Hospitals Sued to Keep Prices Secret. They Lost.

Let the Sun Shine In…………………………………………………………

This will be the end of PPO networks and will turbocharge the explosive growth of Reference Based Pricing strategies…………………..

The decision was a victory for the Trump administration, which sees pressure from patients as a way to control health costs.

By Sarah Kliff and Margot Sanger-Katz

June 23, 2020

A federal judge has upheld a Trump administration policy that requires hospitals and health insurers to publish their negotiated prices for health services, numbers that are typically kept secret.

The policy is part of a major push by the administration to improve transparency in health care. Insurers and health providers usually negotiate deals behind closed doors, and patients rarely know the cost of services until after the fact.

Administration officials said more price transparency would lead to lower and more predictable prices in an industry that has huge ranges in what insurers pay for services. A simple blood test, for example, can cost $11 or $1,000. Coronavirus tests show a similar variation, with prices from $27 to $2,315.

But in a lawsuit, the American Hospital Association said the administration did not have the legal authority to require the publication of negotiated prices, arguing that the publication of the prices could have perverse effects. On Tuesday, the judge, Carl Nichols, disagreed.

In his decision, Judge Nichols found that the hospitals were “attacking transparency measures generally” in a bid to limit patients’ insight into medical prices.

“Hospitals may be affected by market changes and need to respond to a market where consumers are more empowered,” he wrote, stating that was not reason enough to “make the rule unlawful.”

Judge Nichols, who was appointed to the D.C. District Court last year, also rejected the hospitals’ other arguments: that the new rules would create overwhelming administrative burdens and that increased transparency might actually drive up prices.

“Traditional economic analysis suggested to the agency that informed customers would put pressure on providers to lower costs and increase the quality of care,” Judge Nichols wrote.

Among health economists and other experts, the effects of price transparency policies remain unsettled. The Trump administration has argued that published prices will help empower individual patients as well as employers that buy health insurance for their workers, creating market pressure to discourage overcharging.

But research on price transparency in health care, which is limited, has not shown large effects: A study of a New Hampshire law requiring published prices for common services showed very modest price reductions. And a body of research from other fields, including Chilean gasoline and Danish ready-mix concrete, has found that publishing negotiated prices can sometimes backfire in markets where there are few competitors, raising prices.

Judge Nichols conceded that “the evidence in the record is not definitive” in proving that transparency lowers prices, but that it was “more persuasive than a decades-old case study involving Danish ready-mixed concrete contracts.”

The hospital rule is part of the administration’s bid to control health costs through transparency, an effort that has become a health policy priority for President Trump. The hospital rule was preceded by an executive order on price transparency in health care unveiled at a White House event where patients spoke about their experiences with surprise medical bills.

It is not the only part of that transparency effort to encounter legal obstacles. A federal appeals court has thrown out another rule that would have required drug makers to include the price of medications in television advertisements.

Alex Azar, the secretary of Health and Human Services, applauded the court’s decision: “With today’s win, we will continue delivering on the president’s promise to give patients easy access to health care prices. Especially when patients are seeking needed care during a public health emergency, it is more important than ever that they have ready access to the actual prices of health care services.”

The hospital association said it would appeal the decision. “The proposal does nothing to help patients understand their out-of-pocket costs,” said Melinda Hatton, a senior vice president and general counsel for the association. “It also imposes significant burdens on hospitals at a time when resources are stretched thin.”

The price transparency rule is scheduled to go into effect in January.

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