Health care price transparency rules are now in effect, so why isn't it the norm?

Over two years have passed since the federal hospital price transparency rule was enacted. Still, America struggles with high, painfully-opaque pricing across health care that hurts employers, workers, patients, and taxpayers. The Centers for Medicare and Medicaid Services recently announced that in 2021, the nation spent $4.3 trillion on health care–nearly twice the average of other nations in the developed world. Noncompliance and price gouging abound in a market where employers and consumers are blindsided by costs revealed only after care is rendered.

Currently, 150 million Americans have access to employer-provided health benefits, which makes them the largest source of health care coverage in the United States. Employers have increasingly grown frustrated by ‌rising costs and their lack of power to negotiate them. At the same time, 100 million Americans find themselves in health care debt. Consumers have difficulty planning for medical expenses because many hospitals are not clearly publishing their pricing information in a way that is accessible to most people.

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A recent Kaiser Family Foundation poll revealed that 95% of Americans want policymakers to prioritize health care pricing transparency. Additionally, the Transparency in Coverage Act (TiC) provides employers opportunities to reign in their health care costs while providing high-quality, affordable care options for their‌ employees. But, with policy in place and overwhelming public support, why isn’t price transparency the norm?

That’s because facilities aren’t incentivized to publish their pricing information, nor is there large scale accountability for non-compliance. A recent study found that only 16% of hospitals nationwide comply with price transparency guidelines.  To date, only two hospitals in the U.S., out of thousands, have been fined for non-compliance, suggesting there’s little recourse for inaction. Unsurprisingly, the two hospitals that were penalized shaped up: both resolved their transparency issues and brought their pricing into compliance.

As we pass the two-year anniversary of the federal price transparency rule and enter the third year of the COVID-19 pandemic, I foresee five trends emerging in the industry. These involve industry adaptation, employer and consumer behaviors, payer practices, and an overall refreshed focus on the patient experience.

Trend #1: The industry will be navigating new rules and regulations

Hospital price transparency has been out of step with the American public’s expectations and priorities for years. As of January 1, 2023, payers must provide online price estimator tools for patients; those out of compliance will face steeper penalties than before. According to America’s Health Insurance Plans (AHIP), many commercial insurers–up to 94% of them–are already providing such tools.

Another rule that recently went into effect requires hospitals to publicly disclose both in-network negotiated rates and out-of-network negotiated amounts via “machine-readable files.” While this is another step toward transparency, these files tend to be complex, making them hard to translate into actionable information. There’s no doubt that hospitals and health systems will continue to struggle this year to make such data accessible to the public.

It’s expected that 2023 will be a year of learning and adapting to what “the new normal” is going to look like. There is uncertainty and flux in the health care landscape, and it’s going to be key for stakeholders to identify and respond to the changes that are happening. What information needs disclosure, what are the processes for publicizing such data, and how much of it is readily available for employers and consumers? Providers and payers alike will be working on conceptualizing and implementing these new rules over the coming months.

Trend #2: Health care shopping and consumerism will grow in popularity

Whether they are looking to buy a new television, airfare, or a dozen eggs, consumers are in the habit of shopping around and comparing prices. As price transparency opens up the health care marketplace, many people will begin shopping for health care services and procedures the same way they do for other products and services. 75% of consumers consider health care decisions to be the most important and costly ones they make. Unfortunately, health care price prediction can be difficult, if not impossible–four out of five people find comparing costs challenging. And because the average American consumer doesn’t have even $500 available for emergency expenses, many will defer care, likely leading to more costly future health events and further driving costs upward for both them and their employer.

Price transparency may very well mean more patients can pursue and plan financially for the care they need. And with patients more engaged in their care, we may see a workforce comprised of healthier employees–resulting in lower costs for employers. Health care consumerism will continue gaining momentum as people grow more confident in identifying prices and comparing costs.

Trend #3: Patient experience will become a greater industry focus

Part of the patient experience includes their billing experience. People who know the cost of a medical procedure ahead of time are more likely to be able to plan accordingly to avoid debt and are more likely to pay their medical bills promptly. In a health care market where consumers are more informed and exercise more agency overall, I expect the industry focus to sharpen

toward this aspect of the patient experience. Like the customer experience is the driving force in other service industries, health care veterans and newcomers will compete in the marketplace for consumer loyalty.

Trend #4: Employers look for cost predictability

Sixty-five percent of U.S. employees have insurance coverage through employer self-funded plans. As a result of price transparency rules, more and more employers will be looking to directly partner with providers in an attempt to manage their health care spend. The hope is that by partnering with providers, businesses can bring down the cost of health care for themselves and their employees. This direct relationship will also give businesses more visibility and predictability in managing the cost of care that their employees receive. This is a challenging task, but one that is becoming more and more necessary in the current climate.

Trend #5: Increased advantages for cash-pay patients

Lastly, we know that participants in high-deductible health plans (HDHPs) can save on out-of-pocket costs by circumventing their insurance and paying a reduced, upfront cash price for services. Because these reduced prices must now be published, I expect to see consumers taking advantage of them with more regularity. The number of Americans participating in HDHPs is on the rise, and with a substantial gap to cover before their plans kick in with coverage, many are looking for alternatives to billing through insurance when a discount is available.

These trends aren’t new in 2023–all have been gaining traction in the marketplace for some time now. The convergence of transparency rule deadlines, firmer penalties for non-compliance, and consumer behaviors are sure to drive all five of these trends forward in the coming 12 months. One response from providers and insurance companies alike should be to provide consumer-friendly, easy-to-use online price comparison tools. Not only will this be a consumer expectation in the coming months and years, but these kinds of tools will drive value for those that offer them proactively.

Paul Ketchel is chief executive officer of Nashville-based MDsave.