Hospital Price Transparency

Hospital price transparency is the practice of making pricing information available to the public, enabling patients to understand the cost of medical care before receiving it1. Transparency in hospital pricing has become an important issue in recent years as healthcare costs continue to rise, and patients are often left with unexpected medical bills.

Background

Previously, hospitals were not required to disclose prices. As healthcare costs continue to increase in the United States, one contributor is a lack of price transparency and variable prices. Traditionally, healthcare prices have not been transparent to both physicians and patients. As a result, pricing is not regularly discussed in a physician to patient relationship which is problematic as patients bear high out-of-pocket costs2. In response to these issues, there have been efforts to increase hospital price transparency. In 2019, the Trump administration issued a new rule requiring hospitals to publish their prices online in a machine-readable format. The Hospital Price Transparency Final Rule went into effect in January 2021, and has been a major step forward in increasing hospital price transparency. Hospitals are now required to publish payer-specific negotiated rates and cash prices for those uninsured. In addition, hospitals are expected to display pricing data such as out-of-pocket costs in a consumer-friendly manner for easy comparison across healthcare organizations. Penalties for non-compliance are up to a maximum of $300 per day1.

Benefits

Transparent pricing of hospital services is thought to allow patients to shop around and compare prices which increases competition and thoughtful ordering by healthcare providers. This regulation aims to lower prices by empowering patients with data to shop for lowest price for shoppable services. Patients may also benefit indirectly from increased competition between insurance to negotiate for lower prices with less variability. As price variation decreases, hospitals and physicians may prioritize the quality of services in the spirit of competition. The patient to physician relationship may be bolstered with transparent discussion on pricing and shared decision making with price information. The new availability of this data to health policy researches may be able to utilize it to develop strategies to lower healthcare costs in the US3.

Challenges

Hospital participation with this rule remains an issue. A recent nationwide analysis of US hospitals’ compliance showed about 55% of acute-care hospitals did not share any machine-readable price information4. IT preparedness and resources for adequate data sharing may be a barrier for compliance2. Though this is a step in the right direction, many consider this not to be a solution for effective healthcare cost reduction3. The penalties for non-compliance may not be significant enough for healthcare organizations to invest in IT infrastructure to share prices. Healthcare organizations that are currently benefiting from the previous paradigm of hidden prices may not consider compliance with this rule to be financially advantageous at this time. There are also concerns of implementing price transparency in the electronic health records (EHRs) of not adding significant change in behavior and instead additional information overload for ordering physicians5.

References

1. Medicare and Medicaid Programs: CY 2020 hospital outpatient PPS policy changes and payment rates and ambulatory surgical center payment system policy changes and payment rates. Price transparency requirements for hospitals to make standard charges public. Published online 2019.

2. White AA, Liao JM. Policy in Clinical Practice: Hospital Price Transparency. Journal of Hospital Medicine. 2021;16(11):688-690. doi:10.12788/jhm.3698

3. Glied S. Price Transparency—Promise and Peril. JAMA. 2021;325(15):1496-1497. doi:10.1001/jama.2021.4640

4. Jiang JX, Polsky D, Littlejohn J, Wang Y, Zare H, Bai G. Factors Associated with Compliance to the Hospital Price Transparency Final Rule: a National Landscape Study. J GEN INTERN MED. 2022;37(14):3577-3584. doi:10.1007/s11606-021-07237-y

5. Cho HJ, Wei EK, Krouss M. Price Transparency in the Electronic Health Record. JAMA. 2020;323(3):280-281. doi:10.1001/jama.2019.18573

Submitted by (David Cha)