FTC Issues Warnings Regarding Hospital Pricing Transparency: Key Issues for Providers to Address

On October 5, the FTC announced that it had sent “warning letters” to 24 health care services companies regarding the obligation to provide patients with “timely, accurate, and complete” pricing disclosures in advance of care, “especially for non-emergency services that are scheduled in advance.” Based on our experience with the FTC’s actions on price transparency in other industries, there are a number of practical issues providers should consider addressing in order to minimize their exposure.

According to the letter from FTC Chairman Andrew Ferguson, providing patients with incomplete, inaccurate, or untimely price information could violate Section 5 of the FTC Act, which prohibits unfair or deceptive acts or practices. By way of example, the FTC letter noted that pricing disclosures that omit charges like physician fees or facility fees, or that cover only a portion of the expected care, may be deceptive because patients may reasonably believe they have been given the total cost of care.

The FTC urged health care entities to conduct a “comprehensive review” of their pricing practices and take “swift” corrective action in the event of non-compliance. The FTC indicated that it will continue to monitor health care companies’ pricing transparency practices and take enforcement action as warranted, signaling the potential for targeted investigations and enforcement action on the horizon.

The letters all followed a standard form. The FTC stated that it is sending similar letters to other health care services providers and encouraged “all healthcare-service providers in the United States” to review their price-transparency practices. The letters also state that they do not reflect a particularized assessment of, or a conclusion about, any recipient’s practices. These statements make clear that the FTC’s concerns are not limited to these 24 companies, but potentially apply to all health care providers.

While hospitals are already subject to CMS price transparency rules, the FTC has made clear that compliance with those rules is not sufficient to avoid liability under Section 5 of the FTC Act. The letters call the CMS rules a “regulatory floor” and make clear that the CMS rules do not provide a safe harbor from liability under the FTC Act.

The potential liability consequences of noncompliance can be significant. Although the FTC generally cannot obtain civil penalties for a first violation of Section 5, it can seek injunctive relief. Violations of an FTC order can carry civil penalties, and state attorneys general frequently join FTC pricing actions and may seek penalties under state law. Although there is no private right of action under Section 5, follow-on class actions under state unfair and deceptive practices acts (many of which are modeled on the FTC act) are also a possibility.

The FTC has a history of enforcement actions against entities whose prices are viewed as deceptive or misleading. Based on our experience with those actions, health care providers may wish to review their price-transparency practices to consider addressing the following categories of potentially problematic conduct:

• quoting a low headline price followed by charges added later;
• providing incomplete price information accompanied by vague disclosures (e.g., “does not include. . .”);
• failing to make price disclosures sufficiently in advance of scheduled care;
• making disclosures that are not “clear and conspicuous”;
• providing inaccurate estimates that are not backed up by actual billing data;
• providing “do it yourself” fee lists that require difficult consumer calculations;
• making “transparent pricing” or “no hidden fees” claims that cannot be substantiated;
• using phone, scheduling, and front-desk scripts that fail to adequately disclose prices; and/or
• providing incomplete estimates that leave out (at least) affiliated physician, facility, or downstream charges.

We are available to provide detailed guidance as to how to address these issues, based on prior FTC enforcement actions.

If you would like to discuss these issues further, please contact Steve Wernikoff at swernikoff@honigman.com, Herb Allen at hallen@honigman.com, or David Ettinger at dettinger@honigman.com.