Since 2021, hospitals must post clear and accessible pricing information on their websites. This includes list prices and negotiated rates with insurers for 300 shoppable services and cost estimators.
Despite fears of price wars, hospitals need to meet these requirements. Here are a few reasons why:
It’s the law
When patients ask how much a treatment might cost, answering that question in an easy-to-understand way can be complicated. With jargon, multiple costs being listed for one service, and different data formats, it can be difficult for patients to access hospital price transparency information.
Hospitals are required to post standard charges online as part of a Federal rule that took effect in 2021. Those charges must be available in two key formats: 1) a comprehensive, machine-readable file, and 2) consumer-friendly displays of 300 standard, “shoppable” services.
Some hospitals have argued that the required disclosures are misguided and may lead to anti-competitive behavior by insurers. In addition, they point out that the prices posted do not reflect the discounts and rebates negotiated with health plans. But those arguments ignore that patients have no choice but to go to the hospital where their physician has privileges. That’s why patients need to have access to transparent prices.
It’s the right thing to do
The federal government’s new requirement for hospitals to reveal their pricing information has the potential to help consumers better understand how much health care costs and encourage competition. But it has also proven to be more complicated than expected.
Despite increasing fines for non-compliance, hospital compliance with the rule must be revised and completed. Several reasons for this are likely at play.
For one, it isn’t easy to compare prices because of the complexity of contracts with health plans. For example, the rate at which hospitals negotiate with health plans for a given service may be based on a bundle of services or volume.
Additionally, the current regulations allow for flexibility regarding how hospitals report their information (e.g., through consumer-friendly displays and machine-readable files). Greater standardization would make it easier for third parties to develop tools to use the data to serve patients. It could also help drive compliance and facilitate CMS enforcement efforts.
It’s the right thing to ask.
The rule is meant to pull back the curtain on opaque prices that can vary widely by hospital and for the same service—and, in turn, boost competition and give consumers a way to shop around and help drive down those costs. However, evidence of the rule’s impact remains scanty and inconclusive.
The reason is that most hospitals’ online price disclosures need to be completed, legible, or missing large swaths of information, and the format of the machine-readable files released by hospitals needs to be more consistent. Analyzing these files will be easier once there is more standardization in the data submissions and how they are organized.
Moreover, because these prices rarely, if ever, reflect what most patients will see on their bills (because health plans have negotiated rates with hospitals), relying on such a data set to help guide price negotiations is unrealistic. To improve transparency, policymakers need to exert their supply-side leverage more forcefully than individual clinicians and healthcare organizations can.
It’s the right thing to know.
Price transparency promises to empower consumers to shop for the best value healthcare and drive prices down as providers compete for patients. While this goal is noble, the evidence supporting this idea has been mixed.
One key issue is that hospital pricing information can be problematic for patients to understand. Many hospitals have struggled to meet the new rule’s requirements, whether it’s different data formats, multiple costs listed for the same procedure or service, or cryptic codes that reference medical items and services.
Moreover, while hospitals’ standard charges are essential to healthcare cost transparency, other types of costs also need to be disclosed. For example, hospitals must share their negotiated rates with insurers and large employers. This will help consumers shop for the best value by enabling them to see how much they would pay if they opted out of their health plan and went directly to the provider.
