Employers Under Pressure to Make Sure Hospitals Disclose Rates

Companies that cover their employees’ health care face greater responsibility for monitoring pricing now that hospitals in their networks must comply with a new rule requiring that negotiated rates be disclosed.

The rule (RIN 0938-AU22), which took effect Jan. 1, requires hospitals to post the rates they have negotiated with insurers on their websites. The rule could thus enable employers to get payment information that they could use to push their insurers to negotiate better rates with hospitals, helping to ensure that employers are paying hospitals the best rates.

Employers so far haven’t focused on exploring the negotiated rates, but increasingly, employees and groups representing them, such as union-run health plans, may expect them to pay attention to rate disparities as part of their fiduciary duties under the Employee Retirement Income Security Act (ERISA).

A lawsuit filed March 26 in the U.S. District Court in Massachusetts gives a hint at that expectation. The suit by the Massachusetts Laborers’ Health and Welfare Fund, a union group, against Blue Cross Blue Shield of Massachusetts (BCBSMA) charged that the health insurer thwarted the union plan from meeting its fiduciary duties because the insurer refused to provide claims information that caused the fund to overpay providers by millions of dollars.

BCBSMA commented that, “We strongly reject the erroneous claims made in this complaint, which misstates facts and mischaracterizes many events. We maintain best-in-class claim pricing, which helps drive health care affordability. Our comprehensive payment integrity programs, claim edits, and quality assurance programs ensure best-in-class processing of provider payments. BCBSMA consistently exceeds industry standards of audited claims accuracy.”

A high-profile lawsuit out of California also put a spotlight on hospital transparency. A $575 million settlement in an antitrust suit filed by then California Attorney General Xavier Becerra, now secretary of the U.S. Department of Health and Human Services; employers; and unions against Sutter Health was given preliminary approval in March by the California Superior Court in San Francisco. The settlement, which has been hailed by employer groups as setting a national precedent, requires the health system to end a range of anti-competitive practices, including price secrecy.

Use Plan Contributions Prudently

Health plan sponsors, usually employers, have a fiduciary obligation to use the contributions made by both the employer and employees in “a prudent manner” for the “exclusive benefit of plan participants and beneficiaries,” Tony Sorrentino, a lawyer and CPA who is president of advisory firm Health Plan Fiduciary Compliance LLC, based in Denver, said in an interview.

“The plan participants should have the right to have access to better health care and cheaper health care,” Sorrentino said. Employer plan sponsors have a responsibility to keep plan costs low, which affects out-of-pocket costs as well as premiums.

Unlike with retirement plans, there are no havens under ERISA for health plan sponsors, Sorrentino said. Safe harbor regulatory guidelines outline steps retirement plan sponsors can take to be deemed to have fulfilled their fiduciary obligations.

Health plan sponsors need to ensure that hospitals in their networks “are keeping up their side of the bargain,” by complying with the Centers for Medicare & Medicaid Services’ hospital transparency rule, Sorrentino said. That could include insisting that third-party administrators, often insurers that set up networks and negotiate rates, ensure that network hospitals are disclosing rates as required, he said.

“Most employers have not historically thought as actively about their role as fiduciaries under the health plan as they have under the retirement plan,” Michael Thompson, president and CEO of the National Alliance of Healthcare Purchaser Coalitions, said in an interview. “A lot of it is because there has been more activity—suits—in the retirement area around reasonable due diligence,” he said. The coalition is composed of business groups that represent employers on health-care benefit issues, including costs.

“Plan sponsors need to be on their game as they’re going to bat for their employees and their families,” Thompson said. “The opportunity for mismanagement and conflicts of interest to arise in the supply chain has grown so much that plan sponsors could be held liable if they’re not on their game in asking the right questions at the right time.”

Many Hospitals Not Complying

Evidence so far is that many hospitals are not disclosing rates as required under the rule. A recent study published in the journal Health Affairs found that of 100 hospitals sampled, 65 were “unambiguously noncompliant,” either not posting any files or posting files that couldn’t be downloaded, or not including payer-specific negotiated rates as required. There are about 6,000 hospitals in the U.S.

American Hospital Association public policy group Vice President Molly Smith said in an email that the analysis was “subjective” and “oversimplified.”

It “does not accurately reflect the work that hospitals have undertaken to help patients access financial information about their care, nor does it recognize that hospitals were on the front line of the COVID-19 pandemic for the 10 months leading up to January 1,” she said.

Hospitals are helping patients understand their costs in a number of ways, including through the growing use of out-of-pocket estimator tools, Smith said.

“The disclosure of privately negotiated rates does not help patients understand what they will actually pay, which is why the AHA has urged the Biden administration to re-evaluate the rule and use discretion in its enforcement during the public health emergency,” she said.

An analysis of 175 health systems conducted by professional services consulting firm Deloitte & Touche LLP found that some “just kind of data-dumped a large file, which could be obscure, hard to read,” Anne Phelps, U.S. health-care regulatory leader, said in an interview.

“Some of them are easy to navigate and some of them are not,” Phelps said.

Low fines of only $300 a day may not be a strong deterrent for many hospitals.

Employer Plans to Come Under Next Rule

Health insurers as well as employer-sponsored health plans will be subject to their own requirements to disclose negotiated rates under a separate rule (RIN 0938–AU04) that begins to take effect in 2022. But the hospital transparency rule doesn’t directly regulate employer plans, Elinor Hiller, a partner with Alston & Bird LLP, said in an interview.

However, under the hospital transparency rule, employers “could benefit given that employers spend an enormous amount of time thinking about the cost of insuring their employees,” Hiller said.

“In the rule, there’s more discussion and contemplation about how greater transparency and the negotiated rates of other payers may influence the negotiation between the payer and the hospital, for example, or a payer and another type of provider as more information comes out under the Transparency and Coverage Rule” that takes effect in 2022, she said.

Many employers that sponsor health plans are waiting for analysts to start compiling the data and offering it in a manner that they can use to compare prices negotiated by insurers, Marni Jameson Carey, executive director of the approximately 1,200-member Association of Independent Doctors, said in an interview. The nonprofit organization supports hospital rate transparency.

But the lack of compliance with the rule by hospitals is blocking that, Carey said.