What’s the Price of Healthcare Price Transparency?

Business & Financial Planning, CON/CHNA/Regulatory

If you’re looking for the lowest price on a rectal resection or a radical hysterectomy, you might be glad to know that the Biden Administration plans to fine hospitals up to $2 million a year if they fail to publish those prices online.

Yes, this is the latest proposal for keeping a lid on healthcare costs: Encourage “competition” and “price transparency” by forcing hospitals to put a public price tag on the services and procedures that they offer – even if no one would dream of making such a life-changing decision based on price.

The rule originated with the Trump Administration, but fines for noncompliance were capped at just under $110,000 a year. Critics said those penalties were too low, and studies found that about one-third of hospitals failed to meet the strict reporting standards. So on Monday, the Department of Health and Human Services proposed increasing fines by nearly 2,000% for “large” hospitals with more than 30 beds.

This is a bad idea for at least four reasons.

First, healthcare price transparency is not the same as clarity. Duke Regional Hospital does a wonderful job of compliance, and patients can easily download a spreadsheet listing price information for every available cuff, capsule, and catheter, cross-referenced by 15 different payer options (Medicare, private insurance, self-pay, etc.). The result is a spreadsheet with more than 85,000 items and nearly 1.3 million cells. Is that transparent? Yes. Is it clear? Hardly.

Second, transparency is not the same as comparability. Need a lung transplant? With insurance from Cigna, it will cost somewhere between $306,000 and $541,000 at Duke Regional. Every hospital reports these broad ranges, and not because they want to be opaque. Instead, it’s about a complex coding system established years ago by the Federal government to make billing fairer and more consistent by accounting for “complications and co-morbidities.”

A lung transplant for a 20-year-old accident victim is quite different from a lung transplant for a 70-year-old smoker with diabetes. Billing codes have those differences built in, which is great for auditors and payers, but not for consumers trying to compare costs before a procedure.

Third, transparency does not encourage comparison shopping, because consumers don’t “buy” gallbladder surgery the way they do a gallon of milk. When you’re faced with a premature birth or a pacemaker implant, you’re not going to consult a spreadsheet and catch an Uber to a cheaper hospital across town – especially if you’re covered by a third-party payer. Rather than cost, consumers tend to choose a hospital based on convenience, familiarity, or safety because insurance limits their out-of-pocket expense.

Finally, transparency does not come cheap. Every hospital, regardless of size, will find itself reporting millions of data points on thousands of services and dozens of payers. Much of this information has to be manually gathered and reported, plus additional costs for website upgrades to make it all machine-readable and public facing as required by HHS.

For smaller nonprofit systems and rural hospitals, the price of all this is just too high. If these hospitals are failing to comply with the transparency rule, it’s not because they want to hide anything, but rather because they can’t afford it.

No hospital can continue with business as usual, and we believe in transforming the US healthcare system to provide the right care, in the right place, at the right cost. But slapping vulnerable hospitals with million-dollar fines over a regulation that never made sense in the first place? That’s not transformation. It’s a travesty.

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A shortened version of this opinion piece was published on July 27, 2021, in the “Forum” section of The Charlotte Observer and The News & Observer (Raleigh). Read it here.