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The Hospital Price Transparency Rule, implemented four years ago by the Department of Health and Human Services, requires U.S. hospitals to disclose their charges, commercial negotiated prices, and cash prices. The goal is to stimulate price competition and contain healthcare spending. So, what have we learned?
As my coauthors and I discussed in Health Affairs Forefront this week, compliance remains incomplete, and the agency’s enforcement efforts require improvement. A November report from PatientRightsAdvocate.org found that only 21% of hospitals fully complied with the rule.
Nevertheless, a recent analysis from Turquoise Health found that average commercial prices for common hospital services have dropped since the rule’s implementation, highlighting the promising potential of price transparency to curb price increases.
The disclosed pricing information also revealed important disparities that can inform policy and practice. For example, prices at physician-owned hospitals are one-third lower than those at competing hospitals in the same market. Hospital prices for colonoscopies are more than 50% higher than those at ambulatory surgery centers in the same county. Additionally, cash prices are often lower than insurance-negotiated prices in the same hospital, even for unshoppable services like trauma activation fees.
It’s worth noting that healthcare services and products not covered by insurance, such as plastic surgery and over-the-counter drugs, have their prices disclosed in the most patient-friendly way without any government regulation. If we want the price transparency rule to achieve its full price-containment potential, we must address the root cause that discourages providers from voluntarily disclosing prices in the first place.
The root cause is the inability of many patients to benefit personally and directly from lower price. Nobody cares when spending others’ money. Even when pricing data is available, patients without skin in the game have no reason to care. Understanding this, providers comfortably hide and raise prices. Therefore, reforming insurance regulations to allow patients to benefit from lower prices is the right direction.
The uneven playing field in the provider market must also be addressed to facilitate fair competition. Anticompetitive regulations—such as the 340B Drug Pricing Program, site-based payment policies, the ban on physician-owned hospitals, certificate of needs laws, certificate of public advantage laws and the Stark Law—undermine physicians’ competitiveness and fuel their acquisition by large systems.
When policymakers put their thumbs on the scale to pick winners and losers, the process is influenced by large players, thereby harming competition and patient welfare. In contrast, free competition, by empowering all patients to decide winners and losers, is the antidote to high prices and low quality, both of which run contrary to patients’ best interests.
Price transparency has strong bipartisan support and broad appeal to voters because it simply makes sense. It is a necessary catalyst to jumpstart the transformation of our healthcare system into a competitive, fair, and patient-oriented one that leverages American dynamism to organically address unsustainable healthcare spending.
Congress should codify price transparency by adopting the more effective and comprehensive version proposed in the Senate. Accompanied by reforms that align patient incentives and level the playing field for providers, a bright and healthy America could be on the horizon.
