Navigating Hospital Price Transparency—a Cautionary Tale

INTRODUCTION

Price transparency is increasingly proposed to address healthcare spending by empowering consumer choice. Effective January 2021, CMS is requiring hospitals to publicly disclose five “standard” charges (gross, payer-specific, discounted cash price, minimum negotiated charge, and maximum negotiated charge) for “shoppable” services.¹ Information must be online in a “machine-readable” format with descriptions and billing codes. Hospitals that do not comply can face penalties of up to $300/day.²

To explore the implications of this policy, we examined a preceding 2018 CMS rule that similarly required hospitals to publish “machine-readable” charges online.³ To date, the implications of this rule are poorly understood, and no systematic evidence exists on what information hospitals have released. We conducted a national study to better understand the patient’s perspective in shopping for care using information posted by hospitals.

METHODS

We randomly sampled 20% of all acute care hospitals in the U.S. and studied their posted charges.⁴ We analyzed the readability of documentation, the number of files consumers would need to work through, the number of services listed, and whether files included current procedural terminology (CPT) and diagnosed-related group (DRG) codes. Hospitals sometimes posted charges alongside internal codes that were not discernible or required patients to contact administrators, in which case chargemasters were considered unavailable. If services appeared twice for both physician and facility fees, we took the sum as the chargemaster price.

As a case study of outpatient services, we simulated shopping for a head computed tomography (CT) scan without contrast (CPT 70450)—a common and fairly homogeneous service—by comparing the names and posted charges across hospitals. In a second case study of inpatient care, we shopped for an admission for simple pneumonia and pleurisy (without any complication or comorbidity, DRG 195).

RESULTS

Our sample comprised 922 hospitals (Fig. 1) across 50 states and D.C., for which 800 (87%) posted chargemasters online, with 621 (67.4%) in Excel spreadsheets (Supplemental Table). The remainder posted charges on webpages (99, 10.7%) or PDF/text files (80, 8.8%). Most chargemasters were limited to one file (641, 91.8%) but some hospitals split charges into as many as 15 files. When given, a median of 6732 CPT codes (IQR, 3480–15,500) and 275 DRG codes (IQR, 101–524) were posted per hospital.

Fig. 1.

This map shows the distribution of the 922 hospitals sampled (not including Alaska and Hawaii). The size of points plotted correlates with the number of services listed on each respective hospital’s chargemaster if available.

Notably, service names lacked uniformity. Among 760 hospitals that posted charges for CPT 70450, 252 names were used (Fig. 2a). The most common was “CT HEAD W/O CONTRAST,” used by only 60 hospitals (6.1%). Among 363 hospitals that posted charges for DRG 195, 27 names were observed with a plurality (179 hospitals, 49.3%) using “SIMPLE PNEUMONIA & PLEURISY W/O CC/MCC” (Fig. 2b).

Fig. 2.

a Names for a head CT without contrast (CPT 70450) on chargemasters posted by hospitals. b Names for simple pneumonia and pleurisy without any complication or comorbidity (DRG 195). This figure shows the names and frequencies (in percentage terms) consumers see.

Charges were also inconsistent. While variation is expected given differences in market power, labor and capital costs, and other factors, some hospitals listed facility and physician fees; others posted what was likely only the physician fee. The median charge for CPT 70450 was $1761 (IQR, 1180–2470), and that for DRG 195 was $15,736 (IQR, 11,536–23,524). Errors here were also common, with charges listed as fractions of pennies or alongside incorrect billing codes.

DISCUSSION

While price transparency could empower consumer choice, chargemasters generally lack transparency and present potential opportunities for consumer confusion. Hospitals often posted charges that, while “machine-readable,” could not be easily searched. Charges were also difficult to identify. Without standardized names, patients are left on their own to learn that “BRAIN W/O CONTRAST” and “CT HEAD ROUTINE” are the same service.

A patient shopping for care thus faces numerous challenges, from identifying services to comparing charges. The 2021 policy addresses some of these issues (i.e., requiring billing codes). However, it also introduces new opportunities for confusion as hospitals post payer-specific negotiated charges.

For price transparency efforts of this sort to be helpful to patients, posted information needs to be at least comprehensible and comparable. Standardization of information in a common language and format is likely a basic necessity, not to mention information in different languages for those with limited English proficiency and potential consumer assistance. A central platform similar to HealthCare.gov, or a consistent form for hospitals to fill out, may facilitate consumer choice. Given that price transparency tools have not substantially affected consumer decisions in the past, basic elements of standardization would likely aid the success of the 2021 CMS policy.⁵

Declarations

Conflict of Interest

Dr. Song reported receiving grants from the National Institutes of Health and the Laura and John Arnold Foundation, personal fees from the Research Triangle Institute for work on risk adjustment, from GV and the International Foundation of Employee Benefit Plans for academic lectures outside of this work, and for providing expert testimony in legal cases. No other disclosures were reported.