CI Cigna Group

By Stephanie Armour 

This article is being republished as part of our daily reproduction of WSJ.com articles that also appeared in the U.S. print edition of The Wall Street Journal (July 30, 2019).

Hospitals would have to disclose the discounted prices they negotiate with insurance companies under a Trump administration rule that could upend the $1 trillion hospital industry by revealing rates long guarded as trade secrets.

Hospitals that fail to share the discounted prices in an online form could be fined up to $300 a day, according to the proposal. The price-disclosure requirements would cover all the more than 6,000 hospitals that accept Medicare, as well as some others, and is likely to face fierce industry opposition.

Comments on the proposal would be due in September and, if completed, the rule would take effect in January.

The initiative represents the Trump administration's growing effort to shift away from rolling back the Affordable Care Act and put its own stamp on health care instead. Central to that strategy is the notion that more price transparency will inject greater competition into the market and lower costs.

Industry groups have argued the requirement goes beyond the executive branch's statutory authority and could backfire by causing prices to rise if hospitals see their competitors are getting higher insurer payments. The White House has lost in court before: A rule requiring drug makers to post list prices in television ads was blocked in June by a federal judge who said the administration overstepped its regulatory authority.

Some Republicans praised the administration's focus. Sen. Lamar Alexander (R., Tenn.) said the proposal complements provisions in legislation he sponsored with Sen. Patty Murray (D., Wash.) to lower health costs.

"We will carefully review how the proposed rule and our legislation interact," he said.

The Trump administration's move contrasts sharply with proposals by some leading Democratic presidential contenders who say Medicare for All will drive down costs by lowering administrative overhead, curbing spending and leveraging the federal government's negotiating clout to drive down prices. It lands on the eve of the second Democratic presidential debate Tuesday and Wednesday that is expected to focus on health care, which polls show is a top issue for voters in the 2020 election.

Hospitals would have to disclose the rates for services and treatment that they have negotiated with individual insurance companies such Cigna Corp., Anthem Inc. and CVS Health Corp.'s Aetna under the proposal released Monday. The Trump administration is also working on initiatives that could compel insurers to disclose their rates, part of a push to publicize costs that is likely to spur lawsuits and sharp resistance from the industry.

"It's very significant. It's a turning point in health care and a turning point to the free market in health care," Seema Verma, administrator of the Centers for Medicare and Medicaid Services, said in an interview. "It hasn't been a competitive free-market system."

Tom Nickels, executive vice president of the American Hospital Association, said it is "a radical approach."

"This really is an extreme proposal in terms of what we all expected," he said. "It raises a number of legal issues we'll have to work through. It takes the concept to the extreme.

"Publicly disclosing competitively negotiated, proprietary rates will push prices and premiums higher -- not lower -- for consumers, patients and taxpayers," said Matt Eyles, president and CEO of America's Health Insurance Plans, an industry trade group.

The proposed rule is estimated to cost hospitals around $6 million total. It would affect hospitals as well as their subsidiaries, including outpatient health clinics. Hospitals must already post their list prices for services.

The administration's proposal would expand that requirement to include not only gross charges before discounts but also the insurer-specific negotiated charges for all items and services. The charges would have to be linked to the name of the insurer and would have to be updated annually. The data would have to be displayed in a machine-readable format so it could be processed by a computer, and listed by common billing or accounting codes to create a framework for comparing standard charges among hospitals.

The proposal would also require hospitals to disclose insurer-specific negotiated charges for about 300 services consumers are likely to shop for before obtaining care, such as X-rays, outpatient visits, lab tests or childbirth. That price data would have to be made public in a prominent location online or in written form on request.

The Trump administration said Monday that it is also seeking comment for price information that would be useful for consumers, as well as comment on the type of services that should be included.

The rule, if finalized, would reveal how widely costs vary in the U.S. for care. A magnetic-resonance image of the lower back costs $141 at an imaging center in Jefferson, La., but runs $47,646 at a hospital in Torrance, Calif., according to data from Clear Health Costs, a New York company that publishes information about health-care costs.

"I would hope this drive on transparency would unify the left and right, " Health and Human Services Secretary Alex Azar said in an interview. "The opponents here are the proponents of the status quo who will attack us."

Technology companies will use the information to make it available for consumers and patients, he said. "Just imagine having that information out there, how powerful it will be," he said.

Data on the effect of increasing price transparency in health care shows mixed results. In some cases, consumers equate higher cost with higher quality and can be attracted to higher-priced treatments and services. Other studies show that only a fraction of people who have price data actually use the information to shop around for care. Many are already shielded from the full costs because insurance covers the bulk of their treatments.

The proposal wouldn't affect hospitals run by Veterans Affairs, Indian Health Services and Defense Department military treatment centers. State-licensed hospitals would also be covered by the proposal.

The administration is also proposing several policies aimed at reducing payment differences between certain outpatient service sites and expanding the types and number of services, such as total knee replacements, that can be performed outpatient or in ambulatory surgical centers. Those tend to cost less when done as outpatient procedures.

Write to Stephanie Armour at stephanie.armour@wsj.com

(END) Dow Jones Newswires

July 30, 2019 02:47 ET (06:47 GMT)

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