Price Transparency in Hospitals—Current Research and Future Directions

“There are 3 main takeaways from the existing research on the rule. First, the compliance rates have been low. In March 2021, a random sample of 100 hospitals indicated that only 33% reported the negotiated commercial prices for some services. [..] In response to the low compliance, the CMS raised the penalty for noncompliant hospitals to $300 per day for small hospitals and up to $5500 per day for large hospitals beginning from January 1, 2022. Despite the steeper penalties, the compliance rate remains low. For example, Gul et al note that as of March 2022, only 29% to 56% of academic hospitals disclosed commercial prices for 5 common urologic procedures. As of June 2022, only approximately 60% of hospitals disclosed commercial prices across 13 shoppable radiology services.

Second, the commercial prices for the same procedure vary widely across hospitals and within the same hospital. For example, according to our calculations, the IQRs of commercial prices were 65% to 82% of the median price for 5 urologic procedures in the study by Gul et al. For 13 shoppable radiology services, the IQR of the commercial prices was 1.3 times the median across all hospitals, and within the same hospital, the maximum commercial price was 3.8 times the minimum price. [..]

Third, for many hospitals, discounted cash prices for uninsured individuals are lower than the commercial prices negotiated between hospitals and insurers. For example, among the 70 shoppable services specified by the CMS, nearly one-half of the hospitals that disclose both cash and commercial prices set cash prices below the median commercial prices. [..] Gul et al found that some hospitals set the discounted cash price even below the Medicare and Medicaid prices. These findings are surprising because individuals without insurance are in a weaker position to bargain for low prices, which suggests that prices would likely be higher for such patients.

[..] there are 3 important questions that remain to be examined. [..]

First, did the rule lower hospitals’ commercial prices? [..] Gul et al concluded that the rule has had little impact as evidenced by large price variations between hospitals. A more robust inference entails nuanced econometric tests where the effects of the rule on price variations are examined by comparing prerule and postrule prices.

[..] second question is why are so many hospitals still not compliant with the rule? [..]

Research indicates that a hospital’s compliance status is highly associated with peer hospitals in the same market. In addition, the more expensive a shoppable service, the fewer hospitals that disclose cash prices. These findings suggest that hospitals could have concerns about negative repercussions from disclosure. Understanding which factors explain a hospital’s likelihood to comply will help us better understand the rule’s impacts.

[..] third question is what explains the large price variations both between hospitals and within hospitals? Analysis of this question requires an examination of the contextual characteristics of hospitals and health plans that influence price setting. Understanding the factors associated with price variations can enable better design of strategies to reduce health care costs. [..]

More research effort is warranted to provide rigorous evidence on whether price transparency influences health care costs, what structural issues in the market influence the effectiveness of price transparency, and how the behavior of various players in the health care market evolves in response to price transparency. These efforts have the potential to facilitate evidence-based public policy making and influence the purchasing practices of hospital services.”

Full editorial, JX Jiang, R Krishnan and G Bai, JAMA Network Open, 2023.1.5

Research article: Large Variations in the Prices of Urologic Procedures at Academic Medical Centers 1 Year After Implementation of the Price Transparency Final Rule, ZG Gul, DR Sharbaugh, CJ Guercio et al. JAMA Network Open, 2023.1.5