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Trump Administration Proposes Rule Requiring Hospitals to Disclose Negotiated Rates with Insurers

The rule proposed by the Centers for Medicare and Medicaid Services (CMS) would require that all facilities licensed as hospitals within their respective states (including the District of Columbia, Puerto Rico, the Virgin Islands, Guam, American Samoa, and the Northern Mariana Islands) disclose their “Standard Charges.” The rule would define “Standard Charges” as the hospital’s gross charge for an item or service as well as the charges that it negotiates with insurance companies and other payors. The rule would require hospitals to publish these “Standard Charges” for at least 300 shoppable services, with the rule defining a “shoppable service” as one that can be scheduled by a healthcare consumer in advance. These pricing disclosures—subject to annual updates—would be required to appear prominently on publicly available websites.

President Trump, who signed an executive order last month calling for changes that would allow healthcare consumers to compare prices for shoppable services, argues that the disclosed price discounts would enhance transparency and enable consumers to make informed, educated choices. The healthcare industry has already voiced opposition to this plan by arguing that the discounted rates are trade secrets or that they promote competition.

A few months ago, the Trump administration made headlines when it took another step aimed at lowering the cost of healthcare; that time, the administration announced a new rule that would require pharmaceutical companies to disclose the prices of prescription drugs in television commercials. The response, by the pharmaceutical industry, was swift, raising a number of arguments in opposition, including that the rule would confuse the public. According to the industry, there would be no practical way to disclose the “price” of a given drug, because different end-user consumers pay different out-of-pocket costs based on varying co-insurance requirements, co-pays, etc. The drug industry also argued that the required disclosure would violate First Amendment free speech protections, and further insisted that the Department of Health and Human Services (HHS) didn’t have the authority to force the pharmaceutical companies to publish their prices in their ads. In that case, pharmaceutical industry representatives, including a number of manufacturers, as well as the Association of National Advertisers, filed suit against the Trump administration to block the rule from taking effect. A federal court sided with the industry, blocking the initiative on the grounds that HHS lacked the requisite regulatory power.

Whether the negotiated rate proposal from CMS will face the same fate as the HHS advertising proposal is unclear. Stakeholders are encouraged to submit comments to the agency. The deadline for comment submission is September 27, 2019.

This blog post was co-authored by Justin M. L. Stern and Ryan Wesley Brown.