Hospital noncompliance with U.S. price transparency regulations

In November of 2019, the Center for Medicare and Medicaid Services (CMS) expanded price transparency requirements for hospitals in the United States. These measures were intended to promote competition in the healthcare industry and advance patient informed decision-making. However, many hospitals have failed to comply with these requirements, preventing patients from understanding their expected costs and comparing prices among hospitals.

Under the updated requirements, hospitals must release the gross price, payer-specific negotiated charges, de-identified minimum and maximum negotiated rates, and the discounted cash price (uninsured/self-pay rate) for their services in a machine-readable file.¹ In addition, hospitals are required to publish the same data for services that can be scheduled in advance in a “consumer-friendly manner,” which can be implemented by providing an internet price estimator tool.¹ The machine-readable file and price estimator tool must both be free, easily locatable, and cannot require the creation of a username, password, or the input of personal health insurance information to access. As of January 1, 2021, hospitals are required to publish the complete machine-readable file and a price estimator tool showing the expected costs of 300 schedulable services.

Despite the promise of these updated requirements, improvements in price transparency have largely failed to materialize. Hospitals have been under significant strain due to the COVID-19 pandemic, and few hospitals have complied fully, or even partially, with the new requirements since the rule went into effect. A study by Gondi et al. found that in a random sample of 100 of the 6171 highest-revenue U.S. hospitals, 83 were non-compliant with at least one of the major CMS requirements.² A similar study found that only about half the hospitals provided the discounted cash rate in the machine-readable file or consumer tool and 34% provided the payer-specific negotiated rates in the machine-readable files.³ In addition, regulations specify that shoppable services must be “accessible without having to submit personal identifying information.”¹ However, all evaluated price estimator tools in Gondi et al.’s analysis required input of personal data to access price information.² The inability for individuals to access alternative insurance plans’ negotiated rates prevents price comparison and choosing more affordable care.

Even when hospitals comply with the added transparency regulations, other barriers prevent the benefits of price transparency from reaching individuals. Principally, hospitals’ lack of standardization in reporting prices makes price comparison exceedingly difficult, as listed “prices'' vary in what they include. With no single established rate, some hospitals provide estimates, while others publish average or median prices.³ Additionally, prices can fail to represent the individualized cost-sharing properties of payment plans (deductibles, co-insurance, and co-pays) and may not represent patients’ true expected costs. These added barriers restrict direct price comparisons, undermining the value of the new transparency measures.

Despite the insufficiencies of the current transparency reality, the goal of establishing a transparent healthcare market remains promising as a potential force to reduce both individual and systemic healthcare costs. How powerful that force would actually be remains unclear, and it is possible that transparency could instead lead to price escalation as lower priced providers learn of their competitors’ higher prices.⁴ However, given that CMS has now mandated transparency, this is an opportunity to learn about its economic value, which can only happen if hospitals comply. The potential economic effects notwithstanding, hospitals should comply with price transparency regulations out of commitment to patient-centered care and informed consent. By shrouding the prices of services, the healthcare industry withholds key information from patients, reducing their ability to make informed health decisions. In a store, customers can reasonably compare the costs of goods and make educated cost-based decisions regarding their purchases. Yet when they visit hospitals, price opacity impedes people's ability to compare prices in advance, frequently entangling patients in significant medical bills. Medical care can be complex based on an individual's needs, sometimes making the costs of care difficult to anticipate. However, many components of care are predictable, and patients should have the opportunity to factor cost into their health care decisions whenever possible. Recently, legislative actions, such as the No Surprise Act on surprise medical billing, reflect the value of prospective financial consent in health care.⁵ Recognizing that “informed consent is an ethical cornerstone” in the medical profession, more steps need to be taken to ensure greater patient control over the financial costs associated with their care.⁵ As primary patient advocates, physicians should integrate cost into their conversations with patients when possible so that patients can make fully informed decisions prior to receiving costly medical bills. The ability of the physician to accept this responsibility necessarily relies on hospital compliance with transparency regulations.

The first corrective step is to make prices more understandable, accessible, and comparable. This necessitates increased standardization of procedure prices and promulgation of CMS compliant, consumer-friendly price estimator tools that do not require input of personal health information. Further, compliance enforcement mechanisms are weak, with a maximum punishment for hospital noncompliance of $300 per day.¹ Ideally, hospitals, hospital associations, and clinicians would voluntarily take meaningful steps toward transparency as evidence of commitment to authentic patient-centeredness. One study suggested that costs might be a barrier for hospital compliance and that compliant hospitals were more likely to have better IT preparedness, personnel expertise, and more financial resources.⁶ Policy makers should consider providing hospitals with added financial support to help hospitals achieve compliance. Though CMS has issued some warnings, stricter monitoring, enhanced enforcement mechanisms, and stiffer penalties could be necessary to secure greater compliance.² Hospital compliance has been strongly associated with peer hospitals’ average compliance status in the same market.⁶ Focusing efforts on large, noncompliant hospitals may affect a positive change on other local hospitals. Ultimately, strengthened price accessibility and policy changes targeting improved price transparency should advance patient informed financial consent, support better research on price variations, and aim to reduce healthcare costs for patients and the healthcare system at large.

Contributors

AS Miller provided the conceptual framework for the paper, led the literature review, and co-wrote the manuscript. SA Stearns contributed to the literature review and co-wrote the manuscript. DM Berwick oversaw the project and provided critical review and insight into the paper.

Declaration of interests

DM Berwick served as the Administrator of the Centers for Medicare & Medicaid Services in 2010 and 2011. AS Miller and SA Stearns have no potential conflicts to disclose.