Takeaway: Questions remain but yesterday's EO is a significant step in the lurch toward consumerism

Yesterday afternoon, President Trump announced the signing of an Executive Order requiring disclosure of “standard charge information, including charges and information based on negotiated rates and for common or shoppable items and services” within 60 days.

The EO avoids enough specifics that it is hard to know how granular the “standard charge information” will be. There appears to be a bias in favor of disclosing data at the plan level among the president's health policy advisors, based on comments made by CMS Administrator Seema Verma. However, there is a long standing tradition in either regulation or statute of protecting commercially sensitive information. So, what may ultimately get finalized could be more general data like weighted average of charges or median prices.

The EO takes another step forward in price transparency that began in January with the requirement that hospitals post their chargemasters on their website. Chargemasters, of course, are theoretically prices that frequently do not relate to actual negotiated prices. They are, however, valuable for establishing relative expense.

For example, Vanderbilt University Medical Center is known in Nashville as a high-priced provider but maintains its in-network status with most plans because of its preeminent reputation in pediatrics, cancer research and care, among other things. The pricing information provided on their website of average charges for a total knee replacement without complications is $78,243.98.

St. Thomas, an Ascension hospital about one mile away, lists their price as $39,788.84. St. Thomas has a reputation for lower prices and in the case of orthopedics, higher quality.

The problem with the current requirement is that compliance is subjective and spotty. HCA, also known as a low-cost provider, only posts a range of prices of select procedures. Another challenge has been the data is disclosed in a non-uniform manner. For example, Vanderbilt lists procedures by MS-DRG, while Maury County (TN) lists them by internal billing code.

The administration is proposing to change that by requiring the data be presented in a “consumer-friendly form” (i.e. plain English instead of CPT code short descriptors) and that the Secretary develop a monitoring and compliance system.

The impact the EO will have on prices and competition is hard to predict as there is little research. Dr. Larry Van Horn of Vanderbilt University (and past Hedgeye Macrocosm speaker) spoke at the press conference, asserting that his research suggested a 39% drop in prices. However, press reports yesterday, relying on research related to cement in Denmark, suggested prices would go up.

Given how aggressively the industry has resisted price disclosure, we suspect Dr. Van Horn is more correct than those that follow the cement industry in Denmark. The Denmark example and others cited by the Federal Trade Commission in a letter to the Minnesota legislature in 2015 suggest only highly concentrated markets may be at risk for increases when prices are widely known. In markets that are not highly concentrated disclosure should result in prices become more competitive - which is what the president is counting on.

Other provisions of the EO are:

  • A proposal within 90 days to require the availability of information on out-of-pocket costs before care is delivered
  • A report within 180 days from the FTC describing ways in which the Federal government or the private sector impede price and quality transparency
  • A roadmap developed within 180 days to improve data and quality reporting measures across all federal programs
  • Increased access within 180 days to de-identified claims data from all taxpayer funded programs.
  • Guidance issued within 120 days to expand the ability of patients to select high deductible plans that can be used with HSAs.
  • Regulations proposed within 180 days that would expand the definition of eligible medical expenses permitted for health savings accounts, medical savings accounts and flexible savings accounts and would include healthcare sharing ministries and direct primary care.
  • Guidance issued within 180 days to increase the amount of funds that can carry over without penalty in a flexible spending account
  • A report issued within 180 days on additional steps that can be taken to implement the principles of surprise billing announced on May 9, 2019

We will dive into the possible impacts as more details emerge.

Emily Evans
Managing Director – Health Policy



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Thomas Tobin
Managing Director


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