Hospital Price Transparency: Why It’s Not Helping Patients Shop for Care
- The push for greater price transparency in healthcare, championed by both the Trump and Biden administrations, isn’t necessarily leading to the consumer savings initially envisioned.
- The initial impetus came from a desire to empower patients to shop for the best prices on medical procedures, mirroring consumer behavior in other markets.
- A rule requiring hospitals to post prices took effect in 2021, but implementation has been uneven.
The push for greater price transparency in healthcare, championed by both the Trump and Biden administrations, isn’t necessarily leading to the consumer savings initially envisioned. Instead, the data being collected is largely being utilized by health systems and insurance companies during contract negotiations, according to a report from NPR.
The initial impetus came from a desire to empower patients to shop for the best prices on medical procedures, mirroring consumer behavior in other markets. President Donald Trump first suggested requiring hospitals to publish their charges online in , believing it would address a common patient grievance: the lack of upfront pricing. As he stated at the time, patients would be able to “go online and compare all of the hospitals and the doctors and the prices.”
A rule requiring hospitals to post prices took effect in , but implementation has been uneven. Compliance has been a significant hurdle, with a study finding that only about a third of facilities had adhered to the regulations within the first ten months. The Centers for Medicare & Medicaid Services (CMS) has since notified 27 hospitals that they would be fined for non-compliance, spanning from to .
Despite these efforts, the available price data is often sparse, confusing, and difficult for patients to interpret. The data is frequently presented in complex spreadsheets and requires a detailed understanding of billing codes, making it challenging for individuals to effectively compare costs. The American Hospital Association has pointed out that calculating these costs involves “detailed assumptions about how to apply complex contracting terms and assess historic data.”
The result is that, rather than patients driving down costs through informed choices, the price transparency data is primarily being used by insurers and healthcare systems to negotiate rates. Eric Hoag, an executive at Blue Cross Blue Shield of Minnesota, explained that his organization uses the data to ensure providers aren’t being paid substantially different rates, aiming to remain “competitive, or…more than competitive against other health plans.”
Industry Negotiations and Limited Patient Impact
This shift in the primary beneficiary of price transparency aligns with findings from health economists. Zack Cooper, a health economist at Yale University, notes that, so far, “there’s no evidence that patients use this information.” A study co-authored by Cooper revealed that patients often follow their physicians’ recommendations for care, passing by multiple lower-priced providers in the process.
The complexities of healthcare pricing also contribute to the limited impact on patient shopping. Unlike easily comparable goods, medical costs can vary significantly even for the same procedure, depending on individual patient needs and unforeseen complications. For example, two deliveries performed by the same obstetrician can result in vastly different bills based on whether medications were administered to induce labor or if an emergency cesarean section became necessary.
Research also suggests that price transparency doesn’t automatically lead to lower prices. A study of a New York initiative even found a marginal increase in billed charges.
The Role of Startups and Future Regulations
The demand for accessible and understandable price data has spurred the growth of a cottage industry of startups, like Turquoise Health, that specialize in collecting and analyzing hospital pricing information. These companies often market their services to both payers and providers, assisting them in contract negotiations.
The Biden administration has attempted to address the shortcomings of the initial policy by pushing for increased data standardization and stricter compliance criteria. President Trump also signed an executive order in aimed at increasing fines for hospitals and doctors who fail to publish their prices, and CMS followed up with a regulation to increase both the fines and the level of detail required in the pricing data.
A Shift in Focus
The current reality suggests that the initial hope of empowering patients to shop for healthcare services may not be fully realized. Instead, the price transparency rule has become a valuable tool for industry stakeholders during contract negotiations. As Marcus Dorstel, an executive at Turquoise Health, explains, the data is now a “vital piece of the contract negotiation” for both payers and providers. Jamie Cleverley, president of Cleverley and Associates, emphasizes that the variation in pricing stems from differing contracts with insurers and a lack of standardization, rather than intentional obfuscation.
While the policy hasn’t yet translated into widespread patient-driven cost savings, the increased availability of pricing data continues to reshape the dynamics between healthcare providers and insurers, potentially leading to more informed negotiations and, a more transparent healthcare system – even if the primary beneficiaries are not, as initially intended, the patients themselves.