Less than 20% of hospitals in Tennessee are fully compliant with the CMS price transparency rule that went into effect on January 1, 2021. The rule mandates hospitals to publicly list negotiated rates for 300 shoppable services online in a consumer-friendly format. Given the growing prevalence of high-deductible plans, patients are frequently exposed to the full negotiated rate until such a point that their deductible and out-of-pocket maximum is exhausted. The rule requires hospitals to meet several criteria, which are outlined in table 1 below (45 CFR §180.50).
Using these criteria, we evaluated all 88 short-term acute care hospitals in Tennessee during the first week of February and found that only 14 hospitals (16%) fully complied with all criteria. The majority of hospitals continued to post a chargemaster with the gross charge.
Table 1: Summary of Tennessee Hospital Compliance with Federal Rule
Focusing our efforts on the 31 hospitals that released payer-specific negotiated rates, we compared their prices across payer contracts for a major joint replacement of the lower extremity (DRG 470) and a routine screening mammogram (CPT 77067). The results are found in table 2.
Table 2: Summary Statistics of Negotiated Rates for Tennessee Hospitals
There are a number of noteworthy findings from the data that has been released by the 31 Tennessee hospitals that we analyzed. A hospital visit for a knee replacement ranged from $10,536 to a $104,123. In Memphis alone, the price of a routine screening mammogram varied from $87 to $626. Across Tennessee, negotiated rates and cash prices varied up to ten-fold depending on the facility and payer. Within a facility, the range of negotiated rates for these two procedures varied widely across payor contracts. On average, maximum negotiated rates were 191% of minimum rates for mammograms and 233% for major joint replacements.
Prior research has demonstrated that cash prices are often lower than insurance- negotiated rates. Similarly, at 67% of the hospitals we analyzed, cash prices for mammograms and major joint replacements were cheaper than the average negotiated rate. However, we did not observe a consistent relationship between cash prices and negotiated rates. At some facilities, cash prices were less than the minimum negotiated rate, while cash prices were higher than the maximum negotiated rate at others. In figures 1 and 2, we have highlighted several facilities to portray the disconnect between cash prices and negotiated rates.
Figure 1: Comparison of Negotiated Rates and Cash Prices for Mammograms in Tennessee
Figure 2: Comparison of Negotiated Rates and Cash Prices for Major Joint Replacements in Tennessee
For most hospitals, the range of negotiated rates is similar, yet the cash price for a routine screening mammogram at hospital F is nearly seven times more expensive than at hospital A.
These cash prices at some facilities may be an opportunity for significant savings for some patients. A $42 mammogram is 40% cheaper than the minimum negotiated rate in the subset of hospitals that we analyzed. In East Tennessee, one hospital’s negotiated rate for a basic metabolic panel (CPT 80048) was $126. By driving for 45 minutes to a neighboring hospital, a patient could save $123.60 for the same lab test by paying in cash.
It’s still too early to tell what long-term compliance rates will be. Less than two months after the CMS price transparency rule went into effect, hospitals are continuing to release information. Even with this limited amount of data, patients are better off, and we hope that more information continues to empower patients to make informed decisions.
This study was conducted by students and faculty within the Owen Graduate School of Management at Vanderbilt University. Click here to learn more about the Vanderbilt Master of Management in Health Care (MMHC).
