Hospitals must be more transparent about health care costs

Hospitals must be more transparent about health care costs

Some Illinois hospitals are keeping their prices secret from their patients. Only three out of a sample of 11 major medical facilities in the state are fully compliant with a federal rule requiring hospitals to publish the costs of common services, according to data from the nonprofit group PatientsRightsAdvocate.org. That includes hospitals in Chicago.

Hospitals shouldn’t be able to get away with flouting the law like this. Price transparency empowers patients and payers to shop around for medical care — and ultimately allows them to leverage the power of competition to extract the best value for their health care dollar.

The federal government directed hospitals in 2019 to publish clear, consumer-friendly charge lists for 300 of their most common services by the beginning of last year. Six months later, just 6% of hospitals nationwide had complied, according to a study published in June in the medical journal JAMA.

The federal government only began penalizing hospitals for declining to list their prices last month. Two Georgia hospitals were the first to be fined. The facilities had also ignored letters from the Centers for Medicare and Medicaid Services asking them to publicly disclose what they charge for procedures.

CMS has issued more than 350 such warning letters requesting compliance since the rule took effect. Yet transparency has lagged.

The biggest medical centers have been among the worst offenders. Just 0.5% of facilities owned by the country’s three largest hospital systems — including one that operates multiple hospitals in Illinois — were fully compliant as of early 2022, according to the PatientRightsAdvocate.org study.

Hospitals may be leery of revealing their prices because the results can be embarrassing. In one case, an Illinois patient reportedly received a $15,000 hospital bill for an EpiPen. He later learned he could have purchased the same device from a pharmacy for $320.

Or take the recent experience of a couple in Fresno, California. According to reporting from NPR, the husband underwent cataract surgery with an in-network provider that cost over $4,000. His wife, who has the same coverage, received the same exact procedure at a neighboring clinic — and only owed $204. The two facilities were just a half mile from one another.

In Texas, a Cesarean section costs a woman without insurance just over $8,000 at one hospital in suburban Dallas. Just 15 minutes down the road at a different hospital in Dallas, that same procedure would cost nearly $20,000 more.

In Washington, D.C., a basic CT scan could cost a cash payer anywhere from $81 to $1,800, depending on the hospital.

High-cost providers wouldn’t be able to get away with those wide price spreads if patients and payers knew about them. That’s why a 2021 RAND Corporation study projected that improving price transparency could reduce U.S. health care spending by up to $26.6 billion a year.

Of course, some hospitals may be justified in charging more than others. Factors like quality, convenience and the reputation of doctors and hospitals always influence price. But patients and payers should be able to evaluate those factors on their own. Hiding prices deprives them of key pieces of information that help them make prudent decisions.

Opaque prices also undermine competition — and thus help health care providers avoid improving quality or reducing costs in order to attract customers at the margin. The upshot is higher long-term costs and worse service.

The feds did the right thing by finally fining hospitals that aren’t following the rules. But more needs to be done to make hospitals in Illinois and around the country do what businesses in every other sector do every day — tell potential customers what they can expect to pay.

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Nothing contained in this blog is to be construed as necessarily reflecting the views of the Pacific Research Institute or as an attempt to thwart or aid the passage of any legislation.