A legal fight is looming over a Trump administration proposal that would require hospitals to list their standard prices for medical services and their negotiated rates with insurance companies—prices some believe are proprietary.
Hospital and insurance groups are likely to sue if the administration moves forward with a final rule, and the litigation could raise thorny legal questions about a company’s right to be competitive and a patient’s right to make informed health-care choices.
One way hospitals and insurance groups may try to fight the rule is by claiming their negotiated prices are trade secrets, health attorneys say.
“We’ve been looking in our research group at whether health-care prices can be trade secrets, and the law is very unsettled on this issue,” said Jaime King, associate dean and professor of law at the University of California Hastings College of Law in San Francisco.
The Centers for Medicare & Medicaid Services issued the proposed rule July 29 as part of a Trump administration push to make health-care costs more transparent.
It would require hospitals to list their standard prices and what individual insurers have agreed to pay for 70 “shoppable” medical services—like psychotherapy, blood tests, MRIs and ultrasounds—that can be scheduled in advance.
The government’s goal is to give consumers the information they need to compare what hospitals charge for similar services and to help them understand their potential financial liability for services they obtain at the hospital. Hospitals that fail to comply would be fined.
Listing the negotiated price an insurance company will pay on a patient’s behalf will show consumers how effective different health insurers are at negotiating lower out-of-pocket costs, attorneys say.
“We believe that this, in turn, will enable health-care consumers to make more informed decisions, increase market competition, and ultimately drive down the cost of health-care services, making them more affordable for all patients,” the CMS said in its proposal.
Legal Authority Questioned
The American Hospital Association was quick to object, contending in a prepared statement that the plan “exceeds the administration’s legal authority.” If the proposal is finalized, the trade group said it would look at its legal options.
“I think it’s reasonable for hospital groups to be looking at potential challenges if the rule is finalized as proposed,” said Philo Hall, senior counsel in Epstein, Becker and Green LLP’s health-care and life sciences practice.
The Affordable Care Act amended the Public Health Service Act by requiring hospitals to make public their “standard prices” for items and services. Attorneys say the CMS is now interpreting standard prices to also include the privately negotiated rates for each individual insurer.
But neither Congress, the Department of Health and Human Services, nor hospital groups have ever considered the standard prices provision in the ACA to include commercial and financial information that is treated as confidential in a highly competitive industry, said Hall. Hall served as counsel to the George W. Bush administration’s HHS Secretary Michael Leavitt and worked closely in that role with Alex Azar, the current HHS chief.
“The concern that the government is overstepping is not frivolous,” said Michael Adelberg, a former senior CMS official who now leads the health-care strategy practice of the Faegre, Baker, Daniels Consulting.
“I don’t know if you can say to two entities ‘You can engage in a contract in a competitive market, but the most important terms of that contract are public,’” he said. “I don’t know if you can do that.”
In a statement, America’s Health Insurance Plans said the CMS proposal would make it harder for insurance companies to bargain for lower rates. The group said even the Federal Trade Commission agrees that making hospitals disclose their privately negotiated rates would create a floor—not a ceiling—for what hospitals would be willing to accept.
When the HHS Office of the National Coordinator for Health Information Technology indicated in a proposal that it was considering adding network discounts and pricing data to the definition of electronic health information, UnitedHealth Group told the agency the details of the negotiated rates and the overall cost of its networks is a trade secret.
“Although federal courts have upheld regulations compelling the disclosure of Medicare cost report information, there is a significant difference between government payment information held by the government and the internal, proprietary information that the proposed regulation would compel UHC to disclose,” the insurance company said in comments in June.
CMS Could Prevail
The CMS proposal is similar to an HHS rule that would have required pharmaceutical companies to disclose the list price of their drugs in TV advertisements. A federal district court judge in July said the rule exceeded the administration’s regulatory authority and blocked it from taking effect.
In the drug pricing rule, the agency pointed to two provisions in the Social Security Act that tell the HHS secretary to make rules necessary for the “efficient administration of the Medicare and Medicaid program” as the source of authority.
But the U.S. District Court for the District of Columbia said there’s nothing in the law’s text, structure, or context to indicate Congress intended to give the HHS the power to issue a rule that forces drugmakers to disclose their list prices.
Attorneys say the agency’s authority to issue the hospital pricing rule is more explicit in the ACA.
“In this case, we have a different statutory provision that delegates the agency with a more specific task,” a former HHS attorney, who asked not to be identified, said in a conversation with Bloomberg Law.
“We’re not talking about a general statute concerning the efficient administration of the Medicare program to drug companies,” the former HHS attorney said. “We’re talking about an explicit statutory provision that directs the agency to require federally funded hospitals to disclose their ‘standard charges.’”
On that, the former HHS attorney said, the CMS could prevail. But it depends on how the agency defines “standard charges.” The agency could ultimately decide not to include negotiated rates after it considers the public comments.
In a statement, the CMS said its proposal is consistent with the ACA and responsive to patients and their advocates who say knowledge of negotiated rates is necessary for individuals to be able to determine their out-of-pocket costs for hospital services.
“All Americans have the right to know the price of their health care up front,” an agency spokesperson said. “Health-care prices shouldn’t be a mystery and consumers will be able to shop for health care just like they do for everything else they buy.”