Imagine you’re in the market for a new car. You go to the dealership, take a few models out for a test drive, and ultimately choose the one that has the features and driving experience you’re looking for.
But now imagine that there’s no sticker price. You just tell the salesperson you’ll take it — and silently pray that it’s not too expensive. You’ll find out how much you owe in a few weeks, when the bill comes in the mail.
Of course, this scenario would be impractical for any consumer product, let alone one as expensive as a new car. But it’s the status quo for purchasing services that can be far pricier, even matters of life and death — medical procedures.
This kind of opacity was supposed to stop earlier this year, when a new federal rule requiring hospitals to disclose the price of routine and elective procedures — including X-rays, lab tests, and cesarean sections — took effect. But seven months later, many hospitals still aren’t abiding by it.
A July report from Patient Rights Advocate, a nonprofit organization, found that less than 6% of 500 hospitals sampled were compliant with the rule.
Another study, published in June in the Journal of the American Medical Association, analyzed a sample of 200 hospitals — the 100 highest-grossing hospitals, plus another 100 that were randomly selected. The study found that 75 of the top-grossing hospitals and 83 of the randomly selected hospitals were noncompliant with at least one requirement under the rule.
The Centers for Medicare & Medicaid Services recently proposed raising the penalty for hospitals that don’t comply to as much as $2 million a year, up from the current $300 a day.
That penalty is justifiable if it means getting hospitals to comply with a measure that should have been commonplace to begin with. It’s practically extortionate to keep the prices of medical procedures secret.
Moreover, transparent pricing saves patients money, ensures that different patients pay the same prices for the same services, and helps lower overall health care costs.
Over a decade ago, New Hampshire passed a law requiring that median prices for 30 common health care services be listed publicly. A 2019 analysis found that these transparent listings saved a group of patients an average of 36% on medical imaging costs.
A recent study from the Rand Corp. found that price transparency could reduce spending on hospital services by between $8.7 billion and $26.6 billion per year.
As a matter of simple economics, transparency will improve competition and encourage more equitable pricing. Under today’s opaque system, prices for the same services can diverge widely depending on where you live.
A CT scan in Galax, Virginia, costs an average of roughly $1,200, according to a database from Turquoise Health. Drive northeast two hours to Moneta, Virginia, and the cost for the same procedure goes up sixteenfold, to an average of more than $19,000.
That kind of price discrepancy is commonplace across the country — and even sometimes within the same hospital, depending on who is paying.
For consumers, the benefit of a free market is that competition drives down prices. But a market can’t really be free without a free flow of information. And right now, too many hospitals are dragging their feet on sharing prices.
The rule requiring price transparency has been in effect since Jan. 1 of this year. It’s well past time for all hospitals to comply.
Hospitals need to comply with price transparency
Sally C. Pipes
Imagine you’re in the market for a new car. You go to the dealership, take a few models out for a test drive, and ultimately choose the one that has the features and driving experience you’re looking for.
But now imagine that there’s no sticker price. You just tell the salesperson you’ll take it — and silently pray that it’s not too expensive. You’ll find out how much you owe in a few weeks, when the bill comes in the mail.
Of course, this scenario would be impractical for any consumer product, let alone one as expensive as a new car. But it’s the status quo for purchasing services that can be far pricier, even matters of life and death — medical procedures.
This kind of opacity was supposed to stop earlier this year, when a new federal rule requiring hospitals to disclose the price of routine and elective procedures — including X-rays, lab tests, and cesarean sections — took effect. But seven months later, many hospitals still aren’t abiding by it.
A July report from Patient Rights Advocate, a nonprofit organization, found that less than 6% of 500 hospitals sampled were compliant with the rule.
Another study, published in June in the Journal of the American Medical Association, analyzed a sample of 200 hospitals — the 100 highest-grossing hospitals, plus another 100 that were randomly selected. The study found that 75 of the top-grossing hospitals and 83 of the randomly selected hospitals were noncompliant with at least one requirement under the rule.
The Centers for Medicare & Medicaid Services recently proposed raising the penalty for hospitals that don’t comply to as much as $2 million a year, up from the current $300 a day.
That penalty is justifiable if it means getting hospitals to comply with a measure that should have been commonplace to begin with. It’s practically extortionate to keep the prices of medical procedures secret.
Moreover, transparent pricing saves patients money, ensures that different patients pay the same prices for the same services, and helps lower overall health care costs.
Over a decade ago, New Hampshire passed a law requiring that median prices for 30 common health care services be listed publicly. A 2019 analysis found that these transparent listings saved a group of patients an average of 36% on medical imaging costs.
A recent study from the Rand Corp. found that price transparency could reduce spending on hospital services by between $8.7 billion and $26.6 billion per year.
As a matter of simple economics, transparency will improve competition and encourage more equitable pricing. Under today’s opaque system, prices for the same services can diverge widely depending on where you live.
A CT scan in Galax, Virginia, costs an average of roughly $1,200, according to a database from Turquoise Health. Drive northeast two hours to Moneta, Virginia, and the cost for the same procedure goes up sixteenfold, to an average of more than $19,000.
That kind of price discrepancy is commonplace across the country — and even sometimes within the same hospital, depending on who is paying.
For consumers, the benefit of a free market is that competition drives down prices. But a market can’t really be free without a free flow of information. And right now, too many hospitals are dragging their feet on sharing prices.
The rule requiring price transparency has been in effect since Jan. 1 of this year. It’s well past time for all hospitals to comply.
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.