With nearly 30% of workers now having a high deductible health plan
and a typical family being responsible for on average the first $8,000 of
costs, consumers are increasingly weighing care versus cost.
Historically, with a small copay, you would conveniently take care of an
ailment without shopping around, but with the average person now bearing the brunt of the initial
costs, wouldn’t you want to know how much a service costs and what other providers are
charging before you “buy” the service?

CMS believes “consumers should be able to know, long before they open a medical bill, roughly
how much a hospital will charge for items and services it provides.” Cue the hospital price
transparency rule that just went into effect January 1, 2021. Hospitals are now required to post
their standard charges, including the rates they negotiate with insurers, and the discounted price a
hospital is willing to accept directly from a patient if paid in cash. As a consumer, the intent is to
make it “easier to shop and compare prices across hospitals and estimate the cost of care before
going to the hospital.”

There are a few different angles to analyze here:

Are hospitals following the rules?

Each hospital must post online a comprehensive machine readable file with all items and services, including gross charges, actual negotiated prices with insurers, and the cash price for patients who are uninsured. Additionally, hospitals must post the
costs for 300 common “shoppable” services in a “consumer-friendly format.” Some hospitals and
health systems have done a good job at posting these prices in a digestible format, like the
Cleveland Clinic or Sutter Health, but others have posted complicated spreadsheets, relied on
online cost estimator tools, or simply not posted them at all. An analysis from consulting firm
ADVI of the top 20 largest hospitals in the U.S. found that not all of them appeared to completely
comply with this mandate. In some instances, data was not able to be downloaded in a useable
format, others did not post the DRG or service codes, and the variability in the terms/categories
used simply created difficulty in comparing pricing information across hospitals. CMS has stated
that a failure to comply with the rules could result in a fine of up to $300 per day. As with most
new rules, there are growing pains, and hospitals will likely get better at this over time, assuming
the data is being used for its original intent.

Is this helpful to consumers?

Consumers will able to see the variation in prices for the exact
same service or procedure between hospitals and get an estimate of what they will be charged
before getting the care. But how likely is the average person to go to their hospital’s website, look
at a price, and change their decision about where to get care? In addition, awareness of these
price transparency tools is still low among consumers. Frankly, it is competitors and insurers that
have been first in line to review the data. Looking through a number of hospital websites, and even certain state agency sites that have done a good job at summarizing the costs, like Florida Health Price Finder, the price transparency tools are helpful, but appear to be much more suited for relatively standardized services that can be scheduled in advance, like a knee replacement. It’s highly unlikely you will be telling your ambulance driver what hospital to go to based on cost while in cardiac arrest…Plus, it’s all still confusing – even physicians have shared their bewilderment, when trying to decipher and compare pricing. Conceptually, price transparency should be beneficial to consumers, but it will take time; and it will need to involve not just the hospitals posting rates, but the outpatient care facilities as well. Knowing what you will pay before you decide to go to a physician’s office or a clinic or an urgent care or an ED will hopefully help drive consumers to make more educated decisions in the future.

Will this ultimately drive down costs?

I sure hope so. Revealing actual negotiated prices between hospitals and insurers should
push the more expensive hospitals in the area to reduce prices, especially if consumers start using the other hospitals, instead.
However, it could also have an inverse effect, with lower cost hospitals insisting on a payment increase from insurers; thereby driving up costs. In the end, as has historically been the case, the market power of certain providers will likely dictate the direction of costs in a given region. That is, until both price AND quality become fully transparent and the consumer is armed with the tools to shop for the best care at the lowest cost – consumerism here we come.