Hospital price transparency: Is it pushing prices down?

The federal hospital price transparency rules adopted in 2021 have been doing more to cut prices than to spur the cheapest hospitals to raise their rates, according to analysts at Turquoise Health.

The San Diego-based hospital price data company looked at commercially negotiated rates for 37 health care services at 234 hospitals in 10 large U.S. metropolitan areas.

Over the period from December 2021 through June 2024, hospitals with service rates that started out in the bottom 25% pushed their prices up by an average of 3.4% per year, according to the firm’s paper.

But hospitals with service rates in the top 25% cut their prices by an average of 6.3% per year.

Hospitals with service rates in the middle 50% cut their prices by an average of 1.1% per year.

What it means: Turquoise has found support for the idea that, in the United States, at least in the short run, hospital price transparency does more to hold down prices than to strengthen hospitals’ bargaining position.

The backdrop: Many health care policymakers and market players believe that access to price information can help patients do a better job of shopping for affordable, high-quality health care.

But some antitrust economists have argued that, in the U.S. health care market, providing access to detailed price data might end up backfiring, by giving negotiators for hospital companies and large group medical practices information they can use to bargain for higher prices.

Related: Health care price transparency tools increase prices? Ask economists

The Centers for Medicare and Medicaid Services, an arm of the U.S. Department of Health and Human Services, gave economists on both sides a chance to see what hospital price transparency would do in 2021, by implementing regulations that required hospitals to post machine-readable price files on their websites.

During a vice presidential debate held earlier this month, for example, JD Vance, Donald Trump’s running mate, pointed to the regulations as an example of a health care policy accomplishment achieved during Trump’s term in office.

The Turquoise methodology: The Turquoise team started with price data for general acute care hospitals that publish complete, easy-to-use price data.

The hospitals are in the regions around New York, Los Angeles, Chicago, Dallas, Houston, Atlanta, Philadelphia, Miami, Phoenix and the District of Columbia.

The team included common services that are typically paid per case, per visit or per day of care.

The list of outpatient services included two types of cardiac catheterization procedures, allergy tests, five levels of emergency services, seven types of outpatient surgery and six types of radiology scans, including MRIs of the brain and thyroid imaging with blood flow.

The list of inpatient services included acute care room and board, the cost of an intensive care unit bed, three levels of neonatal intensive care unit care, rehab and time in a step-down bed.

What Turquoise found: Economists have predicted that price transparency should do more to help patients shop for outpatient care and care for relatively minor problems than for inpatient care and for care for major, life-or-death problems.

The Turquoise analysis supports that prediction.

The overall range for prices for the outpatient services studied narrowed by about 6 percentage points to 10 percentage points during the study period.

The range for prices for most of the inpatient services studied narrowed by only about 2 percentage points to 6 percentage points.

For the outpatient services, the hospitals in the bottom quarter raised their prices, and the hospitals in the top quarter cut their prices.

For inpatient patient services, all providers cut their prices, but the high-cost hospitals cut their prices more than the low-cost hospitals did.

The future: The Turquoise analysts note that one factor is that hospitals are still expanding and improving access to price data.

“As the data becomes more accessible and comprehensive, it is increasingly utilized by payers, providers, employers and consumers in their decision-making processes,” the analysts write.

In the short run, prices for commoditized outpatient services, like radiology services, have converged more than prices for ICU beds and acute care room and board, and that trend could continue, the analysts suggest.

In the long run, some providers could compete for inpatient business based mainly on price, and others could try to keep their prices relatively high by competing based on their reputation for providing high-quality care, the analysts add.