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Hospitals May Be Forced to Disclose Discount Rates Negotiated With Insurers

By Stephanie Armour / July 29, 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 a rule proposed in the Federal Register. The price-disclosure requirements would cover all the more than 6,000 hospitals that accept Medicare.

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

Hospitals would have to disclose the rates for services and treatment that they have negotiated with individual insurance companies such as Aetna Inc., Cigna Corp. and Anthem Inc. 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.

The initiative represents the Trump administration’s growing effort to shift away from rolling back the Affordable Care Act rollback 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.

“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.”

The initiative 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.

Industry groups have argued that mandatory price disclosure could push up costs if hospitals see competitors are getting higher payments and demand the same. They say the federal government is overstepping its statutory authority and interfering in private contracts between insurers and hospitals. The contracts are generally bound by confidentiality agreements.

Tom Nickels, executive vice president of the American Hospital Association, has said consumers care more about their expected out-of-pocket costs.

“Disclosing negotiated rates between insurers and hospitals could undermine the choices available in the private market,” he told the Journal in March, when the White House was considering initiatives on price disclosure. “While we support transparency, this approach misses the mark.”

The proposed rule is estimated to cost hospitals around $6 million. It would affect hospitals as well as their subsidiaries, including outpatient health clinics.

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Photo: Carlos Barria/Reuters

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Chris J. Stewart

Chris currently serves as Chief Operating Officer at Ortho Spine Partners. Prior to that, he was the assistant vice president and business unit leader of Medical Device Management for HealthTrust.

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