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Gag Clauses and the Path to Healthcare Transparency

Gag Clauses and the Path to Healthcare Transparency

By: Bridget Keaton
October 22 2021

With interoperability, price transparency, and an emphasis on access to personal data, policies on information blocking are imperative. In the United States, the practice of using gag clauses, contractual provisions that prevent providers from giving patients information on their insurance coverages and out-of-pocket costs, is prevalent in healthcare today.  These clauses prevent greater access to medical data that is instrumental to the success of both the 21st Century Cures Act and the recent amendment in the Public Health Services Act which addresses gag clauses.  In an effort to combat the convolutions of the healthcare system and advance medical technology, gag clauses have recently been banned in an effort to promote greater data access. Today, we will discuss the gag clause, the impact they make on the patient and providers, and unravel how they are used in information blocking.   

Named for their restrictive nature, the gag clause is a tool used to withhold information and limit the power of data.  In 2018, gag clauses were federally banned within the pharmaceutical industry in an attempt to make prices more transparent for patients; however, patient’s care continued to be negatively impacted by the drawbacks of data restriction (Heath, Sara).  It was not until the 21st Century Cures Act’s Final Rule was published in March of 2020 that gag clauses within electronic health records (EHR’s) became illegal, broadening the scope of prevention (Wince, Tyler). Defined as “a provision that may be incorporated in a physician's contract with managed care organizations (MCO), which prevents the physician from being open with patients about the terms of the patient's coverage and therapeutic options” (“Gag Clauses”), these clauses include language which contractually prevents a provider from discussing all of the options or billing processes and are thought to be one of the top contributors to high out-of-pocket costs for patients.  They are used to legally “gag” the physician from sharing useful information with a patient.  When data and information are contractually hidden from a patient, the necessary conversations regarding care may be prevented. Restrictive in nature, gag clauses have the potential to negatively impact a patient and prevent a better care option from being recognized.  

The practice of implementing gag clauses prevents the publication of information, limits the amount of data a patient receives about care options, and often leads to higher costs if there is a cheaper alternative with another provider.  In 2013, the University of Southern California conducted a study and found that 23% of the time, the copay for a drug cost more than the drug itself. This overpayment cost patients $7.69 on average per prescription and totaled $135 million a year in patient overpayments (Van Nuys, Karen).  In addition to payments exceeding cost of drugs, each year, over nine million patients overpay for treatment, or use a more expensive treatment, due to gag clauses and they have been a primary contributor to the high out of pocket costs for patients (Heath, Sara).  These high bills for drugs may fall on the patient or employer, and often go unnoticed since the gag clause exists. However, drug overpayment is just one aspect of the effects of gag clauses.  When gag clauses are applied to the discussion of treatment options, patients are unable to receive the full picture of their options which could result in lesser quality of care. An article published in 1998 by Dr. Liang from Pepperdine University stated that gag clauses limit the discussion of care options and may read as follows: “Do NOT discuss proposed treatments with [health plan] members prior to receiving authorization. Do NOT discuss the [utilization oversight] process with members.  Do NOT give out [plan’s oversight] phone number to members” (Liang, Bryan A).  These contracts prevent a doctor from informing a patient of all options, even if it could lead to a better treatment solution. And lastly, gag clauses can prevent doctors from sharing data even if it may be in the patient’s best interest. For example, various EHR companies create contracts with hospitals and medical practices that bind physicians from sharing about glitches within the EHR’s programming.  This not only impacts the initial patient with the data glitch, but prevents a solution to the software program in the future, potentially causing harm.  Because of the limitation that gag clauses put on data transparency, they can be harmful to patients as they prevent full clarity regarding health information, but they also have the potential to cause emotional harm to physicians as well. 

While gag clauses are detrimental to patients, they also create harmful effects on physicians. When physicians are bound to contracts through MCO’s, they are torn between the “competing directives of professionalism, tort liability avoidance, and employment necessity” (Brand, Gordon). Physicians have the responsibility to serve their patients to the best of their ability as promised in their Hippocratic Oath, but the implementation of gag clauses ties physicians to constraints that can jeopardize these oaths and reduce the quality of care.  With gag clauses, physicians may be handcuffed from informing a patient about treatment options that are outside of their MCO care packages or are instructed to choose one form of care over another due to costs.  This bind for the physician prevents the patient from receiving all of the information and forces the physician to potentially do harm, violating their Hippocratic Oath.  In addition to the stress of navigating a gag clause while adhering to their Hippocratic Oath, physicians are forced to choose between ethics of treatment and employment. Many physicians are bound to employee-at-will arrangements and could be dismissed from employment at any time, without cause.  If a physician decides that they will ignore the gag clause and disclose another form of treatment, knowing it may be best for the patient and therefore abiding to their Hippocratic Oath, they can be terminated. This stress to the physician forces compliance to the gag clauses and perpetuates the system of opaque medical practices.  These arrangements jeopardize transparency and add stress to both patients and physicians that cause harm. 

Gag clauses, unlike other aspects of the 21st Century Cures Act, do not have a direct penalty for non-compliance. As gag clauses were banned from use, they simply became null and void. This would enable physicians to disclose alternative forms of care. However, despite the fact that the clauses are illegal, physicians are still bound to employee-at-will contracts and may still be unofficially forced to adhere to gag clauses.   

The use of gag clauses in the US healthcare system prevents access to healthcare data that is critical for high quality care. Because transparency is a principal element of the 21st Century Cures Act, banning information blocking and the use of gag clauses is imperative for the success of this new law.  Patients will have the ability to hear all of the information from care options to more affordable solutions that better fit their needs. Banning the use of the gag clauses empowers patients to become stronger consumers of healthcare and reduce the opaque nature of healthcare processes.  As gag clauses are outlawed, patients will have greater access to medical information leading to a stronger ability for informed decision making.  

Resources: 

Brand, Gordon. “The Two Faces of Gag Provisions: Patients and Physicians in a Bind”. Yale University. https://digitalcommons.law.yale.edu/cgi/viewcontent.cgi?referer=https://www.google.com/&httpsredir=1&article=1350&context=ylpr 

“Gag Clauses”. The Free Dictionary. 2021. https://medical-dictionary.thefreedictionary.com/gag+clause 

Heath, Sara. “Gag Clause Bills Signed into Law Improves Healthcare Transparency”. Patient Engagement HIT. https://patientengagementhit.com/news/gag-clause-bills-signed-into-law-improves-healthcare-transparency 

Liang, Bryan A. “The Practical Utility of Gag Clause Legislation”. Pepperdine University School of Law. 13 June, 1998.  https://www.ncbi.nlm.nih.gov/pmc/articles/PMC1496964/ 

Van Nuys, Karen; Joyce, Geoffrey; Ribero, Rocio; Goldman, Dan. “Overpaying for Prescription Drugs: The Copay Clawback Phenomenon”. University of Southern California. 12 March, 2018. https://healthpolicy.usc.edu/research/overpaying-for-prescription-drugs/  

Wince, Tyler. “The 21st Century Cures Act and its Impact on Healthcare IT”. Myndshft. 16 March, 2020. https://www.myndshft.com/blog/the-21st-century-cures-act-and-its-impact-on-healthcare-it/