Hospital Price Transparency Services Scratch Surface of Spending

January 23, 2020 - A recent analysis conducted by the Health Care Cost Institute (HCCI) is raising questions about the efficacy of a consumer-centered hospital price transparency requirement slated to take effect next year.

 The hospital price transparency rule finalized late last year will require hospitals to display, in a consumer-friendly format, payer-specific charges and other pricing information for at least 300 shoppable services by 2021. According to the new requirement, a shoppable service is “a service package that can be scheduled by a healthcare consumer in advance.”

To help kickstart these hospital price transparency efforts, the rule contained a list of 70 CMS-specified shoppable services that hospitals must post the charges for on their websites. CMS determined these 70 shoppable services based on several analyses including reviews of other shoppable services that are currently made public under state price transparency requirements and of services that frequently appear in web-based price transparency tools.

But data from HCCI is now showing that the 70 CMS-specified shoppable services account for a sliver of total healthcare spending among individuals with employer-sponsored insurance.

HCCI’s analysis found that the shoppable services defined by CMS represented just 12 percent of 2017 medical spending, which excluded prescription drug spending. The services also only made up 16 percent of out-of-pocket medical spending among those with employer-sponsored insurance.

But even other shoppable services identified by HCCI did not account for a large portion of total healthcare spending in 2017. Using its own list of 429 codes that fall into CMS’ definition of shoppable, HCCI found that approximately 36 percent of total spending (including prescription drug spending) and 43 percent of out-of-pocket spending was attributed to shoppable services.

The percentage of total spending attributed to shoppable services also fell, according to HCCI. In a 2016 analysis of 2011 employer-sponsored insurance spending, at most, 43 percent of total healthcare spending was on shoppable services. The services also accounted for just under half (47 percent) of out-of-pocket spending.

“This analysis, like those that preceded it, suggest that, while the amount of total health care spending that is shoppable is not trivial, is does limit the potential impact of consumer-focused initiatives,” HCCI researchers stated in the analysis.

CMS believes the hospital price transparency requirement will empower consumers to shop around for healthcare, resulting in potentially lower costs and higher quality care. But whether the price transparency rule will achieve CMS goals has been up for debate.

Hospital groups including the American Hospital Association (AHA), Federation of American Hospitals (FAH), and Association of American Medical Colleges (AAMC) have spoked out against the requirement, highlighting the fact that the requirement does not give consumers what they truly need to shop around for healthcare: out-of-pocket cost estimates.

The hospital groups identified above and several others have even gone so far as to sue HHS over the price transparency rule. The groups contend that the rule violates their First Amendment rights by mandating “speech in a manner that fails to directly advance a substantial government interest, let alone in a narrowly tailored way.”

With hospitals staunchly opposing the rule, the HCCI analysis also calls into question another aspect of the requirement: hospitals can select the remaining 230 shoppable services to display.

To comply with the rule, hospitals must publish pricing information on the 70 CMS-specified shoppable services, as well as 230 other shoppable services identified by the hospital. This flexibility could mean that hospitals select services that fit CMS’ definition of “shoppable” but do not truly advance a consumer’s ability to shop around for services they require.