Blog | Price Transparency

Studies find glaring issues with federal price transparency requirements

Blog | Price Transparency

Studies find glaring issues with federal price transparency requirements

  • A published study looked at the extent to which independent providers contribute to the cost of care episodes and thus limit the insight to be gained from posted hospital prices.
  • Pending transparency requirements for health plans may help provide global estimates, but issues loom with those regulations as well.
  • A separate study found widespread hospital noncompliance with transparency requirements and examined the hospital characteristics that are associated with compliance.

The first year of federal price transparency regulations for hospitals hasn’t had high rates of compliance, nor has it always been conducive to providing actionable information for consumers, according to two new studies.

Under regulations that took effect Jan. 1, 2021, hospitals are required to post:

  • A machine-readable file with pricing information for all items and services
  • A list of prices “in a consumer-friendly format” for at least 300 shoppable services

A new study adds to questions about how useful the information is for consumers, pointing out that healthcare entities aside from hospitals may contribute substantially to the cost of care episodes.

For the study, which was published Dec. 13 in JAMA Network Open, researchers examined more than 4.5 million commercial claims for 70 hospital-based shoppable services in 2018.

“The chance of receiving care at a hospital from healthcare entities that billed for care separately from the hospital varied widely by service,” the researchers wrote. They added, “Involvement of independent entities was generally most common and most costly in complex medicine and surgery services.”

Most pertinent for consumers’ ability to draw meaningful insight from price listings, “When entities that billed for care independently from the hospital were involved in care delivery, their aggregate reimbursement both in dollars and as a percentage of the hospital portion of costs was often nontrivial. … We also found that the reimbursement amount for services billed by the hospital, i.e., the price that would be disclosed under the CMS hospital price transparency rule, was not strongly correlated with the reimbursement of independent entities.”

New surprise billing regulations, which take effect at the start of 2022, may mitigate that issue in some scenarios by ensuring that patients don’t face out-of-network cost sharing for services received at in-network facilities. But that protection won’t help them know the full cost of those services up front.

Achieving that level of transparency likely requires the involvement of health plans, the researchers wrote.

“As long as patient cost-sharing is a function of practitioner reimbursement (e.g., coinsurance, deductibles), all healthcare entities involved in care delivery should be subject to price transparency requirements,” they wrote. “Obtaining prices of healthcare, and especially out-of-pocket cost estimates for insured patients, is most practical from insurers, not care entities.”

The researchers noted that transparency requirements for health plans are on the way. Regulations will be phased in starting July 1, 2022, with more provisions taking effect in 2023.

One drawback of the rule, the researchers wrote, is that “patients seeking to obtain an accurate estimate of their out-of-pocket costs will be expected to anticipate what individual services will constitute the planned healthcare encounter. This would be a challenging task for experienced healthcare experts, let alone nonexpert patients.”

Which types of hospitals are likely to comply?

A newly published study is the latest — and likely one of the largest — to call out poor hospital compliance rates with the new transparency requirements.

Reporting in the Journal of General Internal Medicine, researchers found that as of June 1, 55% of more than 3,500 hospitals had not posted a machine-readable file that included negotiated prices.

“A hospital’s compliance status is strongly associated with the average compliance status of peer hospitals in the same market,” the researchers wrote, which indicates hospitals “take into consideration the behavior of their peers in the same market when making price disclosure decisions.”

Among 305 hospital referral regions (HRRs), the researchers found 20 in which all hospitals posted negotiated prices with at least one insurer and 26 in which no hospitals did so. Based on statistical analysis, “If all other hospitals in the same HRR switched from noncompliance to compliance, a hospital would be 42% more likely to become compliant as well.”

In addition, “Compliant hospitals are likely to have better IT preparedness, more financial resources and personnel expertise to mitigate the cost required for the implementation of the price transparency rule. The compliance cost, therefore, might be a barrier for some hospitals.”

The researchers said IT preparedness, based on level of health IT investment in relation to fixed costs, is an underexplored research area. But the correlation with price transparency compliance makes sense because “to store pricing information with various payers for numerous hospital services requires nontrivial effort. For hospitals that have already made sufficient investment in health IT, the incremental resources needed and, by extension, the compliance cost for the rule might be less intimidating.”

The researchers noted that it may take time to achieve widespread compliance simply because, “as supported by ample empirical evidence, organizational changes in healthcare do not take place rapidly even when the changes have the potential to bring organizational benefit.” Delays in incorporating best practices likely have been exacerbated by the COVID-19 pandemic, they added.

CMS is trying to use the prospect of more severe penalties for larger hospitals to compel greater compliance. In 2022, the daily penalty of $300 will increase by $10 for every bed a hospital has beyond 30, up to a maximum of $5,500 for hospitals with 550 or more beds.

About the Author

Nick Hut

is a senior editor with HFMA, Westchester, Ill. (nhut@hfma.org).

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