A patient has an emergency and goes to a hospital she knows is in her plan’s network. She receives treatment. She leaves the hospital. Weeks later, she receives a medical bill for tens of thousands of dollars. Unbeknownst to her, some or all of her treating doctors were out-of-network.
This all-too-common story has contributed to a significant medical debt crisis in this country, and has captured the attention of policymakers on all sides of the political spectrum—leading to the rare circumstance of executive and legislative alignment and the potential for bipartisan legislative action.
Proponents of price transparency hope that it will improve competition and allow patients to better understand their financial responsibility ahead of receiving services. The idea is that disclosing prices to individuals will incentivize them to “shop around” for health care services, which may drive down costs. On the other hand, opponents of price transparency argue that releasing such information could compromise bargaining leverage between third party payers and providers, and have the effect of driving up prices since information exchanges in concentrated markets can lead to tacit coordination that’s difficult to detect and punish under the antitrust laws.
This week, CMS has published a proposed rule (as part of the proposed Hospital Outpatient Prospective Payment System rule, or OPPS) that would mandate hospitals disclose their prices to the public, including rates negotiated with third-party payers. This action is the latest in a flurry of executive and legislative activity to address price transparency, lower health care costs, and reduce surprises on patients’ medical bills.
Executive Action on Price Transparency
CMS’s action comes in the wake of an executive order (EO) signed by President Trump in June, aimed at improving price and quality transparency in healthcare. The EO requires hospitals to provide “standard charge information” for common, shoppable health care items and services. This includes charges and information “based on negotiated rates.” The order tasks the Department of Health and Human Services (HHS) with developing a rule to implement these disclosure requirements in an “easy-to-understand, consumer-friendly” format.
Separately, HHS, the Department of Treasury, and Department of Labor are tasked with developing an advanced notice of proposed rulemaking that would require health care providers, health insurance issuers, and self-insured group health plans to facilitate access to information about an individual’s expected out-of-pocket costs.
The order also directs the Secretary of HHS to submit a report on additional steps that the President should take to “implement the principles on surprise medical bills” outlined in his remarks in May. Some of those principles include capping out-of-network costs for patients getting emergency care, increasing transparency regarding whether a patient’s care will be considered in-network, and limiting bills for out-of-network care that patients did not choose.
CMS Issues New Proposals for Hospital Price Disclosure
Following the directive in the EO, CMS is using its authority under the Affordable Care Act to require each hospital operating within the United States to establish and make public a list of the hospital’s standard charges for items and services provided by the hospital. This proposal was included in the CMS proposed Hospital Outpatient Prospective Payment Services (OPPS) rule.
Under this updated proposed requirement, hospitals would need to make public their standard charges – both “gross charges” such as those in a chargemaster, and payer-negotiated rates – in two ways:
- A comprehensive, “machine-readable” file that makes public all standard charge information for all hospital items and services, and
- A consumer-friendly display of common “shoppable” services derived from the machine-readable file. CMS is requiring that these charges be made public and updated at least once annually.
CMS seeks comment on technologies or standards that could facilitate public access to real-time updates to make this information readily available to consumers via applications – such as through an open Application Programing Interface (API).
Notably, this proposal covers items and services provided by a hospital – but CMS stops short of including services furnished by practitioners not employed by the hospital, such as independent contractors who provide services at the hospital. CMS acknowledges that this is the root cause of many “surprise billing” issues, which occur when consumers assume a hospital is in-network, but an out-of-network provider’s services show up on their bill. CMS determined that these practitioners are not offering services “provided by the hospital” as stated in the Affordable Care Act, because they are practicing independently, establish their own charges for services, and receive the payment for their services. The proposed rule also does not cover ambulatory surgical centers, which offer some of the same items and services as hospitals.
CMS is accepting comments on the OPPS rule through 5 p.m. EST on September 27, 2019.
Congress Takes on Health Care Costs Surprise Billing
President Trump issued the order amidst a growing bipartisan effort to address the problem of balance billing, or “surprise” medical bills. President Trump’s EO and proposals in Congress are aimed at preventing this practice. The three most prominent bills are:
- Stopping the Outrageous Practice (STOP) of Surprise Medical Bills Act of 2019 (Senate; Cassidy-Hassan Bill)
- Lower Health Care Costs Act (Senate; Alexander-Murray bill)
- No Surprises Act (House; Pallone-Walden bill).
In all three legislative proposals, an enrollee faced with a surprise medical bill would only be responsible for the in-network cost of care.
President Trump’s EO and CMS’s proposed rule focus on increasing transparency in healthcare by requiring hospitals to publish standard price and cost information. The Cassidy-Hassan bill would require insurers to clearly state the amount for in-network and out-of-network deductibles on insurance cards, and provide a “good faith estimate of the enrollee’s cost-sharing (including deductibles, copayments, and coinsurance)” within 48 hours of receiving a request. Additionally, out-of-pocket costs and benefits information would be proactively made available to enrollees “through an internet website or application.”
The Pallone-Walden bill would require providers give patients oral and written notice about the provider’s network status and any potential out-of-network costs they may incur. Similarly, the Alexander-Murray bill requires that a patient be notified of potential in-network alternatives and that the provider inform them that they may obtain a referral to an in-network facility.
Some of the proposals in Congress favor a price-setting approach that automatically pays providers the “median in-network rate”—which should be no more than what the patient would have paid if the services were provided in-network. In the Pallone-Walden Bill, the “median contracted rate” is defined as “the median of the negotiated rates recognized by the plan or issuer as the total maximum payment…for the same or a similar item or service” in the same geographic region.
The Alexander-Murray bill outlines three payment options, one of which will be finalized “after soliciting feedback” from health insurers, doctors, patients, policy analysts, and other interested parties. One option, the “in-network guarantee” or “network matching,” is unique to this bill. It would require any health care facility contracting with insurers to guarantee that all individual providers at an in-network facility will also be considered in-network.
What Comes Next
Though there is bipartisan consensus that action is necessary to prevent surprise medical bills, policymakers diverge in their approaches to achieving that goal. Hospitals, doctors, and insurers are similarly conflicted in how to address this issue. Final legislation will likely not pass until at least this fall.
In parallel, the CMS proposed rule could be finalized as soon as November (the typical timeline for the hospital OPPS rule). This rule could dramatically change health care payment and rate setting in the U.S.