The Trump administration on Friday put forth two long-anticipated rules that increase price transparency for both hospitals and insurers.
The CMS' hospital price transparency requirements finalize changes that require health systems to make their standard fees available on-demand and online. The "transparency in coverage" proposed rule would require health plans, including employer-based plans, and group and individual plans, to inform participants, beneficiaries and enrollees about price and cost-sharing information ahead of time.
The agency hopes increased price transparency will boost competition among hospitals and insurers to drive down healthcare spending.
"President Trump has promised American patients' A+' healthcare transparency, but right now our system probably deserves an F on transparency. President Trump is going to change that, with what will be revolutionary changes for our healthcare system," HHS Secretary Alex Azar said. "Today's transparency announcement may be a more significant change to American healthcare markets than any other single thing we've done, by shining light on the costs of our shadowy system and finally putting the American patient in control."
The final rule on hospital pricing will go into effect Jan. 1, 2021, thanks to pushback from health systems who said they would need more time to implement the requirements. The CMS is accepting comments on the proposed rule for payers, which would go into effect one year after it's finalized.
Under the hospital price transparency rule, hospitals must publish their standard charges online in a machine-readable format. They will need to create at least 300 "shoppable" services, including 70 selected by the CMS. Under the rule, hospitals would have to disclose the rates they negotiate with third-party payers, which some experts say could be illegal.
Hospitals are already gearing up for a legal fight in hopes of striking down the rule. The American Hospital Association, Association of American Medical Colleges, Children's Hospital Association and Federation of American Hospitals said in a joint statement Friday that they will sue the federal government alleging the rule exceeds the CMS' authority.
Hospitals have argued that making them disclose negotiated prices will increase healthcare costs by allowing insurers to collude to fix prices, a claim that many economists dispute.
"It will have a very negative impact on ... competition among insurers to compete for business by entering into innovative, value-based arrangements with hospitals," said Melinda Hatton, general counsel for the AHA.
Providers have said that compelling them to publish negotiated rates will create more administrative work that will increase, rather than decrease, prices because there will be additional compliance costs.
"Hospitals are not free. There are costs to running them so where is that administrative cost going to come from?" said Michael Strazzella, head of federal government relations for law firm Buchanan, Ingersoll and Rooney. The administration "is adding hurdles when they've been very clear that they want to cut down on red tape. They're going to add red tape with no ROI."
The administration initially expected to publish its finalized rule on hospital price transparency alongside the rest of the 2020 Hospital Outpatient Prospective Payment System rule issued this month, but the policy was delayed.
"This plan is a major disruptor for the way that the industry works today, but it is clearly driven and supported by public/consumer sentiment," said John Nicolaou, a healthcare expert at PA Consulting. "This will inevitably place greater emphasis on reducing utilization of services through improved population health and care management techniques."
The proposed transparency rule would force most insurers to give consumers instant, online access to an estimate of their out-of-pocket costs. Payers would have to give members paper copies of their cost-sharing estimates on request. The CMS thinks that this would reduce healthcare spending by allowing patients to shop around for the best deal before they receive treatment for schedulable, non-emergency medical services.
"Every American should be able to get personalized healthcare cost and quality information before they seek care," said Matt Eyles, president and CEO of America's Health Insurance Plans. "Actionable and personalized information will help patients make informed decisions that are best for their needs."
Health plans and issuers would also need to make their negotiated rates for in-network providers public, as well as how much they're willing to pay doctors that are out-of-network. The federal government is confident that the new requirements would increase competition in the healthcare industry, reduce prices and support greater innovation throughout the healthcare sector.
"What everyone can agree on is that a hospital's patients understand what they're going to be responsible for paying," said Rebecca Davison, a director at consulting firm ADVI Health.
HHS would also let insurers share cost savings with consumers to incentivize them to shop around for healthcare. Insurers wouldn't be required to pay medical loss ratio rebates to enrollees if they already shared cost savings with them.
Under the proposed rule, the Trump administration is seeking comments on whether insurers and plan issues should have to make cost-sharing information available through an application programming interface. That would allow third-party app developers to create new tools that consumers could use to shop for medical services.
The administration also wants to know how it could include information about healthcare quality in the proposed price transparency rules.
"Sometimes there's a perception that more expensive means better. Quality information should be more clearly communicated to patients, not just cost," said Ashley Ridlon, vice president of health policy for Evolent Health. "There needs to be something of a culture shift around patients seeking out higher value services."