Hundreds of US hospitals are breaking the law on price transparency

Is the price right?
Is the price right?
Image: Reuters/Joe Skipper
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It’s been a year since the Hospital Price Transparency rule, which requires US hospitals to make their prices public, went into effect on Jan 1, 2021.

According to the requirement, all hospitals that accept Medicare must publish a machine-readable file listing all their services and prices, including all discounts, as well as a user-friendly file with at least 300 services (or as many as they offer) with their prices and discount. Nearly all of the 6,090 hospitals in the US fall under the law.

Prior to the rule, which was initially introduced in 2019, then strengthened last year after some legal challenges, hospitals were able to keep their prices secret. Patients had no way to know how much a specific service was going to cost beforehand, and couldn’t shop around for lower rates for scheduled services.

Hospitals don’t want to publish their prices

Hospitals opposed the regulation, which encourages competition for lower prices, and complained that publishing every single service as requested would require creating spreadsheets so enormous that would crash standard computer systems.

But there is a much more important reason behind the hospitals’ resistance to share this information: It would put end to the freedom of charging what they want.

“The lack of accountability from hospitals in terms of pricing transparency is really unparalleled in a capitalistic society. There’s no justification for prices. There’s been hyperinflation year over year for more than 20 years,” says Josh Luke, a longtime hospital executive and author who teaches healthcare policy at the University of Southern California.

Publishing prices would encourage people to look for cheaper options—including out of states—as well as attract scrutiny for inexplicably high prices.

Why aren’t hospitals punished for breaking the law?

Initially, the fine established for institutions failing to comply was up to $300 per day, or $109,500 a year—a nominal sum considering hospital revenues can surpass $5 billion a year. As of Jan. 1, the penalty has increased significantly and is now up to $2 million.

According to the Centers for Medicare and Medicaid Services (CMS), at least 335 hospitals received warnings because they hadn’t published the required information, following reviews conducted following complaints made to the CMS and audits of hospital websites conducted by the agency.

Further, 98 hospitals that had previously received warnings were sent requests to provide corrective plans to comply with the law. Yet none of the hospitals that failed to publish the information has been fined. The CMS says it will eventually require payments from hospitals breaking the law, but it hasn’t shared details on when that will be.

Even if fines were applied, however, they may have little impact. Most hospitals make enough that $2 million could be written off as an operating expense, and likely one worth paying for the privilege of keeping prices secret. Nor would it be the only fine hospitals pay to avoid following regulations.

“There’s so many different penalties in the hospital sector…it’s just kind of a footnote in your weekly financial meeting,” says Luke, the author of Ten Years of the Hospital Readmission Penalty. In his book, he looks at a similar fine that was introduced to dissuade hospitals from discharging patients too soon, only to have them readmitted shortly thereafter. The penalty failed to have a significant impact in improving hospitals’ readmission records, since it wasn’t expensive enough to make the required changes a high priority for institutions.

Accountability is on its way

Attempts at introducing transparent pricing have to face three of the US’s most powerful lobbies, says Luke: Hospitals, health insurers, and the pharmaceutical industry, all of which benefit from lack of transparency.

Yet he thinks now that the process has started, it won’t stop, although before the change can have a significant impact on consumers, hospitals will need to simplify a complex system of codes associated with procedures.

“It will take a few years to finesse this law, to make it have a little more teeth where consumers can actually understand what they’re seeing on the websites,” he says.