What’s on the Menu? Maximizing the Potential of Hospital Pricing Transparency Regulations
Beginning January 1st of this year, by order of the Trump administration, all hospitals in the U.S. are now required to publish master price lists – known as “chargemasters” – detailing all products and services offered to patients. According to the mandate, chargemasters must be readily available on the internet in a machine-readable format. While greater price transparency is a righteous goal, in practice, the pricing information is prohibitively difficult to find and utilize. The industry must take great strides in pricing data presentation and availability before the information can begin to positively impact affordability and patient care.
Pricing information currently available has been buried, disorganized, and widely variable among organizations, rendering it unusable for the vast majority of patients. The chargemasters are often hidden in fine print, deep within hospitals’ websites. Once located, the data can be overwhelming and incoherent. As evidenced by chargemasters from the Cleveland Clinic, Cedars-Sinai Medical Center, and Memorial Healthcare System linked below, pricing lists consist of thousands of lines of arcane, often duplicative procedure descriptions and corresponding dollar values. Additionally, data formats vary widely among organizations, restricting the potential for price comparability. Together, these factors make it nearly impossible for patients to navigate and understand the information.
Extracting actionable information from the pricing data will require significant progress by hospital organizations and third parties such as research institutions and healthcare services firms. For certain procedures, in order for patients to make sense out of what is listed in chargemasters, providers must clearly outline necessary procedures, allowing patients to calculate total projected costs before consenting to care. Further, implementing the ability to search and assemble the required procedures and total costs by CPT code can give patients the ability to shop in advance of a visit to the doctor. Next, industry adoption of a standardized data format can permit third parties to aggregate chargemasters into a combined database, empowering patients to compare hospitals’ prices against each other. Over time, consumers will gain the ability to compare prices among hospitals and make an informed decision on providers based on both cost and quality of care. This new demand elasticity can lead to increased price competition among hospitals and a reduction in listed prices in order to retain and grow patient bases. Finally, adding the ability to compare Medicare reimbursement rates to hospital prices can increase transparency and empower uninsured patients to negotiate outrageous bills.
In some cases, the uninsured patient population stands to benefit the most from increased pricing transparency. Without an insurance provider to negotiate rates to reasonable levels, uninsured patients are charged exorbitant list prices with no context. A 2015 study in Health Affairs found 50 U.S. hospitals charging over ten times the cost of care and a national average of 3.4 times the cost of care. Even after “uninsured discounts,” commonly around 20-40% of the total bill, patients can be left with unmanageable bills that are ultimately sent to collections agencies.
The new hospital pricing mandate is a step in the right direction for patients, but we have a long way to go. Ultimately, increasing transparency of hospital billing practices and fostering competition can make healthcare more affordable and can improve the overall health of the population by expanding access to care.
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Cedars-Sinai Medical Center
Memorial Healthcare System
“50 Hospitals Charge Uninsured More than 10 Times Cost of Care, Study Finds,” The Washington Post
“As Hospitals Post Sticker Prices Online, Most Patients Will Remain Befuddled,” Kaiser Health News
“Extreme Markup: The Fifty US Hospitals with the Highest Charge-To-Cost Ratios,” Health Affairs
“Hospitals Must Now Post Prices. But It May Take a Brain Surgeon to Decipher Them,” The New York Times
“Opinion | Donald Trump Did Something Right,” The New York Times
“US Hospitals Are Now Required by Law to Post Prices Online. Good Luck Finding Them,” Quartz