New analysis: CMS vastly overestimates hospital price transparency efforts

More than two years after a federal rule required hospitals to post their actual prices, the Centers for Medicare & Medicaid Services has finally responded to public pressure about the failure of many hospitals to be transparent about what they charge for their services.

Unfortunately, CMS’s new hospital compliance report gaslights American health care consumers by claiming that most hospitals are following the rule. Its survey of a mere 600 out of 6,000 U.S. hospitals showed that 70% are complying with two key rule requirements: a machine-readable file that computer systems can read and a consumer-friendly display.

This sunny conclusion is out of step with other reports.

The results of a review conducted by PatientRightsAdvocate.org, the organization I lead, showed that only 24.5% of the 2,000 hospitals surveyed in December 2022 and January 2023 were fully complying with the rule and posting complete price information. Some of the nation’s largest medical systems, including HCA Healthcare, Tenet Healthcare, Providence, Avera, UPMC, Bon Secours Mercy Health, Christus Health, and Mercy Health, had compliance rates of zero.

Our analysis is far more in depth than CMS’s. It surveys hospitals’ machine-readable files for the completeness of the data the rule requires, including discounted cash prices and all rates negotiated by health insurer and plan.

CMS’s analysis, by contrast, provides a mere surface-level look at the existence of price files and doesn’t analyze whether insurance plan prices are correctly listed. Anything less than listing complete prices in dollars and cents is obfuscation. CMS’s study even admits that it “does not include all the requirements of the Hospital Price Transparency regulation.”

Consumers need detailed price information to perform meaningful comparisons, identify the well-documented widespread price variations for the same care even within the same hospital, and avoid pervasive hospital overcharging. When prices are missing or remain hidden, hospitals can escape competition and accountability. And the dearth of information limits tech innovators from creating easy-to-use web applications such as Priceline or Kayak have done in other areas.

The findings of the PatientRightsAdvocate survey are in line with other reports on compliance with the hospital price transparency rule. Two studies published in January in the Journal of General Internal Medicine found hospital compliance rates of 19% and 35.9%, respectively. A June 2022 JAMA study determined that only 5.7% of hospitals were following the rule.

A complete understanding of compliance is a necessary prerequisite for properly enforcing the price transparency rule. CMS’s rose-colored conclusions likely explain the agency’s meager enforcement so far. It has fined just two hospitals nationwide out of the thousands that aren’t following the rule. Yet even this limited response demonstrates the power of financial penalties. These two hospitals quickly came into compliance, posting exemplary price files.

Disregarding the limited CMS report and viewing the bulk of the published compliance literature, it’s clear there remains an urgent need to ramp up enforcement of the hospital price transparency rule. Ongoing noncompliance by most American hospitals suggests that robust government action is the only way to make hospitals follow the rule and disclose their actual prices.

As a first step, CMS should issue fines on the 30% of American hospitals (approximately 1,800 in total) it concludes in its own analysis are not complying with the rule. Once those hospitals post their real prices, the agency can do another sweep of hospital price disclosures using broader compliance criteria to identify another tranche that isn’t following all facets of the rule, such as posting complete prices by insurance company and plan.

Only when all hospitals post their actual, upfront prices can health care consumers benefit from choice and competition and enjoy significant health care savings. Systemwide price transparency is required to usher in a functional, competitive market that empowers patients, employers, and unions to shop for the best care at the best prices and fight medical billing overcharges, errors, and fraud.

The good news is that CMS seems to recognize the importance of price transparency and has recommitted to advancing it in its report. The bad news is that the agency doesn’t seem to understand the scope of the hospital noncompliance problem.

Cynthia A. Fisher is the founder and chair of PatientRightsAdvocate.org.