Hospital Price Transparency Rule: A Common Misconception

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Original story posted on: August 5, 2020

 The misconception is having to charge everyone the same price.

There are so many misunderstandings about healthcare pricing and how it works. One of the most common is that that many believe there is a legal requirement to charge everyone the same price. This is not even close to accurate. Instead, it is a great example of a widely held view that is wrong. 

I think the origin of the misconception is the idea that discrimination is inherently illegal. It is not. In fact, in many situations, discrimination is highly advisable. For example, if you are choosing a surgeon, you don’t want to select one randomly from across the population. For starters, you want a doctor. I would choose a physician who is a fan of the scientific method, not someone practicing under the name Dr. Demento. And I would choose Hawkeye Pierce over Frank Burns.

In most situations, you want to discriminate against the incompetent. That type of discrimination is permissible, as it’s not done for any illegal reason. In many contexts, the law rightly prevents discrimination that is based on race, gender, national origin, and other protected classes. For that reason, it would be improper to charge women more than men for the same service. But other forms of price discrimination are permitted.

Antitrust aficionados may be thinking, “wait, I’ve heard price discrimination is illegal.” There is indeed a federal law, the Robinson-Patman Act, that prohibits price discrimination. But it applies to goods, not services. Professionals like physicians, lawyers, plumbers, and auto mechanics are free to charge people different rates for identical services. 

One of the things that surprises me is how some people believe there is an obligation to charge everyone the same rate, while still being fully aware of the different reimbursement rates paid by payors. If it was true that you needed to charge everyone the same rate, would the disparity between Medicaid payment and Blue Cross Blue Shield reimbursement be permissible?

A common retort is that “we put the same charge on the bill to all patients, the difference is the amount paid by the insurer. But we are charging everyone the same rate.” There is some merit to that argument, but there is the genuine question of whether you can argue that the amount on a bill is your “charge” when you know in advance that the patient/payer will not pay that amount. It is pretty easy for someone to argue that if there is a dollar amount that you expect to take as payment in full when you send your bill, that figure is your “charge,” regardless of what appears on the invoice. 

Later today I’ll be doing a webcast for RACuniversity exploring pricing issues. It will explain the state of the law in this complicated area, and also offer some thoughts about the hospital price transparency rule that takes effect Jan. 1, 2021. As we head into the Perseid meteor shower and the shortening days of August, it’s a gentle reminder that the season is going to change and that the new year is fast-approaching. If you have a question about healthcare pricing and you plan to tune in to the webcast, feel free to send me an email and I will do my best to answer it during the broadcast.

Programming Note: Healthcare attorney David Glaser is a permanent panelist on Monitor Mondays. Listen to his live report, “Risky Business,” every Monday at 10 a.m. EST.

David M. Glaser, Esq.

David M. Glaser, Esq., is a shareholder in Fredrikson & Byron’s Health Law Group. David helps clinics, hospitals, and other healthcare entities negotiate the maze of healthcare regulations, providing advice about risk management, reimbursement, and business planning issues. He has considerable experience in healthcare regulation and litigation, including compliance, criminal and civil fraud investigations, and reimbursement disputes. David’s goal is to explain the government’s enforcement position and to analyze whether the law supports this position. David is a popular panelist on Monitor Mondays and a member of the RACmonitor editorial board.

 

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