Improving Hospital Compliance With Price Transparency Rules
By: David Muhlestein, PhD, JD, Health Management Associates and Yuvraj Pathak, West Health Institute
Price transparency has long been viewed as a critical component of driving competition and consumerism in health care. Until recently, however, price data were largely unavailable and out of reach of nearly all consumers, policymakers, and researchers.
Starting January 2021, through the Hospital Price Transparency rule, the Centers for Medicare and Medicaid Services (CMS) required hospitals to post prices of a list of 200 shoppable services in a machine readable format on their website, with monetary penalties for noncompliance. For transparency data to make a difference, it has to be consistent across services and hospitals and available to the public in an easy-to-use, machine readable format. However, many hospitals are failing to share information on their negotiated rates or prices. One study found that only 57 percent of hospitals are fully compliant with the regulation and 31 percent are partially compliant, while another study found only 36 percent of hospitals to be fully compliant with another 25 percent partially compliant.
As a part of the push for making prices transparent, CMS also introduced The Transparency in Coverage regulation that requires insurers and group health plans to provide to consumers (1) price data via machine readable files online and (2) a tool or an application that provides customers with real-time cost-sharing data for covered services. The Hospital Price Transparency rule only covers hospitals, but the Transparency in Coverage data also contains prices for doctors’ offices.
In this article, we discuss why so many hospitals may be failing to comply with the Hospital Price Transparency rule. We offer a set of policy proposals to improve compliance and the quality of transparency reporting.
Reasons For Not Complying
To achieve the promise of the price transparency regulations, organizations must comply and fully report their data. A recent study by Mittler and colleagues interviewed a variety of hospital leaders to understand how hospitals are approaching compliance and their findings are instructive. While many hospitals acquiesced to the regulation without significant pushback, others intentionally only responded to a portion of the rule (partial compliance) or even took steps to appear to comply with the regulations without actually complying. One hospital blatantly refused to comply and suggested that if they were fined, they would fight the penalty.
Reasons for failing to comply at the outset ranged from needing additional time (though intending to ultimately comply); the high cost of generating the data; and competitive factors, such as a desire to avoid providing information that could negatively impact hospitals’ ability to negotiate rates with payers. Importantly, none of the organizations reported that the CMS penalties drove them initially to report their rates as the penalties were very modest ($300/day, or $109,500 per year).
Importantly, policy changes have already addressed some of these concerns. First, CMS increased the monetary penalties for violations significantly, with large hospitals subject to up to $2,007,500 in penalties per year. If hospitals are purely concerned with the cost of compliance, and if it is below their potential penalty, they will be encouraged to comply.
Second, significant hospital-level data has been made available under the Transparency in Coverage rule independent of hospitals’ decision to share information under the Hospital Price Transparency rule. The Transparency in Coverage rule requires payers to report negotiated rates and an increasing number of payers are complying with this requirement. Thus, the previously private rates hospitals were seeking to protect are now known, meaning a hospital’s compliance with the Hospital Price Transparency rule won’t impact negotiations with payers.
Policy Recommendations
Hospital price transparency is an important step in health care reform for two important reasons. First, it allows consumers to make informed decisions about their health care which (we hope) will increase the price elasticity for some services, especially the ‘shoppable’ services identified by CMS. This will only happen if people are aware of price information and actually use it to shop around for health care. Thus, the federal government should conduct an information campaign to increase awareness of price transparency and its benefits to the public.
If price transparency—or more specifically transparency regarding the variation in prices for services—pushes people to shop around and makes them choose the less expensive option, this can force providers to compete on prices; that in turn has the potential to bring down total health care spending. To achieve this, the data needs to be made as useful as possible for consumers, industry, and researchers.
But, for these benefits to be realized, CMS needs to continue to improve compliance with the Hospital Price Transparency rule. Compliance has already improved since the rule’s early days but continues to be patchy. A major reason for this is lax implementation of penalties for non-compliance. Originally very modest, penalties have already been increased to a level that can drive compliance (from a maximum of around $100,000 to over $2,000,000 per year). However, in 2022 and 2023, only seven providers had a financial penalty imposed on them (CMS has taken action against 14 providers but half of those actions are under review).
If the dollar amount of penalties is greater than the cost of complying with Hospital Price Transparency rule, providers will be incentivized to make their prices publicly available, but only if penalties for noncompliance are not only large but certain. CMS thus needs to be much more active in enforcing its existing policies and move more quickly from the threat of penalties to actual penalties. If certain hospitals continue to fail to report their prices, CMS could subsequently raise the prospect of having non-compliant hospitals lose CMS certification.
Additionally, we recommend four further changes that will improve the usability of the data to help it achieve its potential.
Standardize Data Reporting Across Payers And Providers
First, data are reported inconsistently between hospitals and insurers. The Transparency in Coverage rule requires relatively standardized reporting, but there is still significant variation, even when using the standardized schema. The recent legislation passed by the House of Representatives (not, yet, taken up by the Senate) does require standardized hospital reporting via machine-readable files, which would then give CMS the opportunity to standardize schemas between payers and providers with standardized reporting time frames—potentially quarterly for both payers and providers. In preparation for this, CMS should release a Request for Information (RFI) to gain industry input, with the goal of ultimately adopting a uniform schema to allow the sharing of pricing data for both payers and providers.
Eliminate Unused Codes From Reporting Requirements
Second, CMS should require hospitals and insurers to limit the data that are shared to procedures where the provider actually performs the service. “Ghost codes” for services the provider never performs significantly increase the size of the data sets involved: A practice that may only ever bill for 100 different codes might have reported rates for over 10,000 different codes. For example, a psychiatrist is not going to perform a heart transplant, so that billing code does not need to be reported.
A simple filtering mechanism would be to only require the reporting of codes if the tax identification number of the practice or hospital has been used to bill for the relevant procedure in the previous three years. This could decrease the size of the data needed under the Transparency in Coverage rule by an order of magnitude or more.
Place Data In A Centralized Location
Third, CMS should require hospitals and insurers to share data directly with CMS, where it can be viewed from a centralized location. For researchers or analysts to assess prices across the health care system, they currently must go to thousands of different sites and aggregate the data. CMS already has significant experience aggregating and sharing data (such as the Healthcare Provider Cost Reporting Information System’s cost reports) and could do the same thing with price transparency data. The volume of the price transparency data is very large, but the volume could be reduced over time if unnecessary data were removed as described above.
This centralization might take years to implement. In the short term, however, all hospitals and insurers could be required to report the file locations for their data (the table of contents files). CMS could easily compile and share these file locations publicly.
Require Reporting Volume Information
Finally, while price transparency is important, information on quality is equally important. A small step toward better understanding quality relates to volume. Higher volumes are associated with better outcomes, so sharing information on how often a facility performs a given service would be very informative for consumers. For both hospital and insurer reporting, CMS should mandate reporting of the number of times a hospital billed for a given code in the past year.
We strongly support and laud the efforts that policymakers, regulators and legislators have made to improve the transparency of commercial prices. Acting on the suggestions offered in this article would further these efforts to make health care pricing information available to all.