have long been understood to be chargemaster or “list” prices, Schneck said.

"HHS’s proposed interpretation of the final rule is untenable and unreasonable because it is wholly inconsistent with other laws that protect payer-specific negotiated rates from disclosure or prohibit disclosure of this data," the FAH added.

It appears other hospitals have the same concerns. A recent survey of hospital leaders by the consulting firm Advis found that a majority believe the rule, if finalized, would face a court challenge.

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The insurance industry is also fighting the transparency rule. The leading insurance trade group America’s Health Insurance Plans (AHIP) said in comments that the forced disclosure of rates will “hamper competitive negotiations and push healthcare prices higher.”

AHIP said that any price information should always “be posted in tandem with quality indicators to give consumers a complete perspective of a provider’s value.” The group said that higher prices may not be corrected with “high-quality providers and vice-versa. Yet that integral component of quality is only in the request for information stage.”