Hospital compliance with price transparency rule would spur an affordability revolution

New studies confirm what American patients already know: Hospital prices remain elusive.

A study recently published in the American Journal of Managed Care finds that only 5 percent of American hospitals are publishing their minimum negotiated charge for healthcare services as required by a new hospital price transparency rule that took effect at the beginning of the year.

A study published in JAMA found that approximately 80 percent of American hospitals are not complying with this transparency mandate that requires hospitals to publish their discounted cash and secret negotiated rates so that healthcare consumers can shop for the best care at the best prices for the approximately 90 percent of healthcare spending that’s not for emergencies.

The rule clarifies an Affordable Care Act provision granting consumers the right to know prices and was upheld by district and appellate courts last year against hospital industry lawsuits. These AJMC and JAMA findings align with other recent studies published by Health Affairs and the Kaiser Family Foundation showing widespread hospital noncompliance.

These studies provide policymakers with ammunition to more rigorously enforce the price transparency rule. Following bipartisan demands from the House Energy and Commerce Committee, the Department of Health and Human Services recently began policing the mandate. Yet stricter measures are necessary to boost compliance. My organization recently sent HHS Secretary Xavier Becerra a letter with specific recommendations, including meaningfully increasing penalties on hospitals that are not meeting the requirements.

Real prices, like those offered at the growing number of price transparent surgery centers, allow employers, unions, and patients to shop for high-quality care at low, known prices and avoid overcharging hospitals whose high costs eat into employee wages and business earnings.

Consider the story of 32BJ SEIU, a major union representing property service workers in the Northeast. It recently decided to drop New York-Presbyterian from its health plan network because the hospital charged 358 percent more than Medicare for the same care.

“We can’t continue to pay higher prices for care we can get somewhere else,” explained Sara Rothstein, director of the 32BJ Health Fund. By shopping with its feet, the union can enjoy substantial health plan savings, benefitting all its members. All Americans deserve the right to see real healthcare prices before care so they can make similar informed consumer decisions about their healthcare.

Meaningful price transparency is urgently needed to lower high prices that cause nearly two-thirds of Americans to delay care each year. New Johns Hopkins University research published in Axios finds that the nation’s largest hospitals mark up their prices by an average of seven times their cost of care.

Studies examining what patients actually pay are also illuminating. For instance, a 2020 RAND report that analyzed actual claims data shows that hospitals charge 247 percent, on average, of the Medicare rate for the same service. Many hospitals around the country charge 400 percent or more than what Medicare pays.

Price transparency can flip the current healthcare pricing power imbalance on its head. Healthcare is the only economic sector where patients generally don’t know what they’ll pay until after care is provided. Under this opaque dynamic, hospitals have immense pricing power. Healthcare consumers can do little more than hope and pray that their ensuing bills won’t be ruinous.

In contrast, transparent pricing puts patients in the driver’s seat to control their physical and financial health. Suhas Gondi, the lead author of the JAMA paper, explains that price transparency can also reduce prices by “influencing negotiations, exposing abuses of market power, and allowing analysis of price variation.”

When all hospitals post their actual prices, a functional, competitive healthcare marketplace can emerge, putting runaway healthcare cost trends in reverse. Healthcare prices can follow those in the airline industry after it deregulated in 1978 and airfares fell by 50 percent in real dollars while safety and access improved. Economic and anecdotal evidence indicates that price transparency can reduce healthcare prices by 30 to 50 percent.

Straight-up, up-front prices resulting from widespread compliance with the hospital price transparency rule can spur an American healthcare revolution that makes healthcare affordable and accessible for nearly everyone.

Cynthia A. Fisher is founder and chair of PatientRightsAdvocate.org.