The Fatal Flaw in Hospital Price Transparency Rules

The Fatal Flaw in Hospital Price Transparency Rules

July 2, 2022 0 By Jennifer Walker

The Hospital Price Transparency rule celebrated its first birthday in January, and as of July 1, the enforcement of a similar requirement for payers and health plans began through the Transparency in Coverage rules. Regrettably, the U.S. is still far from achieving price transparency’s intended outcomes (more shoppable healthcare), or perhaps even understanding what the outcomes are supposed to be. Key compliance metrics vary, and indeed there is also variance in the very definition of “compliance,” which has resulted in estimates ranging from as low as 6% to more than 50%, depending on how you slice the data.

True “compliance” means that a hospital has published price data that is both user-friendly and located prominently on their website (and yes, this includes making the information easily retrievable via search engines). By this definition, compliance is undoubtedly low since many hospitals have not created accessible resources to locate and understand their pricing. This is perhaps unsurprising as hospitals balance myriad challenges like staffing crises, COVID-19 surges, and struggles in revenue recuperation.

Given these hurdles, hospitals that have yet to comply will not feel pressure to make changes unless additional incentives, either positive or negative, come into play. Vague requirements and a lack of repercussions have not created the sense of urgency that regulators hoped for. So where do we go from here?

While price transparency rules are well-intentioned, they suffer from a fatal flaw: too much room for interpretation in the definition of compliance. Healthcare stakeholders need to ask themselves what compliance actually entails. Are hospitals required to publish prices in well-labeled, easy-to-locate areas on their website, or can they get by in placing these numbers on a hidden page? If the industry hopes to improve compliance, then the Centers for Medicare & Medicaid Services (CMS) must lay out clear rules, including what is expected and what is forbidden, and ensure they have closed any potential loopholes in the process.

Many providers view this rule as more of a regulatory compliance burden than a potential opportunity to distinguish themselves from their competitors and increase market share, so they see little incentive to comply. Remember that hospitals tried and failed to block these transparency requirements in the courts. Additionally, the initial civil money penalties associated with noncompliance were laughably low if intended as deterrents. CMS did recently issue their first ever fines for noncompliance, which total over $1 million, so there is hope for an uptick in compliance efforts. On the contrary, only two hospitals were fined, despite CMS sending written warnings of noncompliance to hundreds of hospitals in recent months. While these fines may get the attention of a hospital chief financial officer, we still don’t know if they will view these fines as merely a “cost of doing business” — even a million dollar fine can be a rounding error on a hospital bottom line. CMS can significantly ramp up pressure on hospitals to comply if it so chooses, either by increasing civil monetary penalties, or by linking compliance with the transparency rules to the conditions of participation in the Medicare program, much like they did with their requirement that nursing home employees be vaccinated. However, it is not entirely clear if the statute covering conditions of participation would permit CMS to take this type of action.

Further, there are additional external factors that can impact the shift to greater price transparency, including the fact that the hospital rule does not exist in isolation. While it is difficult to predict the impact of the hospital price transparency rollout on the forthcoming payer transparency rule, one can only hope that payers have been paying attention to the struggles of their counterparts. There may be some confusion at first where payers learn of varying negotiated rates with the same provider organizations. However, these rules in conjunction may deliver an opportunity for greater synergy between payers and providers. I remain hopeful that this rollout can improve on the shortcomings of its predecessor and ultimately help us achieve our true end goal: empowering consumers with the best information to guide their care decisions.

It is important for me to end on an optimistic note. While we have endured clear setbacks on the road to greater transparency, that we remain on the road represents incredible progress in less than a decade. Until 2013, information on provider pricing was almost impossible to obtain, and in fact, CMS was legally prohibited from releasing information that could identify physician reimbursements. The release by CMS of physician-level reimbursement information was considered groundbreaking at the time, but information on prices for people with private sector health insurance remained hidden until recently. We have made unambiguous progress, and although the road is bumpy, our healthcare leaders owe it to patients to continue pushing ahead.

Niall Brennan, MPP, is chief analytics and privacy officer at Clarify Health. He previously served as the chief data officer at CMS, where he led the Obama administration’s healthcare transparency efforts.