On June 24, 2019, President Donald Trump signed an executive order directing hospital and healthcare providers to publish their price lists in a clear and readable format. The transparency proposal is intended to empower consumer decision making as out-of-pocket costs continue to increase and stakeholders in the healthcare industry push the current system to evolve to better serve patients and lower costs. In 2019, out-of-pocket cost increased by more than 24 percent and is expected to inflate to 29 percent in 2020 (per analysis by Transunion Healthcare). The Department of Health and Human Services has proposed an out-of-pocket maximum limit of $8,200 for 2020, up from $6,340 in 2014.

Per the executive order, the Secretaries of HHS, Treasury and Labor must create an advance notice of proposed rulemaking to require hospitals and payers to release information on privately negotiated rates with payers. That rule will be open for public comment within 90 days of the date of the order. In addition, the rule directs the Secretary of Treasury to issue guidance within 120 days around expanding the ability of patients to select health savings accounts. A time frame of 180 days has been given to issue guidance around increasing the amount that can be carried over by patients in flexible spending arrangements and guidance around how patients may use funds within health reimbursement arrangements. The proposal also requires quality and research data to be made available for consumers and for the federal government to take steps to reduce surprise billing.

Impact on payers, providers, and patients

The proposal’s requirement that providers reveal their negotiated rates between insurers and facilities, in addition to provider service rates, may bring unnecessary pricing debates out into the open and spur care networks to modify their price charts. In fact, since procedural charges are unknown outside of insurer contracts, most providers are unaware of procedure and service charges. Making this information more readily available may force expensive hospitals/providers to lower their prices and create price lists at par with the market. Facilities might also find ways to shift their costs.

The order also states that providers and insurers must provide patients with out-of-pocket cost information before they opt for care. This can be quite complicated, since the amounts patients pay out of pocket are decided by multiple factors, including health plan characteristics such as deductibles, network strength, and cost-sharing tiers. To make matters even more complicated, each insurance player in a market has a different bargaining equation and benefit terms that decide the insurer’s relationship with risk-sharing networks. Moreover, charges can vary significantly for patients across private and public health plans.

While new transparency rules could help patients get a better estimate of their out-of-pocket expense, it is still unclear if patients will truly know their total out-of-pocket maximum. The claim cycle management process in the healthcare system is intricate and utilizes many networks. Cost estimates for complete episodes of care rely on several factors, including specialty care providers, hospital stay charges, office charges, the type of visit, procedure charges, diagnostic/lab charges, bundled procedures, and pharmacy charges. The actual calculation of a patient’s out-of-pocket maximum responsibility can take a toll on patients even with the rate information in front of them. The biggest benefit of any future rule tied to hospital price transparency will be to patients seeking elective admission or surgery, since they can compare quality data and pricing information to make an informed choice. On the other hand, patients in need of emergency care and patients with life-threatening illnesses will likely see little benefit, as those patients will have little, if any, time to consider their likely expenses and select a lower-cost facility.

The path of the executive order remains uncertain

While it is commendable to pursue efforts to bring down healthcare costs, the Trump administration’s executive order to require payers and providers to disclose ‘true prices’ will be met with resistance from both groups. This also isn’t the first price transparency effort pursued by the administration. A similar proposal by the administration that would have ordered drug companies to display drug prices on television ads created an unrest in the pharmaceutical industry and was later blocked by a federal judge. The future of the latest price transparency order is still uncertain, but if implemented the order has the power to change the dynamics of the healthcare market by helping consumers select the best options to fit their financial and healthcare needs.

 

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