Time for Hospitals to Come Clean About Pricing

The Biden administration is cracking down on hospitals that keep their prices secret.

Under a policy announced last week, failing to abide by Trump-era hospital price transparency rules will no longer prompt a warning letter from the Centers for Medicare and Medicaid Services. Instead, hospitals will have 45 days to submit a Corrective Action Plan for meeting these requirements — or face a fine.

It seems that not even Democrats can quarrel with former President Trump's price-transparency reforms — nor should they. For healthcare markets to function properly, patients and payers must be able to shop around for the highest-value care. That's impossible without good information on what hospitals actually charge.

Better enforcement of price transparency rules is one reasonable way to get that information out in the open where it belongs.

President Trump enacted these rules through an executive order signed in 2019. The policy requires hospitals to disclose the prices they charge individual patients and third-party payers for various treatments, procedures, and services. They must present these data in both a consumer-friendly format and a machine-readable file.

That hospitals must be asked for this information in the first place is evidence of dysfunction in the healthcare market. In other parts of the economy, sellers compete for buyers' business by advertising their prices and the value those prices purchase.

But in health care, insurers and hospitals negotiate in secret, hoping to extract as much from one another as possible — and to get a better deal than their competitors. Providers and patients often have no idea what the services they're selling or the care they're buying costs.

In many cases, the price of a particular procedure or treatment is only apparent months after it's delivered. Even then, this information is often hidden in medical bills that are nearly impossible to decipher.

So, patients rarely have the chance to compare prices when seeking care — and hospitals remain insulated from the kind of competitive forces that yield lower costs and higher quality in other markets.

It should come as no surprise, then, that hospitals have done their best to avoid Trump's transparency requirements since they took effect in 2021. A recent analysis by federal officials found that as of 2022 "at least 30% of hospitals are still not fully in compliance with the regulations." But even that figure almost certainly underestimates the extent of the problem.

Consider a survey of 2,000 hospitals by the group PatientsRightsAdvocate.org released in February. According to that review, just one in four hospitals fully complied with price transparency rules. A number of major hospital systems — such as HCA Healthcare, Mercy Health, and Avera Health — had no compliant hospitals at all.

In light of such widespread dismissal of the rules, a renewed emphasis on enforcement makes perfect sense. Until now, hospitals could ignore the law for months before any real consequences materialized.

The previous process began with a warning letter, which gave a hospital 90 days to start posting its prices. If it failed, the facility would receive another 45 days to develop a Corrective Action Plan. It would generally get 30 to 90 days to fulfill the terms of that plan. If it failed, then it could receive a fine. As CMS notes, the whole process took, on average, between 195 and 220 days. What's more, just four hospitals have ever been forced to pay a fine.

Clearly, a more aggressive enforcement strategy is in order, as House Republicans have long insisted. Last month, Rep. Brett Guthrie, R-Ky., the chairman of the Health Subcommittee on the House Energy and Commerce Committee, published an op-ed asserting that "Greater enforcement [of] . . . these important transparency rules would create greater competition among healthcare providers and allow patients and employers to shop around for better healthcare deals."

He's hardly the first Republican lawmaker to make this argument. Nevertheless, it's encouraging that the Biden administration is finally heeding these calls. If providers can keep patients in the dark about the actual cost of care, health spending will continue to grow unsustainably — and affordable, high-quality care will remain out of reach for far too many Americans.