A federal judge has upheld a Trump administration policy that requires hospitals and health insurers to publish their negotiated prices for health services, numbers that are generally kept secret.
The policy is part of a major push by the administration to improve transparency in healthcare. Insurers and healthcare providers generally negotiate closed-door deals, and patients rarely know the cost of services until after the fact.
Administration officials said greater price transparency would lead to lower and more predictable prices in an industry that has wide ranges in what insurers pay for services. A simple blood test, for example, can cost $ 11 or $ 1,000. Coronavirus tests show a similar variation, with prices ranging from $ 27 to $ 2,315.
But in a lawsuit, the American Hospital Association said the administration did not have the legal authority to require publication of negotiated prices, arguing that the publication of prices could have perverse effects. On Tuesday, the judge, Carl Nichols, disagreed.
In his decision, Judge Nichols found that hospitals were “attacking transparency measures in general” in an attempt to limit patients’ perception of medical prices.
“Hospitals may be affected by market changes and must respond to a market in which consumers have more power,” he wrote, saying it was not a sufficient reason to “make the rule illegal.”
Judge Nichols, who was appointed to the DC District Court last year, also rejected the other arguments of the hospitals: that the new rules would create overwhelming administrative burdens and that greater transparency could actually raise prices.
“Traditional economic analysis suggested to the agency that informed clients would pressure providers to reduce costs and increase quality of care,” Judge Nichols wrote.
Among health economists and other experts, the effects of price transparency policies remain unresolved. The Trump administration has argued that the published prices will help empower individual patients, as well as employers who buy health insurance for their workers, creating market pressure to discourage flight attendants.
But research on price transparency in health care, which is limited, has shown little effect: A study of a New Hampshire law requiring published prices for common services showed very modest price reductions. And a body of research from other fields, including Chilean gasoline and Danish ready-mix concrete, has found that publishing negotiated prices can sometimes backfire in markets where there are few competitors, increasing prices.
Judge Nichols admitted that “the evidence on the record is not final” by showing that transparency lowers prices, but that it was “more persuasive than a decades-long case study involving Danish ready-mix concrete contracts.”
The hospital rule is part of the administration’s bid to control health costs through transparency, an effort that has become a health policy priority for President Trump. The hospital rule was preceded by an executive order on price transparency in medical care presented at a White House event where patients spoke about their experiences with surprise medical bills.
It is not the only part of that transparency effort to find legal obstacles. A federal appeals court has rejected another rule that would have required drug makers to include the price of drugs in television commercials.
Alex Azar, secretary of Health and Human Services, applauded the court’s decision: “With today’s victory, we will continue to deliver on the President’s promise to provide patients with easy access to healthcare prices. Especially when patients seek needed care during a public health emergency, it is more important than ever that they have immediate access to the real prices of health care services. ”
The hospital association said it would appeal the decision. “The proposal does nothing to help patients understand their out-of-pocket costs,” said Melinda Hatton, the association’s senior vice president and general counsel. “It also places significant burdens on hospitals at a time when resources are depleted.”
The price transparency rule is scheduled to take effect in January.
