Are hospitals complying with the new price transparency rule?

The lack of price transparency for medical services has been a huge problem for patients and insurers for years. No market can function if consumers don’t know the price of what they are buying, yet in health care, it is famously impossible for patients get an answer to the simple question, “How much will this cost me?”

Hospital prices are difficult to uncover because patients will pay different amounts based on their insurance coverage. The prices that hospitals charge insurers for services, known as “chargemaster” prices, are often highly inflated; insurers later negotiate these prices down for their beneficiaries. While hospitals often make their chargemaster prices available, they are reluctant to share their insurer-negotiated prices– the “real” prices. But now they have to, according to a new rule from the Centers for Medicare and Medicaid Services (CMS), which went into effect January 1, 2021.

What is the new price transparency rule?

The rule requires hospitals to publish a machine-readable file online containing their payer-negotiated rates for all items and services, as well as the gross (chargemaster) charges, and the cash price for patients without insurance. This set of data is not very consumer-friendly, but it will be useful for researchers, insurance companies, and employers to analyze, and could also be used to create consumer-facing apps to help people compare prices.

The CMS rule also mandates hospitals to post a display of about 300 “shoppable” services in a consumer-friendly format– services like CT scans, patient consultations, blood tests, and other elective procedures. The price estimate must show the total of all costs involved, including physician fees, devices, drugs, etc. Hospitals can either post the list of shoppable services online, or make a price estimator tool available for patients to calculate their out-of-pocket costs for these services.

Who could benefit from this rule?

The new price transparency rule could be beneficial for patients, insurers, and employers. For patients who are deciding where to go for an upcoming scan, test, or other elective procedure, being able to compare prices at different hospitals beforehand can be very helpful. And patients with high deductibles or no insurance may find this information even more valuable, since they have the most “skin in the game.” However, health policy experts also note that the prices hospitals will post are still just ballpark figures; patients’ insurance deductible, the complexity of their specific case, and any complications that arise will impact the final price.

Employers and insurers can also use this information to try and lower their costs. For example, knowing that one hospital in the region charges far more for certain services than all the other hospitals could give payers leverage to negotiate harder with that hospital. And employers could give their employees incentives to avoid the priciest hospitals, or even stop covering as many services from these hospitals. But again, it might not be that easy. Depending on the hospital’s market power in the area, insurers may not be able to negotiate lower prices. And hospitals in a region could decide to raise their prices to the level of the most expensive hospital, rather than all bring their prices down to match the least expensive facility.

Are hospitals complying?

Of course, none of these potentially transformative changes can happen if hospitals don’t comply with the rule. Although the rule went into effect January 1st, many hospitals are lagging on making this information available. CMS is currently auditing a sample of hospitals for compliance and investigating complaints from the public. Hospitals that have not complied may get a written warning, then a request for corrective action from CMS; if hospitals don’t respond to the request, they could be fined $300 for per day until they comply with the rule.

To see whether hospitals are complying with the rule, we took a look at the websites of eight hospitals/systems in the Boston area. As of January 22, here’s which hospitals have the required information available:

Cambridge Health Alliance and hospitals in the Mass General Brigham system both have payer-negotiated prices in machine-readable format. Hospitals in the Steward Health System have a price estimator tool that includes “gross charges, self-pay cash prices and negotiated payor rates” to be CMS-compliant. Cape Cod Healthcare also has a price estimator tool with negotiated prices.

Tufts, Boston Medical Center, and Beth Israel Lahey Health have chargemaster prices and average charges or standard Medicare charges based on diagnostic related grouping codes (DRG) but not the insurer-negotiated rates required by CMS. A note on the Beth Israel Lahey Health system website reads, “If you need additional information, we will be expanding our available resources as outlined in the hospital price transparency rule. Please check back soon.”

There aren’t any clear patterns in this scan of Boston hospitals. Large nonprofit systems (Mass General Brigham), small safety nets (Cambridge Health Alliance), and for-profit systems (Steward Health Care) alike have complied with the rule. At the same time, other large nonprofit hospitals like Tufts Medical Center and safety nets like BMC have not.

Why aren’t some hospitals complying? Several hospital associations have been fighting the rule in court, so hospitals may have been waiting it out to see whether they had to comply before spending time implementing the project. Others may be biding their time to see if the Biden administration reviews or changes the rule before they reveal their prices. And for many hospitals, understandably, the stress of Covid-19 and the vaccination effort has stretched their resources, making it difficult to implement this rule change. Given that $300 a day is not a large fine for most hospitals, it may not be worth it for them to spend their time on price transparency right now.

However, other experts don’t think hospitals should be excused so easily. “I don’t think [hospitals] should be facing implementation challenges,” said Health Care Cost Institute CEO Niall Brennan, in Modern Healthcare. “These are large, multimillion, and, in many cases, multibillion-dollar corporations with very sophisticated financial accounting departments… The hospitals that are already complying have proven that it’s not that difficult to extract and post that information.”

In other words, if Boston’s biggest nonprofit hospital system and Boston’s only for-profit hospital system can both make their prices available, there’s no real excuse for other hospitals not to get on board.