Shedding dim light on hospital bills, part II

As noted earlier this week in part I of the ongoing saga of efforts to improve the transparency and utility of hospital pricing practices, the Trump administration notched a relatively rare legal victory in federal court last month. Judge Carl Nichols upheld a November 2019 federal rule requiring more extensive disclosure to consumers of real prices, not just artificially inflated chargemaster rates.

The initial lesson is that investing the time and effort to maneuver through the required steps of regulatory revisions, without adding counterproductive inflammatory rhetoric to the process, can work — particularly when harnessed to more popular objectives and easier target villains. The rule-making effort by the Centers for Medicare and Medicaid Services benefitted greatly from the indefensible pricing and billing excesses of the hospital industry (as in, “Just ignore the fake prices, hope that someone else pays most of your still-inflated bill anyway, and then we’ll tell you about what’s left for you later.”). The regulatory efforts also were more nuanced than the past work of the administration’s usual legal advisers from the firm of Arbitrary & Capricious (see, e.g. Medicaid work requirement waivers).

The Howard University Hospital is pictured in Washington October 3, 2014. Via REUTERS/Joshua Roberts

It might appear that the ambiguous statutory language of overreaching health care legislation that promises more than it has a credible and consistent plan to deliver (see Affordable Care Act, 2010, just pick a page at random …) can indeed be reshaped later, in the right hands, like more malleable plastic if not a Transformer toy. However, that underestimates the remarkable elasticity of longstanding health care policies and practices that, even when stretched too far, usually bend but don’t break.

Of course, the hospital industry will appeal the June 23
ruling to the US Court of Appeals for the DC Circuit. A fresh mix of judges
there may decide the issues differently, but it’s not likely. Moreover, the clock
also is running out for implementation of the price transparency rule (and
another one to follow for the health insurance industry). Because hospital
leaders chose to play the short-term game of “legal chicken,” many hospitals
will simply be unprepared to comply quickly with the January 1, 2021 deadline,
so practical accommodations and watering down of money penalties may be
necessary anyway. A shorter list of price estimates for less complex shoppable
services seems like a more achievable first step.  

Whether the consequences of even full-strength versions of these
regulatory changes will be consequential is more conjectural, given the limited
interest thus far by consumers in actually utilizing price transparency tools
to change market behavior. Nevertheless, other third-party payers and health
care analysts may benefit more from spillover effects of any enhanced price
competition potential that this transparency tool can unleash.

Counterarguments by health sector interest groups that too
much price transparency could lead to less, not more, price competition seem
like self-serving diversions. Few industries have such deliberately camouflaged,
convoluted, and cozy schemes to hide their real prices from potential value
purchasers. The goal behind such practices, not surprisingly, is to keep prices
higher, not lower. Mission accomplished thus far. Cui bono?

Healthcare workers cross a skybridge connected to the Mount Sinai Kravis Children’s Hospital as the outbreak of the coronavirus disease (COVID-19) continues in the Manhattan borough of New York U.S., May 8, 2020. REUTERS/Lucas Jackson

Nevertheless, we shall hear a renewed violin concerto plucking at our heartstrings about mounting COVID-19 financial losses throughout the hospital industry and the incredible pressure on their unquestionably brave and resilient medical staffs as front-line guardians of our health during a pandemic. So it’s not just the Affordable Care Act alone that continues to shape shift over time. Our own ongoing conflict between wanting guaranteed access to just-in-time medical repairs and hoping to avoid its full costs (let alone inflated ones) provides a different type of price elasticity. Past practices that keep health care costing more than it is worth to us individually can snap back into place as long as health care vendors can find new places to shift and hide those costs collectively.

But because we already have done far worse in combating the persistent virus of blame-shifting and buck-passing throughout most modern health policy history, we should at least hope to do better through a little more transparent price competition. Letting in some sunlight (not swallowing more bleach) remains the best disinfectant.