Beginning in 2021, new federal regulations that finalized Nov. 15, 2019, require hospitals to disclose all prices negotiated with insurers and health plans. The goal is to give consumers the information needed to promote competition that will lead to lower costs.

Of course, hospitals are not pleased. However, advocates of well-informed, patient-centered healthcare are cheering.

Real numbers, real comparisons

Hospitals already post their standard or “chargemaster” rates for the thousands of codes used in their billing systems online. However, most never pay these rates. The rates are intentionally inflated which gives hospitals an edge in negotiating with insurers.

Under the new regulations, hospitals, which account for roughly one-third of all healthcare costs, must divulge the actual rates paid by health plans and insurers for those same codes.

To help consumers make informed decisions, hospitals will be required to go beyond the individual codes and post their negotiated rates so consumers can examine them before selecting a provider. This requires a hospital to link their services that usually accompany each other, such as laboratory and pathology charges along with surgery.

As for insurers, there is still a two-month public comment period before new regulations become final. As drafted now, the new law would force insurers to disclose negotiated rates, as well as rates paid for out-of-network services. They will also have to give cost information to consumers in advance.

A win for consumers, but fear from providers

The new regulations be a cure-all. However, they do take several important steps toward rebuilding trust in the healthcare system.

Hospitals and insurers fear potential danger for them as the new regulations begin. The industry business model is built around confidential rate negotiations. This means hospitals will fear that revealing their lowest prices will mean having to give those prices to all payers.

Insurers are concerned they will lose the ability to win deeper cuts than their competitors. Hospital groups plan to go to court to block the regulations. They will argue that prices stemming from closed-door negotiations are trade secrets and CMS lacks the authority to mandate their disclosure.

No doubt transparency will be disruptive to the industry. However, it’s believed that making prices more transparent will save money. The regulations should spur greater price competition and reduced prices will benefit all consumers, not just those who will shop around.

When hospitals began reporting quality measures the quality of service jumped despite consumers not using the information directly in the decision making. No hospital wants to be known as the lowest quality or highest priced facility. Also, public reporting of prices will be invaluable to researchers and policymakers on the lookout for unfair business practices.

Without transparency in how our medical services are charged, the consumer cannot make an informed decision when seeking medical care. This is long overdue, so to know the Trump administration has taken this step for the American people, is something that should make us all happy.



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