A panel of appellate judges seemed highly skeptical of the hospital lobby’s claims that it is unlawful for the government to compel providers to publish the negotiated rates they reach with insurers for services provided to patients.
While all eyes are on the Supreme Court and whether it will overturn the Affordable Care Act, on Thursday a three-judge panel heard oral arguments in a case that could usher in a sea change within the larger hospital industry, though some economists warn it will ultimately harm patients in the form of higher prices.
It’s hard to see AHA prevailing in the price transparency case before the D.C. Circuit Court of Appeals after listening to the barrage of skeptical questioning from primarily two of the three judges.
The American Hospital Association lost its previous challenge in a lower court.
Barring intervention from the D.C. Court of Appeals, hospitals will be forced to disclose the negotiated rates they reach with insurers beginning Jan. 1.
One key point of contention centered around whether hospitals could in fact produce this information. The hospital lobby contends that they cannot produce neat, itemized rates for consumers. And that “many rates are unknowable,” Lisa Blatt, the litigator for AHA, said Thursday in a digital hearing held remotely.
To the average consumer, this statement might seem absurd, laying bare the complexities of the nation’s healthcare system. How could hospitals not know the prices for services after signing legal contracts with insurers?
The judges seemed baffled, as well, and tried to use their own experiences with the healthcare system to launch into a line of questioning to help understand AHA’s contention that the requirement is too burdensome and impossible to compile in a consumer-friendly list.
“Why is that not doable? Why is it only after Judge Garland leaves the hospital that you know how much to put on Judge Garland’s X-ray charge?” Judge Merrick Garland, appointed to the court by former President Bill Clinton, asked.
Blatt answered that the X-ray charge might be billed on a volume discount or per diem, or in such a way where it cannot be easily itemized, particularly in advance and is an “unknowable number.”
That answer only drew more confusion.
“I still don’t understand that,” Judge David Tatel interjected. “I don’t understand what you just said. Why is the price of the X-ray unknowable?” Tatel, also appointed by Clinton, asked.
Although she raised the issue of volume discounts of a possible explanation, she didn’t elaborate in way that seemingly helped the judges’ understanding.
“If you both got the same care, you would know the amount after the fact but you didn’t know the amount before the fact because no one treated you,” Blatt said.
“Why? It’s just an X-ray?” Tatel asked. “If I have one, I’ll get charged for $100; and if he gets two, he’ll get $200.” Tatel said.
The judges didn’t seem to get an answer that satisfied their line of questioning as they moved into a discussion about trying to use car prices as an analogy.
Get ready for Jan. 1
The use of the word “unknowable” may have been the undoing of the hospital lobby’s argument.
Although, she wasn’t wrong, Delphine O’Rourke, a partner of the life sciences group for the legal firm Goodwin, said that a better word choice may have been “variable.”
Either way, the hearing may have been pivotal, O’Rourke said. And she is advising clients to get ready for Jan. 1 as they are also in the midst of dealing with a deadly pandemic.
Still, economists following the case closely are skeptical of this claim that shining a light on hospital prices will ultimately benefit consumers.
President Donald Trump’s administration has tried to inject transparency into the nation’s notoriously opaque healthcare system. The administration argues that putting pricing information in patient hands will encourage them to shop around, choose less expensive care and ultimately lower healthcare costs.
Paul Ginsburg, an economist at Brookings Institution, is among those that say it will have the opposite effect.
“It will lead to higher negotiated rates between hospitals and insurers,” Ginsburg, who serves as the Leonard D. Schaeffer Chair in health policy studies at the institution, said.
Currently, a hospital system gives insurers a discount in exchange for having access to a greater number of insured patients. But in this new landscape, a hospital system may be less likely to offer those discounts, knowing competitors will learn of them and will likely seek to quickly match them.