By Gina Veazey

A new federal rule aiming to give health care consumers more meaningful information about the cost of care obligates hospitals to reveal certain negotiated prices and give consumers an interactive, shopable tool. But a new study, “Early Hospital Compliance With Federal Requirements for Price Transparency,” published in JAMA Internal Medicine, shows hospital compliance with the rule is disappointing. Researchers found only about 20 percent of hospitals were in full compliance as of March, following the January 1 compliance deadline. Moreover, researchers found that many high-revenue hospitals were sidestepping provisions that could help identify market distortions and inform negotiations and price analyses.

The rule, “Price Transparency Requirements for Hospitals To Make Standard Charges Public,”pulls back the curtain on hospital-insurer negotiated prices and is intended to give patients access to information about the market-based cost of care. It expands the information hospitals are required to disclose expands the information hospitals are required to disclose under section 2718 (e) of the Public Health Service Act. Hospitals had previously been able to satisfy those requirements by posting a chargemaster, which contains information that is of little value to consumers.

The new requirements give consumers access to the real-world prices that hospitals and health plans have negotiated as part of their contracts, as well as the hospital’s discounted cash prices. For consumers, these prices allow meaningful price comparisons and better planning for health outlays. The rule requires hospitals to post standard charges prominently on a publicly available website. It instructs hospitals to give patients a shoppable tool, allowing consumers to compare the costs of services like a colonoscopy or an MRI at different hospitals. It also instructs hospitals to post the pricing information in a machine-readable file (such as an Excel spreadsheet). And that’s where the researchers spotted issues.

In the study, researchers looked at compliance by 100 randomly sampled hospitals and the 100 highest-revenue hospitals. Beyond the high-level finding — a full compliance level of about 20 percent overall — they also found “selective” compliance. “Interestingly, the highest-revenue hospitals exhibited selective compliance — 86% provided prices to individual patients through price estimator tools, but only 35% reported payer-specific negotiated rates in a file. This limits any real impact on prices,” said Suhas Gondi, one of the study authors, in a June 14 Tweet thread.

Unlike the consumer-friendly tool, which serves up a discrete set of information specifically for a given consumer, a machine-readable file unlocks access to a complete dataset. Indeed, the prospect of gaining easy access to a treasure trove of hospital pricing data has itself been heralded as an important element of the rule, with implications for driving down cost, for market analysis, and for future price negotiations. “Because patient-oriented price estimator tools make prices visible only for a given patient and insurance plan and not to payers or the public, selective compliance 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,” the researchers wrote.

Enforcement Measures

The research ultimately suggests that the measures used for enforcement of hospital compliance are an insufficient counterbalance to market-based rewards for keeping pricing information private. In the Tweet thread, Gondi says the study authors believe that enforcement provisions are insufficient to drive meaningful compliance by hospitals. The monitoring and compliance plan promulgated as part of the rule lays out a series of three successive actions that the Centers for Medicare & Medicaid Services (CMS) can take in the case of noncompliance — a written warning notice, a request for a corrective action plan, and imposition of civil penalties. The penalty portion of enforcement tops out at $300 per day, an amount that Health Affairs mocks as trivial, noting that, even if a hospital were noncompliant for an entire year, the penalty would be just $109,500, or roughly the “equivalent to seven c-sections.”enforcement

Commentary: Price Transparency in the Balance

Although it is understandable that hospitals would want to keep specific elements of their negotiated pricing private, as Gondi says in the Tweet thread, “If price transparency is going to have any impact, hospitals need to play ball.”
Hospitals have long been vocal about the hardships their patients encounter as health costs rise. And, they have complained that the trend toward higher deductibles has put more patient debt on their books. By their own arguments, hospitals win when systemic costs of health care decline and when patients become part of that solution.

Genuine market-based pricing information is the missing link that is preventing patients from behaving like true health consumers. Price transparency may not be the solution hospitals would choose, but outright subversion of the rule isn’t a productive solution either.

Gina Veazey is a writer and consultant focused on health care. As the former editor of the America’s Health Insurance Plansprint magazine, Coverage, her interests and experience are far-reaching and include topics in public health, consumer health engagement, precision medicine, health information technology, Medicare Advantage, and many others. She can be reached at gina@veazeymedia.com