Executive Order on Hospital Price Transparency May Prompt Disclosure of Negotiated Prices

Overview


President Trump has issued an Executive Order instructing several federal agencies to begin rulemaking processes intended to increase the transparency of hospital pricing. Among other measures, the Executive Order directs the Secretary of the US Department of Health and Human Services to begin a rulemaking process that would require hospitals to publicly post commercially negotiated rates with third-party payors.

This On the Subject provides an overview of historic developments in the regulation of hospital price transparency, summarizes key provisions of the Executive Order and analyzes various aspects of the Executive Order relevant to industry stakeholders.

In Depth


On June 24, 2019, President Trump signed an Executive Order directing the Secretaries of the US Department of Health and Human Services (HHS), Department of the Treasury and Department of Labor to initiate rulemaking intended to bring greater transparency to negotiated prices between hospitals and commercial insurers. The Executive Order also called on the Secretaries to develop strategies relating to data and quality reporting, while also improving access to claims data from taxpayer-funded health care programs and group health plans. Among other directives, the Executive Order called on the Secretary of HHS to submit a report on additional steps the Trump Administration may take to address surprise medical billing.

Hospital Pricing Transparency Background

Hospital pricing transparency measures have been a focus of federal and state legislators for much of the past decade. For example, the Patient Protection and Affordable Care Act (ACA), enacted in 2010, required US hospitals to make public a list of their standard charges. In 2014, the Centers for Medicare and Medicaid Services (CMS) issued guidelines regarding the requirement and promulgated a final rule in 2018 requiring hospitals to make their charges available via the internet. Various states have implemented their own hospital pricing transparency measures, including measures intended to prevent surprise billing.

In the midst of growing support for hospital pricing transparency regulations, the Federal Trade Commission (FTC) raised concerns in 2015 regarding certain forms of increased price transparency. It concluded that forcing the disclosure of competitively sensitive health care pricing information may result in anticompetitive consequences. The FTC elsewhere has noted that such disclosures “may chill competition by facilitating or increasing the likelihood of unlawful collusion,” and recommended that legislators limit transparency to “the kinds of data that are most useful to consumers when selecting health care services and providers.”

On October 12, 2017, President Trump issued an Executive Order intended to promote health care choice and competition. That Order provided that rules and guidelines affecting the US health care system should improve access to information Americans need to make informed health decisions, including data about health care prices and outcomes. On December 3, 2018, HHS, together with Treasury and Labor, published a report proposing that price transparency efforts should distinguish between the charges a provider bills and the rates negotiated between payers and providers. The report found that “[b]oosting price transparency will likely have limited utility unless the dampening effect of third-party payment on consumer engagement is addressed.”

The Executive Order

On June 24, 2019, President Trump signed a new “Executive Order on Improving Price and Quality Transparency in American Healthcare to Put Patients First.” The administration takes the position that patients must know the price and quality of health care goods and services before they can make informed health care decisions. The Executive Order discussed the potential for pricing transparency to reduce prices, citing a study that found that giving patients the ability to “price shop” for imaging services was associated with a per-service savings of up to approximately 19%.

These principles underpinned the Executive Order’s directive to the Secretary of HHS to issue a notice of proposed rulemaking within 60 days requiring hospitals to publicly post charges and information, based on negotiated rates, for common “shoppable” items and services, in easy-to-understand, consumer-friendly and machine-readable format. The Secretaries of HHS, Treasury and Labor are also charged with issuing an advance notice of proposed rulemaking within 90 days and soliciting comment on a proposal to require health care providers, health insurance issuers and self-insured group health plans to provide or facilitate access to information about expected out-of-pocket costs for items and services to patients before they receive care.

In addition to these directives, the Executive Order required a report describing the manners in which the federal government and the private sector are impeding price and quality transparency for patients, and recommendations for eliminating those impediments; a “roadmap” to align data and quality measure reporting across Medicare, Medicaid, the Children’s Health Insurance Program (CHIP) and other federal health care programs; increased access to governmental and commercial third-party payor claims data; and a report on steps the administration may take to address surprise medical billing, among other directives.

Industry Responses

The American Hospital Association (AHA) and America’s Health Insurance Plans (AHIP) quickly expressed concern that the Executive Order may result in higher prices to consumers. AHA noted that hospitals already provide consumers with information on pricing (see the ACA requirement above) and that publicly posting privately negotiated rates could undermine the competitive forces of private market dynamics. AHIP similarly noted that disclosing competitively negotiated prices would reduce competition and push prices higher, specifically referencing the FTC’s position discussed above. The American College of Physicians (ACP) released a statement supporting the Executive Order as consistent with its own position on transparency of out-of-pocket costs and quality data that allows consumers, physicians, payers and other stakeholders to compare and assess medical services and products in a meaningful way.

Analysis

The Executive Order alone does not create new transparency requirements; rather, it requires HHS and other agencies to initiate regulatory proceedings to propose and analyze transparency requirements. These agencies must follow notice and comment rulemaking procedures, which provide industry stakeholders with an opportunity to submit formal comments addressing the agency proposals. Agencies are required to consider and respond to comments from private stakeholders during such rulemaking proceedings.

While the Executive Order directs various agencies to issue proposed regulations concerning pricing transparency, any regulation that is finalized must be consistent with the statutes that it implements. The Executive Order does not specify which statute or statutes the administration believes authorize the actions proposed. If the final regulatory actions are inconsistent with the text of the relevant statutes, or are arbitrary and capricious for any other reason, or if the agencies fail to observe the procedural requirement established by the Administrative Procedure Act, they will likely be challenged in court.

If regulations are promulgated that require hospitals to disclose negotiated commercial third-party payor rates, such disclosures may affect market dynamics. Hospitals with comparatively lower reimbursement rates may be likely to leverage that price information in negotiations with third-party payors for higher reimbursement rates. Hospitals with higher reimbursement rates (and, presumably, higher patient cost-sharing responsibilities) will have to justify their higher prices to patients through quality of care, patient services or other competitive factors. As hospitals consider marketing campaigns intended to demonstrate their comparative value, it will become increasingly important to consider potential beneficiary inducement prohibitions and the nuances of appropriate marketing under the federal and state anti-kickback statutes.

The Executive Order’s directives raise a number of potential questions and concerns for industry stakeholders. For example, it is unclear how frequently hospitals may be required to submit pricing data or the format that data may take. Regulations may be proposed requiring hospitals to submit pricing data for individual items and services that are sometimes or always packaged or bundled into a single negotiated payment rate when furnished to patients enrolled in certain third-party payor plans. In addition to potential reporting challenges for hospitals, patients may review these prices and choose not to receive care based on a mistaken understanding that they would incur various charges that would be packaged or bundled in their case.

Challenges may also arise for hospitals utilizing value-based contracting structures, where ultimate third-party payment rates for hospital items or services may vary based on care furnished by other providers or patients enrolled in the same value-based plan. Hospitals may utilize contracted service providers that separately bill for items and services in connection with a hospital service, and it is unclear how these costs would be reported.

Industry stakeholders may address these and other questions and concerns in comments to proposed rules and advanced notices of proposed rulemaking to assist the Secretaries of HHS, Treasury and Labor in balancing the value of patient access to certain pricing data against potential antitrust implications, administrative burdens, and the potential risks associated with miscommunication and patient misunderstanding.