A new federal policy requires hospitals to release details about the prices of common services they provide, aiming to help patients to do comparison shopping before they make choices about where to get many common services. The policy also requires the release of a range of other price information.
Yet four months after the new policy adopted Jan. 1 by the Centers for Medicare & Medicaid Services (CMS), fewer than half of the hospitals in California were fully compliant with the requirement to post prices for their services, according to a new Stanford study. Those services could include X-rays, ultrasounds, lab tests, or services such as a colonoscopy.
The regulations were originally passed under the Trump administration; President Joe Biden signed an executive order on Friday supporting the price transparency policy.
The motivating theory behind the regulation is that a lack of price transparency in hospital services has contributed to the upward trajectory of U.S. health-care spending. Lifting the veil on hospital prices may empower consumers to demand lower costs and better services, and lead to lower negotiated payment rates between insurers and hospitals — and lead to lower and more uniform costs.
“Prices that hospitals negotiate with insurers have often been considered trade secrets, and insurers and hospitals didn’t want to reveal their operations to their competitors,” said Stanford Health Policy’s Laurence Baker, senior author of the study supported by the California Health Care Foundation.
“In some cases, hospitals that managed to negotiate high prices for their services may not have wanted to subject those rates to public scrutiny,” said Baker, a professor of medicine and Bing Professor of Human Biology.
But now, the regulation requires that hospitals release detailed pricing information for the services they provide. And those who don’t comply could be fined $300 a day, or more than $109,000 a year.
Baker worked with Stanford medical students Bianca Mulaney and Shreya A. Shah, and with Christine Kim, a predoctoral research fellow at the Stanford Institute for Economic Policy Research, where Baker is also a senior fellow.
The team examined 522 California hospitals in total, and focused on 391 acute care, children’s and specialty hospitals for the month of April. They pored over hospital websites and coded measures of compliance by whether the hospital provided a shoppable services machine-readable file such as CSV or Excel; a shoppable services online tool; and for those that did provide a tool, whether the tool could be used without account registration or disclosure of personal identifying information.
Thirty percent of hospitals (117 of 391) were identified as fully compliant, and 43% partially compliant, leaving 27% of the hospitals fully noncompliant with the regulation. Nearly half of hospitals complied with some parts of the regulation but not others, indicating awareness of the price transparency regulation but incomplete compliance with it. The Stanford team found the low level of compliance is consistent with other reporting on hospital compliance around the country.
Questions remain about how big an impact the regulation will have.
“Even when hospitals do provide information, it is often complex and not always comparable from one institution to another,” said Mulaney, one of the authors of the study. “Additionally, many patients who access health care may have limited choices of hospitals due to network restrictions or may be seeking hospital care during a medical emergency.”
And the prices that were disclosed are the hospital’s portion of the price for a service — which often does not include the physician’s component of the price.
The researchers said it’s too early to understand why more hospitals are not complying with the new federal policy. Some hospitals, they said, may be intending to comply but haven’t yet fully worked out the system, or may not be fully aware of the requirements. Some hospital representatives told the researchers that they did not post standard charges as they mostly service MediCal patients with free or low copayments.
“It is also possible that some hospitals may not want to disclose contract-negotiated rates that were previously considered proprietary information,” the researchers wrote. Those hospitals administrators, they said, may be willing to pay the penalties or wait to see if CMS is actually going to enforce the regulations. The agency began issuing warning letters on May 5, giving the hospitals 90 days to get with the program, which could improve compliancy over time.
“Overall, it remains uncertain how much, and how quickly, compliance might improve,” they wrote, noting a lack of consistency in how data files are reported across hospitals and that some shoppable service files are not easy to obtain. “Ultimately, standardization of procedure names, codes, and file formats across all hospitals seems valuable if the reported data is to be of service of consumers, hospitals, and insurers.”