A year after federal regulators doubled down on price transparency requirements, most hospitals are complying with the law despite their insistence that the data isn't useful for patients.
Researchers estimate at least three-quarters of hospitals have posted prices they negotiated with commercial insurers. That’s about a three-fold increase since 2021, when some hospitals argued the associated cost to compile the data, as well as its possible benefit to competitors, outweighed potential penalties.
Related: Hospital price transparency: fines or full compliance?
Under the hospital price transparency law, implemented in 2021, providers must post machine-readable files with data on prices they negotiated with payers, gross charges and discounted cash prices for 300 shoppable services. In 2022, the Centers for Medicare and Medicaid Services increased the maximum yearly fine to more than $2 million for larger hospitals that didn't comply, up from a max of $110,000 a year.
Higher fines, coupled with regulators' and lawmakers’ reinforcement that the law isn’t going away, compelled the majority of hospitals to disclose their prices. The threat of hold-out hospitals has largely faded, healthcare attorneys said.
“When CMS upped the penalties significantly, it seems a lot of chatter of hospitals opting out went away,” said Katrina Pagonis, a healthcare attorney at the law firm Hooper, Lundy & Bookman who specializes in regulatory issues.
This month marks a year since CMS Administrator Chiquita Brooks-LaSure announced plans to bolster oversight and enforcement of the price transparency law during a House Energy and Commerce health subcommittee hearing. Brooks-LaSure said CMS would reduce the amount of time hospitals would have to correct issues with their pricing data and expedite the enforcement process.
CMS has since added to price transparency regulations as the agency looks to make the information more useful for patients. Starting Jan. 1, hospitals had to link to price transparency data at the bottom of their homepages. By July, hospitals will have to standardize pricing files and add new fields, including service descriptions. Come 2025, hospitals must list the average amount they received from payers for certain services, among other metrics.
A CMS spokesperson said these changes will make its enforcement actions more transparent and efficient, boost hospital compliance and increase the public’s access to prices.
To date, only 14 hospitals have received fines, though CMS has sent more than 1,000 warning notices to hospitals. More than 99% of potential fines have been avoided since hospitals completed corrective action plans, the CMS spokesperson said. Fines are reserved for the most flagrant offenders and have ranged from $56,940 to $979,000.
“Some hospitals have taken comfort in the fact that only 14 hospitals have been hit with civil monetary penalties, and understanding they only come after multiple bites of the apple,” said Michelle Garvey Brennfleck, a healthcare attorney at the law firm Buchanan Ingersoll & Rooney who advises providers. “Hospitals have appreciated the information CMS has put out in webinars and their tech support. There’s certainly a desire from hospital boards to stay out of the news.”
Still, stakeholders continue to debate whether price transparency will meaningfully slow spending in a sector that accounts for about a third of total healthcare costs.
Hospitals argue a one-dimensional focus on prices, without factoring in patients' proximity to hospitals, cost-sharing amounts and quality scores, will not lower healthcare costs. It could produce the opposite effect if low-priced hospitals adjust to meet the market average, they contend.
“Getting a knee replacement isn’t the same as buying a Honda,” said Steven Schnelle, a partner at the law firm McDermott Will & Emery who advises hospitals. “The idea that you can apply a cost-based marketplace to hospital services seems to philosophically mischaracterize the role of hospitals.”
Researchers, lawmakers, employers and data analysts, however, claim the data is the foundation of a long-term process that will ultimately help guide patients to the most affordable and effective providers. Lawmakers should do more, including further increasing fines, to sway the remaining hospitals that have yet to meet the mandate, they say. Transparency's ideal impact may hinge on a complete pricing dataset, supporters argue.
“As is, the penalties are too low to incentivize hospitals to comply,” said Morgan Henderson, principal data scientist at The Hilltop Institute at the University of Maryland, Baltimore County, who studies the price transparency law.
Even if all hospitals disclose their prices, that's just the first step in efforts to curb healthcare spending, said Cheryl DeMars, president and CEO of The Alliance, an employer coalition in Wisconsin.
“Transparency is a necessary but insufficient step on its own," she said. "We have a laundry list of policy priorities, including getting rid of anticompetitive contract terms.”
While there hasn’t been much progress yet on price transparency moving the needle on hospital costs, it will come, Henderson said. Price transparency should lead to less price variation and prices that are more reflective of a treatment’s cost, he said.
“I am optimistic we will get there,” Henderson said.
Federal and state lawmakers are working on related legislation designed to increase oversight and compliance. In December, the House passed the Lower Costs, More Transparency Act, a bipartisan bill that looks to codify and improve existing price transparency regulations, in part by levying fines of up to $10 million a year for large hospitals that don’t comply. The Senate followed suit in January with the Health Care Price Transparency Act 2.0, which resembles the House bill.
In addition, at least 26 states have passed or are considering passing transparency laws, according to the National Academy for State Health Policy. Wisconsin lawmakers, for instance, are considering a bill that would fine hospitals up to $10,000 a day if they didn’t meet federal price transparency requirements.
However, new state and federal laws have the potential to drain the resources of rural hospitals, which are struggling to stay open, said Brock Slabach, chief operations officer for the National Rural Health Association.
“In an environment where 50% of rural hospitals are losing money on operations, it’s difficult to concentrate on meeting a regulatory requirement that might seem a bit esoteric compared to being able to keep a hospital open,” he said.
