The Keckley Report

The Hospital Price Transparency Final Rule: HHS Gets A for Effort but the Rule is Flawed

November 18th, 2019

Friday, while media attention was focused on the House Impeachment inquiry, HHS released its final rule on hospital price transparency.

It requires every non-federal hospital to post detailed information for 300 shoppable services starting January 1, 2021 or pay fines.  Hospitals must provide this information online in a machine-readable file including 1) gross charges; 2) discounted cash prices; 3) payer-specific negotiated charges; 4) de-identified minimum negotiated charges; 5) de-identified maximum negotiated charges; in addition to supply costs, facility fees and professional charges for employed physicians and other practitioners for each specified service.

Industry reaction to the final rule was swift: The Federation of American Hospitals, the American Hospital Association, the Association of American Medical Colleges and the Children’s Hospital Association promised to file a lawsuit challenging the rule. But public support for price transparency in healthcare is growing and Congress is receptive.

My Take

I read the entire 331-page rule. It’s a fascinating document premised on HHS’ core belief:

We believe there is a direct connection between transparency in hospital standard charge information and having more affordable healthcare and lower healthcare coverage costs. We believe healthcare markets could work more efficiently and provide consumers with higher-value healthcare if we promote policies that encourage choice and competition. As we have stated on numerous occasions, we believe that transparency in healthcare pricing is critical to enabling patients to become active consumers so that they can lead the drive towards value.” (p.9-10)

It’s hard to argue that price transparency in healthcare is adequate: polls show the public is getting tired of excuses. So, HHS deserves an A for effort, but this final rule has flaws:

The rule applies to every hospital, with very few exceptions. Only federal, Indian Health Services and VA hospitals are excluded. That means factors related to an individual hospital’s patient population, programs and services, and cost structure are not considered. Teaching hospitals, rural health providers, critical access hospitals, safety-net hospitals and others operate differently. This rule applies inadequately recognizes those distinctions. It’s a mandate to 6002 non-federal hospitals that takes effect in 13 months.

The cost for implementing the rule will be significant. The rule says:

We estimate the total burden for hospitals to review and post their standard charges for the first year to be 150 hours per hospital at $11,898.60 per hospital for a total burden of 900,300 hours (150 hours X 6,002 hospitals) and total cost of $71,415,397 ($11,898.60 X 6,002 hospitals). We estimate the total annual burden for hospitals to review and post their standard charges for CMS-1717-F2 7 subsequent years to be 46 hours per hospital at $3,610.88 per hospital for a total annual burden for subsequent years of 276,092 hours (46 hours X 6,002 hospitals) and total annual cost of $21,672,502 ($3,610.88 X 6,002 hospitals).”(pp 194)

Fat chance. The cost will be dramatically higher in most hospitals and duplicative in states like Florida, Maine, New Hampshire and others where hospital price transparency is already required.

And perhaps the biggest flaw: the rule will not enable consumers to know their out-of-pocket costs. Arguably, that’s what matters most to consumers.

This rule will advance discussion about hospital price transparency and stimulate app developers to create price comparison tools for simple, uncomplicated hospital services. But how hospital price transparency translates to responsible shopping by consumers, given the role of insurance coverage and variability in the cost structure and program mix of hospitals, remains the big question.

HHS deserves an A for effort, but this rule has flaws. Like HHS has done with other rules, modifications to make it more useful to consumers and more impactful on competition among hospitals are important.