News | Transparency

Hospitals express concerns on latest transparency order

News | Transparency

Hospitals express concerns on latest transparency order

  • A new executive order requires a range of department rules implementing several healthcare transparency steps.
  • HHS will have to decide how to implement an order to release “charges and information based on negotiated rates.”
  • Hospital advocates are warning of a spending spike if their negotiated rates are released.

Hospitals were generally supportive of President Trump’s latest executive order requiring more federal healthcare transparency initiatives. But the possibility of coming agency rules requiring release of health plan-provider negotiated prices raised warnings.

On Monday, Trump issued an executive order requiring several federal departments to issue rules:

  • Requiring hospitals to publicly disclose “charges and information based on negotiated rates” in an easy-to-read format
  • Making information on out-of-pocket spending more readily available to patients before they receive care
  • Improving access for researchers, innovators and providers to data that will help them develop tools to provide patients with more information about healthcare prices and quality
  • Improving quality measurements and making them public
  • Expanding the benefit of health savings accounts (HSAs) and other tax-preferred health accounts

Hospital impacts possible

In response, Chip Kahn, president and CEO of the Federation of American Hospitals, issued a statement praising the effort to improve transparency for consumers.

“If implementing regulations take the wrong course, however, it may undercut the way insurers pay for hospital services resulting in higher spending,” Kahn said. “The Federal Trade Commission has said that spending would likely increase if hospital-insurer payment arrangements were published.”

In contrast, Doug Badger, a visiting fellow at the Heritage Foundation, said he hoped final rules would require the release of negotiated prices to help patients compare treatment costs in hospitals to other provider types.

“It’s particularly true with so many high-deductible plans now in the marketplace, particularly in the [Affordable Care Act] exchanges,” Badger said in an interview.

Caroline Pearson, senior vice president, NORC at University of Chicago, also said the most important aspect of the order is how it is implemented. Unlike previous price transparency efforts which were directed at consumers, the latest initiative appears aimed at driving behaviors within the industry, Pearson said in an interview.

 

“It’s probably going to be used by insurers to attempt to reduce rates, and I think hospital systems will be under a lot of pressure,” Pearson said in an interview. “If you can see what you’re giving to one insurer, every other insurer wants the best rate possible. You create the potential for this race to the bottom in terms of pricing.”

Larry Goldberg, a long-time hospital adviser, said the subject is much more complicated than simply having hospitals and other providers and insurance companies list their prices. 

“Many services for care are not based on individual components,” Goldberg said in an email. “Look at Medicare. It pays an all-inclusive price based on DRGs for inpatient care and APCs for outpatient care. Neither look at individual nor quantity of items provided.”

Insurers could see effects

Pearson also warned about possibly undermining the ability of health insurers to create networks.

“One of the ways that health insurers get providers to accept lower rates is by bringing them in to the network and giving them big volumes,” Pearson said. “When you don’t have confidentiality around these rate negotiations, you sort of undermine that competitive dynamic. It’s pretty interesting to imagine how that would play out, but it certainly would be incredibly disruptive and transformative in how healthcare works today around pricing.”

The executive order “leaves open a broad range of options” for the transparency requirement for hospital-health plan negotiated prices, Health and Human Services (HHS) Secretary Alex Azar said in an industry call.

Azar said the rulemaking process will decide details including whether the individual health plans’ rates will be mandated for release or whether regional averages are used.   

Badger said there are variety of approaches the administration could take to ensure consumers know what the allowed rate is for the physician, the facility and any other involved providers “some of which are probably preferable to others.”

“There’s no defense for concealing prices from consumers, so as a general matter it is a good thing for them to know, but the details are going to matter,” Badger said.

Proposed rules implementing the hospital price provision of the executive order were required from HHS within 60 days. 

Nick Hut, HFMA editor, contributed to this report.

About the Authors

Rich Daly, HFMA senior writer/editor

is a senior writer/editor in HFMA’s Washington, D.C., office. Follow Rich on Twitter: @rdalyhealthcare

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