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Jun 27, 2022 Aditi Ramaswami

Hospitals Are Flouting — And Fighting — Price Transparency Rules

Now one state is fighting back with an innovative new law to crack down on hospitals hiding their fees.
Hospitals Are Flouting — And Fighting — Price Transparency Rules
A Tennessee woman holds her unpaid medical bills. (AP Photo/Mark Zaleski)

The vast majority of U.S. hospitals are ignoring a new bipartisan federal law that requires the facilities to make their service prices available to the public, new research shows, and the Biden administration is facing growing criticism for not doing enough to enforce compliance with the landmark rule.

Now one state, Colorado, has taken matters into its own hands, passing an innovative law to bring its hospitals into compliance with the federal price transparency requirements — despite health care lobbyists’ efforts to sink the legislative effort.

The state of affairs reveals just how far health care interests are willing to go to prevent consumers from making informed financial decisions about their medical care — but also hints at a potential way forward to finally force hospitals to reveal their prices, a first step in making health care more affordable for all.

The federal price transparency law, written into the Affordable Care Act, became effective last January, after former President Donald Trump’s Centers for Medicare and Medicaid Services (CMS) finalized and codified it in federal regulations. Per the rule, each hospital in the U.S. must provide its pricing information as both “a comprehensive machine-readable file with all items and services” and “a display of shoppable services in a consumer-friendly format.”

According to CMS’ description of the rule: “This information will make it easier for consumers to shop and compare prices across hospitals and estimate the cost of care before going to the hospital.”

But despite raking in record profits in 2019 and remaining profitable even during the COVID-19 pandemic, in part because of taxpayer-funded COVID relief, hospitals nationwide have largely ignored the rule. According to a new CMS report, six to nine months after the final rule went into effect, only 6 percent of U.S. hospitals — out of a sample of more than 5,200 — were fully complying with the requirement to make prices available to the public.

Hospitals, particularly hospital chains with market power, are a key driver of sky-high health care costs in the United States. According to a RAND Corporation study of medical claims from the privately insured, while some states had relative prices below 175 percent of Medicare prices, other states — including Colorado — had average hospital charges that were at least 300 percent of the Medicare rate for the same care.

Some Colorado hospitals, including HCA Healthcare’s North Suburban Medical Center in Thornton and Centura Health’s St. Anthony Hospital in Lakewood, charged nearly 400 percent or more, on average, than what Medicare pays.

While consumers can aid enforcement efforts by submitting a complaint to CMS if a hospital is not in compliance with the federal price transparency rule, such a mechanism is likely limited in effectiveness, given polling last summer showing just 1 in 10 U.S. adults were aware of the rule.

During his nomination hearing last February, Health and Human Services Secretary (HHS) Xavier Becerra, whose nomination was backed by the country’s largest hospital industry lobbying group, responded to a question about price transparency, saying that: “The American people are entitled to know what they’re buying, especially if it’s a life-or-death situation. We will do robust enforcement to make sure that price transparency is there for all Americans because for far too long, people have never had an idea of what they’re going to pay if they walk into a hospital.”

More recently, when asked about his agency’s enforcement of the law in an NBC News interview, Becerra said, “There’s got to be a new sheriff in town. If I can implement this the right way, then I’ll… try to do something about it.”

Sure enough, earlier this month, the federal government levied its first fines against a pair of hospitals in a Georgia-based health system for failing to comply with the price transparency law.

But some argue Becerra and HHS have been too soft on hospitals since the rule went into effect.

“The federal government has been slow in enforcing this regulation, but the two cases so far are a great start in at least signaling the federal government’s seriousness in pushing hospitals to disclose the price,” Ge Bai, a Johns Hopkins University professor of accounting and health policy and management, told The Lever. “We did not know whether the federal government was waiting to put in extra effort to push hospitals to comply. So that actually sent the wrong signal to hospitals, saying it’s fine if you don’t disclose — we won’t even enforce it.”

“By Hiding The Price, They Might Gain More Revenue”

Despite strong support for price transparency across the aisle, hospitals nationwide have tried to stave off such mandates. In 2019, the American Hospital Association, the national hospital industry lobbying group, joined forces with several other organizations to sue the Trump administration in order to stop the federal price transparency rule from going into effect.

According to The Washington Post, “The trade group sued, arguing that forcing the disclosure of rates is anticompetitive and won’t actually help patients make more informed decisions. But a federal appeals court let the rules go into effect.”

And when the rules went into effect, hospitals and health systems were quick to attribute their adherence struggles to “the high cost and complexity of implementation.”

But while the cost of compliance could be challenging for some small hospitals, a lack of resources doesn’t seem to be the main reason that many hospitals aren’t complying with the new rule. A recent study of 1,000 hospitals by the consumer advocacy group Patientrightsadvocate.org found that just 0.5 percent of hospitals owned by HCA Healthcare, CommonSpirit Health, and Ascension — the three largest hospital systems, with a combined 2021 revenue of $119 billion — were complying with the federal requirements.

At Johns Hopkins, Bai suggested there might be other reasons why hospitals would be reluctant to come into compliance.

“Some hospitals might believe that if they disclose their price, their revenue would be affected negatively,” she said. “So they think it’s better to not disclose.”

Bai added, “For those large systems, their compliance cost is trivial because they’re huge, have a very large budget, and they already have a very large IT infrastructure. Therefore we can say the reason they do not [comply] is because it is more likely for strategic considerations. By hiding the price, they might gain more revenue or be less likely to lose revenue.”

Caitlin Donovan, senior director at the National Patient Advocate Foundation, agrees. “One of the big problems with the federal transparency law has been that a lot of the major hospital systems make enough money that it costs them less, or it’s more worth their while to just pay the fine rather than actually post prices,” Donovan told The Lever.

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According to Bai, another reason hospitals don’t want to disclose pricing is because it could help payers more effectively negotiate prices for care. That’s because the new federal rule requires that hospitals publicly disclose secret rates they negotiate with insurance companies — which are often far cheaper than what they charge patients without coverage.

Donovan has also heard reports of hospitals posting their prices, but doing so in a way that’s difficult for health care consumers to navigate. “They are doing all sorts of different things that make it really difficult for anyone to look up something in their everyday parlance and figure out what something should cost,” she said.

The American Hospital Association responded to The Lever’s request for comment with a link to the organization’s latest blog post, titled “Hospitals and Health Systems Are Working to Implement Price Transparency Policies and Help Patients Understand Costs.” The post notes that outside groups have “reached wildly different conclusions about the status of implementation across the hospital field.”

“Give The Federal Law A Lot More Teeth And Force Hospitals Into Compliance”

Against the backdrop of limited federal enforcement, Colorado is leading the charge on creatively bringing hospitals into compliance, thanks to a new state law: House Bill 1285.

The law, recently signed by Gov. Jared Polis (D) and effective starting this August, has dual goals of accelerating the timeline on which hospital systems must meet the federal mandate, and curbing the crippling medical debt that plagues more than 100 million Americans.

The measure adds a state-level enforcement mechanism by requiring that hospitals be in compliance with the federal pricing transparency act in order to send Coloradans to collections for medical bills.

David Silverstein, founder and chairman of patient advocacy organization Broken Healthcare, wrote the bill and spearheaded the effort to get it across the finish line.

“H.B. 1285 was our effort to say we have an opportunity to use state law to give federal law a lot more teeth and force hospitals into compliance,” Silverstein told The Lever. “It needs to be a model for the rest of the country so 49 other states can enact similar legislation.”

Virginia, Massachusetts, Alaska, and Minnesota have also recently passed legislation to require hospitals to post their prices, but unlike in Colorado, those bills stop short of tying compliance to medical debt collections actions.

The Colorado bill passed with overwhelming bipartisan support, mirroring the bipartisanship such efforts have enjoyed at the federal level. Presidents Trump, Barack Obama, and Joe Biden have all been vocal in their support of hospital price transparency.

The bill’s chances might have been helped by the fact that Colorado’s hospital prices rank among the highest in the nation.

“Medical debt is a big problem in Colorado,” Bethany Pray, legal director at the Colorado Center on Law and Policy, a consumer group that supported HB22-1285, told The Lever. “I think the percentage of medical debt has surpassed other kinds of debt in terms of what kinds of debt people face. It used to be that medical debt was smaller. Now it’s larger. That’s a national trend.”

The new law could be life-changing for some patients, said Isabel Cruz, policy manager at the Colorado Consumer Health Initiative, a nonprofit helping Coloradans access affordable health care.

“We as consumer advocates always have to think about what the consequences are for patients when hospitals aren’t in compliance with these laws,” said Cruz, “and think about the real financial consequences of when hospitals give egregiously large bills to people that are not in alignment with what would have been posted if they were in compliance.”

“Just One Patient Taking Action On This Would Galvanize The System”

House Bill 1285 didn’t pass without a fight. The Colorado Hospital Association (CHA), several of its member hospitals, and the Colorado and Denver Chambers of Commerce all lobbied against the bill during the legislative session, according to the Secretary of State website. In total, CHA paid their contract lobbying firm, Brandeberry McKenna Public Affairs, roughly $47,000 to lobby on state bills between February and May.

Hospital and business interests argued that since the federal government wrote the rules, they alone should handle enforcement, and that the law could result in frivolous lawsuits, since it allows patients to sue hospitals that sent them to collections while being out of compliance with the price transparency rule.

HCA, the largest hospital corporation in the U.S., also lobbied on the bill. In total, HCA paid the lobbying firms The Fulcrum Group and Husch Blackwell Strategies roughly $75,000 to work on their behalf during the legislative session.

HCA was one of the sponsors of a dark money group called Colorado’s Health Care Future, which fought Colorado’s public option bill. HCA’s hospitals charge some of the highest prices in Colorado. Their Colorado facilities have been featured in national and local news stories about exorbitant medical bills.

The investor-owned health conglomerate also owns Medicredit, a medical debt collection firm that filed collection lawsuits against nearly 8,000 patients in Colorado between 2010 and 2019. HCA Healthcare’s former chief executive officer was paid a record-breaking $109 million in 2018. And earlier in the COVID pandemic, the hospital corporation undermined a nurse union election in North Carolina.

Denver Health, a safety-net health system that appears to be in at least partial compliance with the federal law, also lobbied against House Bill 1285. According to Pray at the Colorado Center on Law and Policy, it’s not the first time the organization has opposed such a measure.

“Denver Health has done a lot of great work,” said Pray. “They also, though, were one of the opponents of a bill several years ago that would have… ensured that people don’t get sent to collections when they’re on Medicaid. Denver Health thought it was going to be too cumbersome, which was really distressing to hear, because it’s a core part of their mission to serve people who are on public benefits or uninsured.”

Ultimately, some concessions were made to the industry. That included stripping out a section  of the bill that would have allowed state regulators to use price transparency compliance as a factor in the hospital license renewal process. The bill was also amended to provide a longer timeline for so-called Critical Access Hospitals — certain rural hospitals with a special designation from CMS — to come into compliance with the federal rule.

But even with these concessions, Silverstein at Broken Healthcare was pleased by the final version of the bill. As he put it, “They didn’t get anything that I thought gave them any advantage.”

Now, thanks to the law, patient advocates believe hospitals across Colorado and beyond might finally change their ways.

“I think it will be helpful,” said Donovan at the National Patient Advocate Foundation. “There’s a good chance just one patient taking action on this would galvanize the system into just posting its prices.”

CHA did not respond to The Lever’s request for comment. And while a review of 17 Colorado hospitals by the consumer advocacy group Patientrightsadvocate.org bolstered the new CMS report’s finding that roughly 6 percent of state hospitals are following the price transparency rule, Katherine Mulready, chief strategy officer at the Colorado Hospital Association, recently told The Denver Post that she believed 85 to 90 percent of hospitals in the state were in compliance.


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