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  • Writer's pictureSpencer Dunlap

Price Transparency: Is It a Law or Just a Suggestion?

Updated: Jan 7, 2022

The Affordable Care Act was originally signed into law back in 2010 under the Obama administration, but it wasn’t until a new rule in October 2020, under the Trump administration, that the policy of price transparency was established. At a high-level, this new set of price transparency rules mandated that hospitals post the prices for all of their procedures online and in an accessible format.

This sounds great in theory. After all, the United States ranks only 18th amongst the world for healthcare quality, with factors like “higher costs and lower availability of care” marked as reasons for its placement, so something like price transparency should theoretically help with those points, in addition to giving the patient a better healthcare experience. Now, it’s been about 8 months since the new rule took effect on January 1, 2021, so how much has changed?

Price Transparency Non-Compliance

Well…not much. Before we look at the statistics, let’s first note the current penalties for non-compliance. Currently, the maximum penalty is $300 dollars a day for non-compliance. Multiply that out to 365 days in a year and you’re looking at a fine of $109,500 – compare that to the average hospital revenue in the US of $327 million and decide how impactful you think it is. A study by the JAMA Network actually noted it may be *more* expensive for a hospital to comply than it would be not to.

At this point (or if you knew already) you may be estimating that compliance probably wasn’t great this past year, and you’d be correct. A study by the Patient Right Advocate organization analyzed a random sample of 500 of the 6,002 hospitals subject to the rule and found only 5.6% [28] of them were compliant with the price transparency guidelines. Extrapolate that 5.6% to the full hospital population and you’re looking at well over 5,000 cases of non-compliance – a staggeringly large number. On the bright-side, the fines and penalties are at least being enforced, right?

Price Transparency Enforcement

Not quite. As of October 4th, CMS has contacted 256 hospitals for their non-compliance, with 156 being sent out by July and then another 100 at the end of September. At that rate of about ~50 a month (100 between August and September), you’re looking at 100 months, or a little over 8 years, to catch up to those 5,000+ non-compliant hospitals. Now, CMS proposed a new rule August 4th of this year in hopes of boosting compliance, which would increase the maximum fine amount to over $2 million a year for larger hospitals.

It sounds like a step in the right direction but it begs the question – if a rule can’t be properly enforced, what change can we truly expect? Will $2 million be high enough to incentivize larger hospitals, or will their cost-benefit analysis still show it cheaper to keep their prices hidden and pay the fine?

Let us know your thoughts by connecting with our page on LinkedIn, or message me directly to discuss.

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