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Biden Administration moves to tighten hospital price transparency regulations

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Image: Adobe Stock

Democratic and Republican officials agree that hospitals must make “standard charges” easily accessible to consumers

For years, North Carolina hospitals hid the prices for their services. Now under a federal rule, they are required to disclose the listed prices and insurance-negotiated rates, but some are doing it slowly and secretly.

Each hospital has a list of the prices of all billable treatments and services. This is known as the “chargemaster.” Hospitals use the lists to bill insurance companies and insured patients.

However, for many years, the information hasn’t been made public, even though federal rules have demanded hospital price transparency. This was first required by the Affordable Care Act, and later adopted as a rule by the Trump administration.

The final rules, [2] overseen by the Centers for Medicare and Medicaid Services (CMS), took effect January 1 of this year. They mandate that hospitals publish total charges, insurance-specific negotiated rates, and discounted prices for people paying out-of-pocket. Hospitals must also publish the prices for 300 commonly used services that patients could schedule and shop for in advance, such as surgeries and X-rays.

Since many hospitals failed to follow the rules, the Biden Administration is now tightening enforcement.

Last week, CMS proposed new rules [3] that would increase penalties for noncompliance for larger hospitals from $300 per day to $10 per bed for those with more than 30 beds, capped at $5,500. Hospitals with fewer than 30 beds would still face a $300 fine per day.

The proposed rules will go through a 60-day comment period starting August 4.

A Wall Street Journal investigation [4] from March examined more than 3,100 hospital websites and found that hundreds had embedded computer code to make it harder for their pricing pages to be located and identified by search engines like Google.

Novant Health, a Winston-Salem-based hospital chain, used such anti-web crawling techniques. A spokesperson for the company told Policy Watch that it used the code to help direct customers to its more friendly tool for price estimates. The company removed the code in April.

State Treasurer Dale Folwell said some hospitals are flouting the rule since it’s more profitable to pay the $300 penalty per day.

The American Hospital Association tried to block the CMS rule, but last year, the U.S. Court of Appeals [5] for the District of Columbia rejected its motion to do so.

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Cynthia Charles

The North Carolina Healthcare Association [7], a trade organization representing more than 130 individual hospitals and multi-hospital systems, said in a statement that hospitals and health systems have done their best to comply.

“The federal rules play a large part in hospital price transparency. However, NCHA believes they should be more focused on helping patients shop for care, rather than focusing on privately negotiated rates between third parties (insurance companies and hospitals),” Cynthia Charles, NCHA vice president of communications and public relations told Policy Watch in an email.

Charles said the CMS rule requires information on certain items that merely increase the administrative burdens on hospitals but fail to help patients.

Charles said the NCHA doesn’t know of any member hospitals that are in noncompliance or that have been fined by CMS for non-compliance.

What happens after hospitals make their price information public?

Because of the uncertainty over health care costs, “what’s been happening is 64% of Americans have delayed getting care and not gone for fear of financial ruin,” said Cynthia Fisher, founder and chairman of the group Patient Rights Advocates.org [8].

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Cynthia Fisher

Fisher said the new transparency rule is a game-changer that brings market competition to the healthcare industry. Consumers, including individuals and state health plans will have more power to spot and defend themselves against price gouging.

Fisher said she agrees with the U.S. Department of Health and Human Services that the rule would not impose a significant financial burden on hospitals. “It’s a minimal effort, because they already have all these prices digitally, in order to get paid every day… All that HHS was asking them to do is pull back the curtain.”

Fisher said enhanced transparency could help reduce health care costs and increase access to care. Armed with the upfront price, she says, patients will be better positioned to fight erroneous bills.

Researchers have found average prices for the same procedure decreased from 2017 and 2019 after the initial price transparency guidelines went into effect; and the variation of these prices at different hospitals also decreased, according to a study [10] published in the North Carolina Medical Journal.

A CMS press release [11] stated that the agency was encouraging price transparency to prevent consumers from getting unexpected medical bills from out-of-network providers.

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Attorney General Josh Stein

Attorney General Josh Stein’s office has sent letters to hospital administrators asking for the price data and information about the use of anti-crawler code. “Hospital prices must be transparent so patients know what to expect. I’m looking closely at this issue and will do everything in my power to make sure hospitals and health care systems are following the law and treating North Carolinians fairly,” Stein said in a statement.

State Treasurer Folwell has also been pushing for price transparency. Hospital executives have perpetuated the practice of secretive pricing and billing for years to “cartelize healthcare in North Carolina,” Folwell said.

His office manages the $3.5 billion State Health Plan for close to 750,000 teachers, state employees, retirees and their dependents.

Folwell said Blue Cross NC withheld negotiated rates from his office and the state auditor, preventing him from detecting overpayments.

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State Treasurer Folwell

This practice was technically legal because lobbying groups added language to a law enacted in 2016 [14] that allowed it. A new bill [15] under consideration at the General Assembly would require Blue Cross NC to disclose negotiated rates. The bill passed the House with bipartisan support and is now in the Senate.

“You cannot manage what you cannot measure,” Folwell said in an interview. “And when you don’t know the cost [you are] paying for, obviously you can’t measure it.”

Folwell commended the new CMS rule to raise the penalties for noncompliant hospitals. “They are making billions of dollars off teachers and troopers and just pay the fine,” he said.

Spotty enforcement, slow hospital responses

In other states, such as Oklahoma [16] and Pennsylvania [17], researchers and journalists examined all major hospitals and found widespread noncompliance.

A recent report [18] by Patient Rights Advocate.org found nine of 10 hospitals sampled in North Carolina failed to comply with the rules.

UNC Health [19] and Novant Health [20], whose hospitals researchers cited to be delinquent on the public disclosure duty, both said through their spokespersons that they have been compliant.

Both studies listed UNC Rex Hospital as noncompliant for directing customers to an app rather than making the file downloadable.

UNC Healthcare spokesperson Alan Wolf argued that the Patients Rights Advocate.org study is inaccurate. He pointed out that the web app allows users to download the master file that includes rates for all different payers, although users must first select an insurance provider before arriving at the “export” page. UNC Health’s technology team is working to fix the download option.

Spokespersons from UNC Health and Novant Health said they strongly encourage patients to use their customizable “price estimator tool” and live customer services. They stress that there are more factors at play than prices.

Some hospitals want to provide a cost estimator tool, but that does not exempt them from publishing the chargemaster file, according to federal rules. Researchers have expressed concerns about the recommendation by some hospitals. “Relying on estimator tools and price experts further muddles health care costs by keeping list prices obscured and relying on aggregate data and consumer reporting,” authors of the NC Medical Journal article wrote.

CMS said the public can submit a complaint [21] if hospitals fail to post their price information online. The federal agency is now auditing the hospitals.