The Trump Administration’s Hospital Transparency Rule – a help or a hinderance?

stethoscope dollars

On Friday 15 November, the Trump Administration proposed extending the price-disclosure initiative to include the private-employer market; meaning hospitals and insurers will be forced to publicise their agreed rates, which industry figures fear could upend the healthcare industry

Administration officials asserted that the proposed transparency rule will compel health insurers and hospitals to give cost information to consumers in advance and, overall, reduce the high costs of US healthcare. “Right now, there is too much arbitrage in the system,” a senior administration official said in an interview with The Wall Street Journal, commenting on the hidden charges and discounts that currently permeate healthcare markets, and which can lead to a price disparity among consumers.

As per the proposal, hospitals will be required to provide insurer-specific negotiated rates in a computer-readable file and must post negotiated charges online for 300 specific services that patients typically shop around for. Hospitals can choose 230 of the services they post online, whilst 70 are already stipulated in the new rule. Hospitals failing to comply with the new regulations around sharing negotiated rates will face fines of up to US$300 a day.

Insurers will be required to provide a web-based tool for beneficiaries disclosing list prices, negotiated rates, cost sharing and out-of-network rates. Reports detail that this could cost insurers an estimated $200 million, in addition to a further $64 to $161 million for three years to implement and maintain posting about cost sharing. For the hospital industry, the new requirements could cause costs to amount to around $39 million dollars annually.

Naturally, the new proposal has faced plenty of backlash from the health insurance industry, with some healthcare companies arguing that public rates will cause hospital systems to push for payment rates that match their crosstown rivals and many suggesting that financial incentives may encourage shoppers to substitute price over quality. Elsewhere, industry groups have also suggested that the proposal runs counter to the First Amendment.

As such, a statement implying an intent to file a legal challenge to the administration – signed by the American Hospital Association, the Association of American Medical Colleges, the Children’s Hospital Association and the Federation of American Hospitals – reads: “This rule will introduce widespread confusion, accelerate anticompetitive behaviour among health insurers and stymie innovations.”

In addition, Scott Serota, President and CEO of the Blue Cross Shield Association, said: “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 healthcare costs.”

But the Administration team has waved these concerns aside, insisting that the new proposal will bring costs down – out-of-network doctors can compete with in-network negotiated rates; health systems won’t charge higher negotiated rates, for if they do they could lose business for not matching competitors’ rates or justifying the reasons for their steeper costs; and employers will be able to influence their insurers to include hospitals with lower negotiated rates in their networks.

The proposal, which has been deemed ‘radical’ by opposing groups and ‘a game changer’ by those who concur with it, would not take effect until 2021. The consequences of potential federal court challenges are yet to be revealed, but we’ll be keeping a close eye on the story as it develops.