Hospital price transparency is necessary, but is it enough?
The administration's rule falls short, but it can still drive lower prices and reduce price variation.
Nearly 18 months after new hospital price transparency rules took effect on Jan. 1, 2021 — requiring hospitals to supply detailed pricing information for easy cost comparisons — this much is clear: Price transparency may be a necessary mechanism to lower hospital costs and health care spending, but it’s not enough.
That’s the message delivered during a 60-minute webinar on April 14 hosted by the American Academy of Actuaries titled “Hospital Prices: Can Greater Price Transparency Drive Lower Prices and Reduce Price Variation?” Presenters included representatives from the academy, as well as the Kaiser Family Foundation and the Congressional Budget Office.
Related: Hospitals continue to flout price transparency requirement rules
The rules “shine a light on what has been a dark and confusing topic, but they are not sufficient,” says Andrea Rome, a member of the American Academy of Actuaries Health Care Delivery Committee, which authored a 14-page brief on this topic, released in March.
“Even if price transparency worked perfectly, it is not an end-all and be-all for issues consumers face in U.S. health care,” added Krutika Amin, associate director of the Kaiser Family Foundation’s Program on the Affordable Care Act. “Even when hospitals are posting, the data is messy and may not be consumer-friendly.”
Indeed, according to a 2021 KFF Health Tracking Poll, only about one in 10 adults are even aware hospitals are required to disclose the prices of treatments and procedures on their websites.
Amin cited multiple factors that she said indicate transparency is not enough: quality of care can be conflated with higher price (“which might not be the case”), price transparency could force costs up or down, and prices within hospitals vary based on situations.
“Prior research has already established that prices charged within commercial lines of business can vary dramatically across hospitals for particular services without being explained by differences in quality,” according to the brief. “The variations reflect many factors, including hospital cost allocation strategy with consideration for the mix of services provided, patient characteristics, and contracted payers.”
As the brief details — and as the webinar explored — price transparency might not lead to increased competition, lower hospital prices, and lower variation in prices unless the following happen:
- Data is submitted uniformly, accurately, and completely, and is easily usable to make comparable observations.
- Payers use the data to develop hospital networks and negotiate hospital prices that focus on creating high-quality and cost-effective networks.
- Consumers use the information to seek care from lower-cost and high-quality providers.
During the webinar, Michael Cohen, an analyst for the Congressional Budget Office, cited CBO research indicating that commercial insurers’ prices for hospitals’ inpatient services varied substantially among states in 2018, as did the gap between their prices and Medicare’s prices. States with the widest price gaps were Massachusetts, New York, and Tennessee.
What’s more, according to Cohen, commercial insurers’ prices for the same hospital service vary substantially based on geographic area. CBO’s analyses also found that hospital prices generally are higher in areas where consolidation is greater and attributed price differences to providers’ market power.
The brief also notes that “consumers might not have an incentive to seek lower-priced care unless their out-of-pocket costs are tied to prices and referring providers also have an incentive.”
“It might be worth thinking about the unintended cost of price transparency,” Amin said.
Indeed, it remains to be seen how price transparency will impact overall health care expenditures and consumer affordability.
“Affordability can pose barriers to access into the health care system, which can then beget inequities in receipt of care and patient outcomes,” the brief concludes. “If price transparency can bring down health care system costs and make health care more affordable, then price transparency would be seen as a success. If price transparency coupled with plan design does not bring down health care system costs, then policymakers may need to consider other alternatives to addressing the cost and affordability issues of the existing health care system.”
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