A Look at Hospitals and Pricing Transparency Compliance

The Hospital Price Transparency Rule, mandated by the Centers for Medicare & Medicaid Services (CMS), which took effect at the start of 2021, requires that all US hospitals publicly display prices for 300 “shoppable services” and provide a downloadable and machine-readable data set for all services provided. But according to recent research, only a small proportion of hospitals were following the requirements outlined in the new federal rule as of early 2021.

A report published June 14 in JAMA Internal Medicine looked at 100 randomly sampled hospitals and the 100 highest-revenue hospitals, conducting data acquisition and analysis between March 1 and 10 of 2021. Of the 100 randomly sampled, the majority (83) were non-compliant with at least one major requirement, according to a group of Harvard researchers. Meanwhile, an analysis of the 100 highest-revenue hospitals determined that 75 were non-compliant with at least one requirement.

Although compliance could improve over time, the selective compliance seen early on suggests reluctance that could continue, the authors noted.

A separate study published June 21 in the American Journal of Managed Care also revealed that a significant proportion of US hospitals are not fully compliant with the new price transparency legislation. According to the findings, about 60% of the hospitals displayed their cash prices, and just 5% showed the minimum negotiated charges.

To arrive at their findings, the researchers examined the public-facing websites of the 20 hospitals named in the 2020-2021 US News & World Report honor roll and did so between February 1 and February 14 of 2021. They chose two imaging studies (brain MRI and abdominal ultrasound) and three hospital services (cardiac valve surgery, total joint replacement, and vaginal childbirth).

True Transparency Could Take Time

Compliance may be limited, some say, because the cost of disclosure potentially outweighs the penalty for noncompliance. “The most obvious issue is that hospitals don’t have a strong incentive to reveal their prices,” Joseph Antos, PhD, a coauthor of the American Journal of Managed Care paper and a health policy scholar at the American Enterprise Institute, told First Report Managed Care, calling the $300 per day fine “chickenfeed.”

Hospitals are not complying yet because their computer systems are not set up for it, he explained, and because it is not in their best interest. A system that complies with the regulation, provides information that is useful to patients, and avoids undercutting the commercial position of a hospital requires a significant financial investment. “Hospitals were not on that road prior to January, and they are largely still not on that road,” he said, so “this is not something that is going to happen very quickly.”

Dr Antos does, however, think that compliance will improve over time, at least in part because hospitals may be criticized for their noncompliance. “They’re going to do their best without investing an enormous amount of money in the short run,” he predicted.

Over time, other factors may also provide a nudge, such as changes in the way hospitals are paid, changes in the way patients and referring physicians behave, and new federal rules. “I see us moving in that direction,” he added, but this is not going to be a sprint to a finish line when we’re not entirely sure what that finish line represents.

Lead author Peter Cram, MD, MBA, professor of internal medicine and chair of the department of internal medicine at the University of Texas Medical Branch, said that insurers are better positioned than hospitals to provide consumers with price-related information in a transparent manner.

While the information required from hospitals is meant to encourage competition and thoughtful shopping, “it misses the mark,” he and Dr Antos wrote in a JAMA Health Forum paper published April 5, 2021. The requirement doesn’t tell consumers what they are most interested in knowing, like what they will need to pay out-of-pocket if they require health care and whether there is a lower-cost alternative to hospital care.

Services are named using terms and abbreviations that are often unclear even to those in the medical profession, they explained. And considering that hospital care is provided as a combination of services that isn’t always predictable ahead of time, it is not easy to determine what a hospital might bill or what an insurer will cover.

Dr Cram and Dr Antos view the Transparency in Coverage rule, which requires insurers to report detailed prices beginning in 2023, as a “better starting point” than the recently implemented rule geared toward hospitals. Insurers have an incentive to nudge their enrollees in the direction of lower-cost providers and can more accurately determine what any given enrollee would pay out-of-pocket for care, they noted.

Instead of searching a variety of websites for price data, enrollees would be able to use an insurer’s pricing tool to view cost differences across providers. And that type of on-demand information would enable enrollees to know the cost when deciding where to obtain care rather than discovering it after the fact.

Price Transparency Alone Is Not Enough

Even though the recent research examining early compliance among hospitals reveals room for improvement, those findings have helped identify some of the problems and gaps that need to be filled, said
Jeffrey T Kullgren, MD, MS, MPH, a research scientist at the VA Center for Clinical Management Research, VA Ann Arbor Healthcare System and an Associate Professor of Internal Medicine at the University of Michigan. These findings could lead to changes in the penalties for noncompliance or other approaches that would encourage hospitals to comply more consistently.

There is still work that needs to be done, he told First Report Managed Care, “But I’m optimistic that the supply of information will become more consistently available to patients over time in the coming years” via hospitals in the case of the new rule and via health plans in the case of the rule that will take effect in 2023.

However, Dr Kullgren believes there is even more work that needs to be done to make that price-related data accessible and useful to patients. Previous research has shown that price transparency tools are infrequently used by patients and have not significantly impacted consumer out-of-pocket spending, so several actions are needed to help ensure that new price transparency requirements lead to clinical and financial benefits.

Patients ought to be made aware of the information’s existence and made aware of the benefits of using that information. Incorporating price information into health care delivery at the time and place when it is most beneficial to the patient is another crucial step. Suppose pricing information can be incorporated into electronic health record systems. In that case, it could be considered right along with all other pieces of data that clinicians use in their decision-making and conversations with patients.

“We need to figure out how health care systems can make this information more consistently available at the point of care and also help clinicians understand and be comfortable with working that information into their conversations and their decision-making with patients,” he said.

When considering both the hospital and insurer price transparency rules, Sherry Glied, PhD, dean and professor at New York University’s Wagner School of Public Service, said they are not likely to make much of a direct difference to health care costs. Even so, the shift in focus from utilization to prices “reflect a seismic change in thinking about cost containment in health care,” she wrote in a JAMA Health Forum paper published April 20, 2021.

For decades, she explained, cost-containment policies have gone after unnecessary utilization and waste. But some health policy analysts have long argued that prices—not quantities—explain the high health spending seen in the US. This argument has gained traction because of newly available data revealing that rates paid for hospital and physician services are significantly higher for commercial insurers than Medicare and that prices vary widely among commercial payers even when the care is delivered within the
same facilities.

The price disclosure rule will make plenty of information public, explained Dr Glied, but once that information is put out there, the real question is: Who will look at it, and how are they going to use it?

The most straightforward notion is that individual consumers will utilize the transparency tool, she told First Report Managed Care, but that’s an unlikely outcome. Most patients have insurance, so it is not obvious what the prices charged by a hospital mean to them. In addition, prior research has shown that only a small proportion of patients make use of price transparency tools when they are made available.

Another possibility is that hospitals will be the primary users of hospital price transparency tools. “They will be looking at what their competitors are getting for different services, and they’ll actually use that in their negotiating,” Dr Glied explained. Similarly, insurers will likely make use of the information to inform their deal-making. And it is a phenomenon that could wind up leading to higher prices.

From her vantage point, the most beneficial aspect of price-related data is that it can enable researchers to better understand what leads to higher prices in different contexts. This could ultimately lead to policy changes that extend beyond just the revelation of prices to help contain costs. And that, she says, is what will make a difference.