New rules could force hospitals to publish prices negotiated with insurers

Federal regulators want to give patients a clearer picture of what they will spend during a hospital visit, with a more accurate list of costs for everything from hip replacements to CT scans.

The new requirements, announced by the Centers for Medicare and Medicaid Services (CMS) on Monday, July 29, would compel hospitals to publish the prices for hospital services that have been negotiated with individual insurance companies. The policy is aimed at helping consumers anticipate out-of-pocket costs and make prudent choices on where to seek care, and has the potential to lower costs by boosting competition among hospitals, CMS officials said in a statement.

Though the policy has the potential to make the byzantine and opaque structure of hospital billing more accessible to the public, hospital leaders swiftly condemned the proposal. Rick Pollack, president and CEO of the American Hospital Association, said it could “seriously limit” choices available to patients and fuel anti-competitive behavior among private insurance companies.

“While we support transparency, today’s proposal misses the mark, exceeds the administration’s legal authority and should be abandoned,” Pollack said in a statement.

The proposed policy comes at a time when two-thirds of Americans say they are either “very worried” or “somewhat worried” about unexpected medical bills, according to a survey published by the Kaiser Family Foundation. Among the concerns, hospitals that are within the network of an insurance plan may provide care through out-of-network doctors, leaving patients with surprisingly large bills.

In 2017, 18% of inpatient visits and 26% of emergency room visits to an in-network hospital in California incurred at least one out-of-network charge, according to the foundation. Congressional lawmakers on both sides of the aisle have been drafting policies in recent months aimed at limiting how much out-of-network hospital services can cost patients.

But having an accurate view of the costs ahead of time has been a priority of the Trump Administration, which announced last month its intent to demand more transparency on hospital pricing. The rule change would expand on existing laws requiring hospitals to publish so-called “gross charges,” which are arguably useless to consumers. These prices are typically negotiated down through contracts with individual insurance companies and are much higher than reimbursement rates set by public insurers like Medicare. Even the uninsured are unlikely to pay the list price.

Instead, hospitals would be required to list the negotiated price of at least 300 services for all insurers, including 70 hand-picked by CMS. Those services include psychotherapy, X-rays and CT scans, blood tests, joint replacement procedures and mammograms.

The announcement comes after CMS began publicly releasing billing information from a federal database in 2013 showing health care costs for common procedures vary enormously from one hospital to another, sometimes by an order of magnitude.

In a July 29 press release, CMS officials describe the plan as a step toward improving consumer choice and competition among health care providers, encouraging lower prices and higher-quality services. A report produced by the U.S. departments of the Treasury, Labor and Health and Human Services last year recommended that any effective price transparency policy must include third-party agreements between hospitals and insurers.

“Boosting price transparency will likely have limited utility unless the dampening effect of third-party payment on consumer engagement is also addressed,” according to the report.

The changes proposed by CMS do not address the problem of out-of-network doctors providing services at in-network hospitals.

Whether publishing the negotiated prices will help is up for debate. Jan Emerson-Shea, vice president of external affairs at the California Hospital Association (CHA), told the Voice that patients are concerned about out-of-pocket expenses and the bill that arrives after a hospital visit. Individual plans and differing options for deductibles and co-payments aren’t going to get captured through the disclosure of negotiated prices with insurance companies.

Transparency is important and is supported by the CHA, Emerson-Shea said, but the proposed rule changes by CMS won’t be useful.

“Simply disclosing the negotiated rate between hospitals and insurance companies is not going to help patients shop and compare at all,” she said. “We don’t think this is useful or helpful for patients — it’s frankly a misguided approach to increase transparency.”

The premise that patients will be able to easily shop around and pick the cheapest option is also flawed, Emerson-Shea said. Patients typically go to the hospital that’s in network or where their doctor works. Finding out the out-of-network hospital down the street offers the procedure at a better rate isn’t relevant information, she said.

El Camino Hospital officials have yet to take a position on the president’s executive order or the proposed rule changes by CMS, but agreed it could have far-reaching implications on insurance companies and hospitals alike. Iftikhar Hussain, the hospital’s chief financial officer, said El Camino is generally in favor of greater transparency when it comes to informing patients how much they’ll pay, but that it’s still too early to comment on whether it would be a good change for the hospital and its patients.

“Surprise” billing after emergency room visits hasn’t been a problem at El Camino, Hussain said. Rather than charge patients the out-of-network rate for services, he said the hospital negotiates directly with insurance companies for reimbursement and avoids penalizing patients with a higher rate.

“We understand that a patient in an emergency situation may have no choice of hospital, being brought in by ambulance or needing to go to the nearest hospital,” Hussain said.

In recent years, many hospitals and insurance providers have voluntarily sought to improve transparency through online price estimators and calculators that attempt to capture the costs associated with visiting the hospital. In 2017, El Camino Hospital launched an estimator with a short list of services that takes into account the patients’ insurance plans including Aetna, Blue Shield, Blue Cross and Cigna.

The caveat is that the out-of-pocket costs generated by the tool are a “good faith estimate” based on information provided by the patient and the likely costs for all the services rendered, according to the hospital. An extended stay in the hospital, unexpected treatment or services deemed necessary by a doctor all have the potential to rack up a higher bill. The estimator also includes a limited range 94 services and procedures, most of them types of imaging and lab work. By comparison, the list of gross charges provided by El Camino includes the costs of 34,290 procedures, supplies and tests.

Financial counseling and price estimates are also available via telephone and in person at the hospital, Hussain said.

In other cities, health care providers had faced local efforts that aimed to add transparency and to limit how much hospitals can charge patients.

Two such initiatives, spearheaded by the Service Employees International Union-United Health Workers (SEIU-UHW), were on the 2018 ballots in Palo Alto and Livermore. The measures, which would have prohibited medical providers for charging patients more than 115% percent of the cost of “direct patient care,” faced stiff opposition from Stanford Health Care and other area hospitals. Both measures were soundly defeated at the polls.

Price transparency is one of numerous changes proposed by federal regulators in the July 29 announcement, and must go through a lengthy monthslong public comment period ending Sept. 27. Pollack of the American Hospital Association accused the Trump administration of trying to further cut payments for outpatient clinic visits in order to save money, which he calls both illegal and a harmful to rural and vulnerable communities, and ramping up the cost of drugs provided in an outpatient setting.

Kevin Forestieri writes for the Mountain View Voice, the sister publication of PaloAltoOnline.com. Palo Alto Weekly staff writer Gennady Sheyner contributed to this report.

Kevin Forestieri writes for the Mountain View Voice, the sister publication of PaloAltoOnline.com. Palo Alto Weekly staff writer Gennady Sheyner contributed to this report.

Kevin Forestieri writes for the Mountain View Voice, the sister publication of PaloAltoOnline.com. Palo Alto Weekly staff writer Gennady Sheyner contributed to this report.

Kevin Forestieri writes for the Mountain View Voice, the sister publication of PaloAltoOnline.com. Palo Alto Weekly staff writer Gennady Sheyner contributed to this report.

Kevin Forestieri writes for the Mountain View Voice, the sister publication of PaloAltoOnline.com. Palo Alto Weekly staff writer Gennady Sheyner contributed to this report.