Health care prices have long been a black box for U.S. consumers. Not only is it challenging for consumers to identify medical service prices, but there are also wide and unpredictable price variations within and across hospitals and health systems. In an effort to bring transparency to healthcare prices, federal regulations that took effect in 2021 attempted to shed light both on the amount health plans pay hospitals and the prices consumers can expect to pay for certain services or medical items.
The new federal rule requires U.S. hospitals to provide the prices for their services in two ways: as a comprehensive machine-readable file (i.e. raw data), and in a separate consumer-friendly format that people can use to compare prices and services. The goals of the new transparency rule include enhancing consumerism (the ability of consumers to shop around and compare prices and services) and reducing costs through market competition.
A new study from Virginia Commonwealth University, the University of Minnesota School of Public Health (SPH), and the Ohio State University examines U.S. hospitals’ initial strategic responses to the federal price transparency rule and seeks to understand why U.S. hospital compliance with the new rule varied in its first year. The study is believed to be the first to investigate why hospitals chose to comply, and to what degree they did so, during the first year of the federal hospital price transparency rule.
Between November 2021 and March 2022, researchers interviewed leaders across several non-profit hospital organizations about their initial strategic responses, investigating the key internal organizational factors and external market factors affecting the health organizations’ approaches to the new rule. Published in the journal Health Services Research, the study found:
- Hospital organizations’ strategic responses skewed toward compliance, particularly for the consumer-oriented, price-shopping tool requirement.
- Hospitals were more likely to comply with the new rule when they:
- Were more committed to consumerism as reflected by their organizational values and goals;
- Had the necessary human, financial, and information technology resources to comply;
- And had an overall compliance mindset (defined as, the degree to which the organization places significant value on being compliant).
The researchers also found additional factors that influenced hospitals’ responses to the regulation, including the perceived effects of complying — or not complying — on the hospitals’ reputation and the potential adverse impact that information-sharing would have on contract negotiations with insurers.
“The push for greater healthcare price transparency and consumerism continues to generate many headlines,” says Jean Abraham, SPH professor and a co-author of the study. “This study offers new insights as to how hospitals approached federal price transparency regulation, including the people, resources, and market-related factors driving their decision making.”
“The U.S. healthcare system is complex for consumers to navigate,” says Jessica Mittler, associate professor in the Virginia Commonwealth University and lead author. “Our study found that hospitals are supportive of consumerism in principle, but they struggled to fulfill the regulatory requirements due to challenges with clearly interpreting the regulation and their own resource constraints. For policymakers, our study highlights the complexity that hospitals are encountering when generating timely and accurate price information in different formats.”
The study suggests that policymakers would benefit from a better understanding of the complexities health care organizations face in producing the required price transparency data, and that policymakers should also consider what information would yield the greatest benefits for consumers or other key stakeholders.
Additional study co-authors include Julie Robbins., associate clinical professor of health services management and policy at the Ohio State University College of Public Health, and Paula H. Song, interim dean and Richard M. Bracken chair and professor of Health Administration, VCU College of Health Professions.