The Trump administration believes it has the authority to compel hospitals to reveal secret pricing information tucked into their contracts with insurance plans, but the case isn't entirely clear-cut.
A legal challenge to the proposed rule requiring the disclosure from hospitals and insurance companies is likely, and experts are split on the odds payers and providers could beat back the effort in court.
Hospitals and insurers are loathe to share payer-specific negotiated prices, arguing it would harm patients in the form of higher prices or limited access to care. Payers believe it would create a floor for hospital prices, encouraging any hospital being paid less to demand higher reimbursement, while hospitals argue it will fuel anticompetitive behavior among payers and reduce access to care.
"Given the disruption this would cause in the industry, I'd give a strong likelihood that this will be struck down as arbitrary and capricious," Thomas Bulleit, a partner at Ropes and Gray, told Healthcare Dive.
The proposed rule released last week would require hospitals to disclose negotiated rates with specific insurers for at least 300 "shoppable services."
Regulators believe a section of the Affordable Care Act gives them the power to force negotiated rates out into the open. The section in question discusses "standard charges," and requires hospitals to release standard charges for services provided.
Some lawyers argue the ACA left standard charges largely undefined. But President Donald Trump, through an executive order issued earlier this summer, went a step further to define standard charges to include negotiated rates.
The key in the administration's case against payers and providers is that executive order, James Burns, a partner at Akerman, told Healthcare Dive.
"The idea that there is no possibility for the administration to prevail is greatly overstated," Burns said.
Together with the ACA, the order creates a strong case, he said. Any legal challenge would likely have to include attacking the executive order, he said, and very few of the more than 13,000 executive orders in the country's history have been successfully overturned.
Jonathan Emord, president of Emord and Associates, agreed. The ACA, coupled with the executive order, along with the "broad deference accorded agency interpretations of statute," means the administration is likely to prevail, he told Healthcare Dive.
But not everyone agrees it's as simple as looking at standard charges as a proxy for negotiated rates.
Donna Thiel, shareholder at Baker Donelson, told Healthcare Dive, "there is a wide gap between 'hospital's standard charges' and 'payer-specific negotiated rates.'" While there may be room for interpretation, Thiel thinks it's a stretch.
Still, it's just a proposed rule from CMS and there's no guarantee rate disclosure will make it into the final rule. The agency is now requesting comments from the public.
In public statements, the American Hospital Association and America's Health Insurance Plans have said the disclosure is a bad idea and would harm consumers. AHA has said the proposal exceeds the government's legal authority.
And, while the administration cites ACA language as support for its rule, at the same time, the administration is no longer defending the ACA against an ongoing legal challenge from a coalition of red states led by Texas, meaning one of the sources it cites for its legal authority could be invalidated.