Healthcare price transparency is advancing
As of December, more than half of hospitals were still flouting the rule. Patients deserve better. Transparent prices can help them make more informed decisions about their care — and drive down health costs. The 2021 CMS rule ordered hospitals to reveal their prices for 300 “shoppable services,” ranging from a basic blood test to joint replacement surgery. But since the penalty for noncompliance was just $300 per day , many hospitals chose to ignore it.
Some have uncomfortable truths to hide. For example, Massachusetts General Hospital in Boston charges a patient with a Blue Cross Blue Shield PPO plan nearly $950 for a typical emergency room visit. Across the Charles River, Mount Auburn Hospital in Cambridge charges the same patient $467 for the same ER visit. That discrepancy may not be a function of quality. Both hospitals have received five-star ratings from Medicare — the highest possible score. But the new CMS fines will force hospitals with more than 30 beds to pay up to $5,500 per day if they fail to comply with the price transparency rule — more than $2 million per year.
This really matters: Transparent prices are crucial to the efficiency of markets. Consumers can’t leverage the power of competition to demand lower prices and better quality if producers, healthcare providers, in this instance, can keep that information from them. The RAND Corporation estimates hospital price transparency could reduce patient and insurer spending by nearly $27 billion . Not small change.
Healthcare is one of the few sectors of our economy where prices are often unknown or unclear. It’s no coincidence that costs in the sector have risen inexorably. More price transparency can help arrest that trend.
Sally C. Pipes is president, CEO, and Thomas W. Smith fellow in healthcare policy at the Pacific Research Institute. Her latest book is False Premise, False Promise: The Disastrous Reality of Medicare for All (Encounter 2020). Follow her on Twitter @sallypipes.