Despite Transparency Push, Cost of Hospital Care Remains Inscrutable
Stories that caught our attention
President Joe Biden issued a wide-ranging executive order earlier this month designed to increase competition in the US economy. As part of that goal, Biden directed the Department of Health and Human Services to “support existing hospital price transparency rules and to finish implementing bipartisan federal legislation to address surprise hospital billing.”
“President Biden is putting his foot down,” Alexandra Ellerbeck reported for the Washington Post, signaling that he will enforce the rules established by the prior administration. So far, few hospitals are in full compliance with them.
The Trump-era rules require hospitals to disclose the prices they charge to various payers, including insurance companies and uninsured patients paying out of pocket. While some stakeholders assert that prices negotiated with insurance companies constitute legally protected trade secrets, recent research from the UC Hastings College of the Law found no statutory basis for this claim in federal or state law.
The disclosure rule also specifies that hospitals must offer a consumer-friendly tool that allows prospective patients to estimate their costs for 300 common procedures. That is a far less controversial and more common practice that predates the new federal regulation. These federal transparency measures, intended to drive down prices by encouraging competition between hospital systems, took effect on January 1, 2021.
California has had its own set of hospital price transparency requirements since the mid-2000s, and a new statewide database with information about negotiated payment rates is currently being set up.
American Hospitals Aren’t Posting Prices
Studies and news reports indicate that few US hospitals are complying with the federal rule. Research published in June in the American Journal of Managed Care and JAMA Internal Medicine reached that conclusion, as did a new CHCF-supported study from Stanford University that found lack of compliance predominates among California hospitals as well.
Even when hospitals do comply, consumers may have a hard time comparing costs, according to California Healthline reporter Bernard F. Wolfson. He recently spent months trying to compare prices between Kaiser Permanente in Oakland and a nearby Sutter Health hospital using their price transparency data. “It was a fool’s errand,” he wrote. “My efforts ultimately yielded just one helpful piece of advice: Don’t try this at home.”
The pricing transparency rule, which was finalized in November 2019, gave hospitals more than a year to fulfill requirements that they post their prices. Because hospitals already had their own pricing data, that should have been sufficient time to obey the rule even through the upheaval of the COVID-19 pandemic, said economist Morgan Henderson and policy analyst Morgane Mouslim in a March blog post for the journal Health Affairs.
When they surveyed 100 hospitals in January and February, they found that “65 were unambiguously non-compliant” with the rule. Henderson and Mouslim expressed hope that their survey findings would soon be “outdated as more hospitals move to comply with the regulation.”
Unfortunately, more recent research suggests that widespread failure to follow the rule has continued.
Few consumers are aware that the price transparency rule even exists, according to recent polling.
The American Journal of Managed Care study looked at the websites of 20 prominent US hospitals and found that “a significant proportion of hospitals were not in compliance.” Researchers reported that “only 60% of hospitals display their cash prices, and 5% display their minimum negotiated charges on their public websites.”
The JAMA Internal Medicine study by researchers from Harvard and Yale found that only 17 of 100 randomly sampled hospitals complied with at least one aspect of the rule. Among the US hospitals with the highest revenue, the authors found that 25% complied with at least one aspect of the rule.
Only One in Three California Hospitals Are Fully Complying
In the Stanford study, researchers led by health economist and professor of medicine Laurence C. Baker found only 30% of California hospitals complied with the price transparency rule by posting a machine-readable file (such as an Excel spreadsheet) with all required information.
About 45% of hospitals “provided a file reporting at least some payer-specific prices.” Of the 391 hospitals reviewed, 200 provided a tool where consumers could search for the expected costs of at least some services.
Twenty-seven percent of the hospitals were completely noncompliant, leading the authors to conclude that “a considerable amount of additional work will be required to achieve the goals of the new regulation.”
The Problem with Partial Compliance
The Stanford researchers said it wasn’t clear why hospitals failed to post their prices. They offered possible barriers to compliance, such as the extent of the requirements and reluctance to disclose what they charged different payers.
It is “possible that hospital resources are associated with compliance,” they wrote. “Hospitals in counties with higher poverty and unemployment rates, and rural hospitals, were less likely to be compliant. On the other hand, the largest hospitals were also less likely than smaller hospitals to be fully compliant.”
In their JAMA Internal Medicine study, the Yale and Harvard researchers noted that hospitals were more likely to meet the requirement for a price estimator than they were to make all of pricing data fully accessible.
“Hospitals exhibited selectively higher compliance with the requirement of a price estimator for patients to view personalized out-of-pocket costs for shoppable services; a smaller proportion made their data fully accessible to the public by posting a machine-readable file with payer-specific negotiated rates,” they wrote. That kind of selective compliance, they warned, “may fail to expose abuses of market power, affect price negotiations, or support broad analysis of price variation to the extent intended by the transparency initiative.”
As Usual, Consumers Remain in the Dark
Few consumers are aware that the price transparency rule even exists, according to a KFF / Peterson Center on Healthcare poll conducted in June. Only “9% of adults know that hospitals are required to post the prices of treatments and procedures on their websites,” Dave Muoio reported in Fierce Healthcare.
That lack of awareness is a significant barrier to greater competition and reduced health care costs. “With only 1 in 10 adults aware of the federal requirement for hospitals to publicly post prices for services, the potential for price transparency efforts to reduce costs remains a question,” Muoio reported.
Knowing about the rule and trying to use the data would not necessarily lead to more competition for patients or drive prices down, Wolfson reported in California Healthline. “The prices I examined were as transparent to me as hieroglyphics,” he wrote. “I’m pretty sure that hospital executives — who unsuccessfully sued to stop implementation of the price transparency rule — are not losing any sleep over that fact.”