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CEO Message

CEO Message: Flawed Price Transparency Rule Continues to Advance

Last week, America’s hospitals faced a challenging day in an appeals court in Washington, D.C., where a panel of judges appeared skeptical of legal arguments in the American Hospital Association’s (AHA’s) attempt to overturn a federal rule requiring hospitals to disclose confidential, privately negotiated payment rates with insurers —  a fight we are in together.

If the rule is not struck down, it will go into effect on Jan. 1, 2021. It is not clear when the court will issue a decision, but one is expected ahead of the effective date.

And, if the rule does go into effect, let’s be clear: the information should be no surprise to anyone.  News flash — negotiated rates between hospitals and insurance companies will vary dramatically across California and across the nation.  

Looking under the hood of this car won’t look like a Tesla. Rather, it will feel like you are looking at your father’s Oldsmobile V-8 engine. The agreed-upon payment rates between providers and insurers are built on decades of negotiations and positioning in a fee-for-service world. They vary dramatically due to the diversity of hospitals and insurers, the size of the populations served, the geography of the area served and the types of services provided. They vary dramatically due to history and positioning and differing market dynamics. Some of those agreed-upon payment rates have been fair for hospitals, others have been anything but fair for hospitals.

Much like the release of the Dartmouth Atlas some 20 years ago and its look at variations in the use of health care resources, a look at hospital/insurer negotiated rates will raise questions about variation in rates, but help little in informing an understanding of which levels are appropriate.

While hospitals support providing consumers with accurate, relevant information to help them assess the overall value of a health care service, and California is a national leader in doing so, we will continue to work with AHA to seek a delay of the requirements, as major concerns with the rule have not been addressed. These include:

  • Requiring hospitals to provide detailed information on the thousands of negotiated payment rates with insurers does nothing to help consumers understand what they care about most — useful information about their out-of-pocket costs for the care they will receive. 
  • The rule could actually drive prices up, as hospitals become aware of competitors’ negotiated rates and are disincentivized to offer discounts for large numbers of insured patients.

In the meantime, it’s important that hospitals work toward a good faith compliance effort. To support this work, CHA has created an online resource page that includes a detailed summary of the final rule and a 90-minute recorded webinar with the law firm of Hooper, Lundy & Bookman to help prepare for implementation.

We’ll continue to keep you informed of any action by the court and any movement on the work to delay this problematic rule.

~ Carmela