The health care industry is closely watching a recent decision by the Texas Supreme Court that some say could have broader implications on how hospitals and health insurers negotiate their rates.
The court sided with an uninsured woman who was billed $11,037 after an emergency room visit.
The justices said that in order to prove her bill was “reasonable” compared with what an insured patient would be billed, the medical center would need to share in court details about the discounted rates it had with health insurers, data that’s generally seen as proprietary and confidential.
The case outlines the complexities of health care billing that consumers often see as arbitrary, confusing and not transparent, whether they have insurance or not.
Read the Texas Supreme Court decision here
While few dispute that costs are out of control and transparency would help, the ruling is seen as unprecedented by some, who worry it could deal a big blow to free market competition in health care.
The hospital had fought to prevent the data on its charges from being admissible at trial, saying it wasn’t relevant since the woman was not insured. But in a ruling published Friday, the Texas Supreme Court disagreed.
“The reimbursement rates sought, taken together, reflect the amounts the hospital is willing to accept from the vast majority of its patients as payment in full for such services,” the ruling said.
The key benefit of a hospital negotiating to be in a health plan’s network is that it can offer lower rates for a potentially higher volume of patients, like the difference between going to Sam’s Club and a boutique, said Christian K. Puff, a Dallas-based healthcare attorney with Hall Render, a group that represents hospitals.
“They’re private companies that want to be free to set their own rates,” she said.
But the problem for the Texas justices is that uninsured patients like the one who brought the case can too easily be stuck with big bills they couldn’t avoid or afford.
Crystal Roberts was taken by ambulance to the North Cypress Medical Center emergency room in June 2015 after a car accident. She was sent home three hours later, after X-rays, a CT scan, lab tests and other services, and later got a bill for $11,037.35, the full “chargemaster” rate, because she was uninsured.
The chargemaster lists the costs for each procedure, service, drug or test a hospital will bill for. It’s key in the health care revenue cycle and considered the starting point for billing patients and negotiating with health insurers.
But patients don’t get to see it. And some say there is a big incentive to keep it that way.
“Can you imagine a better scenario than “I’m not going to tell you how much I’ll charge you until you’ve already received the service and you have to pay me exactly what I say,” said Timothy S. Jost, an emeritus professor of health care law at the Washington and Lee University School of Law in Virginia. “We’d all like to be in that situation,” he said.
That may be the case, but should it be for the courts or a jury to decide, Puff asked.
“We don’t want courts determining what is usual and customary. We prefer they stay out of pricing, as a general rule,” she said.
Six of the nine justices signed the opinion. The final three issued a dissenting opinion, siding with the hospital. The dissent argued that neither the court nor the plaintiff could state how confidential reimbursement rates could be used to show that charges to an uninsured, self-paying consumer are unreasonable.
The debate is one that’s drawing attention not just in Texas — where both traditional hospitals and freestanding emergency rooms have been in public wars over negotiated rates — but on a national scale.
Health care price transparency has emerged as a hot topic among state legislatures, consumer groups and the federal government as the nation scrambles to contain unwieldy health costs.
There are many approaches that have varying level of success. Since 2005, California has required hospitals to publicly list the average charges for common outpatient procedures.
A handful of major health insurance companies have partnered to voluntarily share data anonymously about what they pay, which has led to regional comparisons. But it’s mainly a research tool, said Dr. David Blumenthal, president of the Commonwealth Fund, a private group based in New York that researches ways to make the health care system more efficient.
“It’s helpful from a policymaking standpoint, but not a consumer standpoint,” he said.
And getting hands on data can be tricky, even for policymakers.
For example, pharmaceutical giant Pfizer sued the state of Texas in 2016 because the Texas Health and Human Services Commission provided two state lawmakers — who were trying to draft budgets– details about Pfizer’s negotiated drug pricing rates in the Texas Medicaid program, the most expensive health care program administered by the state.
The courts have been where more of these cases have been bubbling up. However the movement toward health care price transparency got a major boost last week, when the Centers for Medicare & Medicaid Services issued a more than 1,800 page proposal that, among other issues, expressed concern about surprise medical bills and other cost-related issues.
The agency proposed requiring hospitals to make available a list of their current standard charges via the internet or in a digital format annually, “or more often as appropriate” starting in January.
It is also considering requiring hospitals to issue consumer-friendly communications about their charges that help patients understand the potential for financial liability for seeking hospital services. The public will be able to weigh in with comments through June 25.