Price transparency as a guiding principle: directionally correct

HFMA is now on record opposing the pending federal regulations that would require hospitals to disclose their privately negotiated rates with insurers. Yet HFMA has long been a staunch price transparency advocate. How can those things be reconciled?

Simply put, disclosing payer-specific negotiated rates won’t help consumers understand their out-of-pocket medical expenses, which is a key goal of price transparency.

Here’s the back story: In December 2019, the American Hospital Association (AHA) filed a lawsuit challenging HHS’ authority to mandate hospital disclosure of payer-specific negotiated rates. In June, a federal district court ruled in favor of HHS. AHA appealed. In July, HFMA filed a friend-of-the-court brief supporting the appeal, arguing that the HHS mandate, which takes effect on Jan. 1, 2021, creates a huge administrative obligation for hospitals but little or no new information for consumers. (It also ignores the economics of payer mix — i.e., that hospitals with different public payer mixes cannot compete on a level playing field.) This focus on consumer benefit is not new for HFMA; it dates back to the report published by the task force we convened in 2014.

The legal arguments in the amicus brief may be complicated, but our core message is not: “There is no rational connection between the hospital disclosures [the proposed rule] requires and the objectives it seeks to achieve. The cost that matters most to patients is their out-of-pocket cost, which the final rule does nothing to help patients learn.”  

Yet — directionally — CMS is right in supporting transparency. We should recognize and affirm that. Consider the environment: A flurry of private-sector interest in price transparency seems to have ended with an informal consensus that utilization of price transparency tools is too low, and transparency isn’t the silver bullet that will bend the cost curve. (Frankly, it was unrealistic to expect that it would be.)

The industry may have moved on, but consumers have not. Many still struggle and fail to get information on their out-of-pocket expenses or resign themselves to going without. So isn’t it reasonable to conclude that we should work on the solution? Until healthcare price transparency tools are as accurate and convenient as those in other sectors, it’s premature to draw any conclusions about consumer interest. 

CMS Administrator Seema Verma summed it up at an industry conference in November: “Everybody’s had the experience of going into a hospital, or going in for a healthcare service, and you have no idea what it’s going to cost. That is simply not fair to the American people .… We should be listening. People are frustrated, and they want change.”

Exactly. We couldn’t agree more. We commend CMS for its commitment to improving price transparency, against strong headwinds. That is why HFMA recognized Administrator Verma with the 2020 Richard L. Clarke Board of Directors Award during its Digital Annual Conference on August 12. HFMA and CMS may have different ideas about how to achieve consumer-centered price transparency, but we remain optimistic that we eventually will agree on the methods in addition to the principle.