Consumers are capable of weighing market tradeoffs in the healthcare industry Image By Brian Miller Key Points Despite federal rules since 2020 requiring hospitals to disclose prices for shoppable services, compliance remains poor: more than half of U.S. hospitals still fail to provide both required data sets (machine-readable files and shoppable displays). Initial civil penalties ($300/day) were too low to drive compliance; even after the Biden Administration raised fines to as much as $5,500/day, a 2024 HHS Inspector General report found persistent noncompliance. Patients often face hidden “facility fees” at hospital outpatient clinics, which are confusing and poorly disclosed. Stronger CMS rules and FTC scrutiny of hospital marketing practices are recommended. This is a lightly edited excerpt of testimony recently provided to the U.S. Senate’s Health, Education, Labor, and Pensions hearing " Making Health Care Affordable: Solutions to Lower Costs and Empower Patients." Consumers regularly make a variety of tradeoffs between cost and quality in their daily lives when purchasing items, small and large. Americans purchase a variety of everyday consumer products. In calendar year 2019, Americans consumed 612.4 million jars of peanut butter, while in 2023, Americans chose among at least 51 varieties across nine brands. Consumers also make more complex, large purchases with greater transaction costs while weighing cost, quality and other features. For example, in 2022, Americans purchased 13.6 million new and 39 million used cars, with the new car market comprising 275 models and untold thousands of potential combinations of colors and features. In addition to the purchase of goods, consumers also regularly decide – as part of their daily life – and choose between various providers of service, weighing tradeoffs between price, convenience and reputation. To assume that American consumers cannot value and make tradeoffs incorrectly assumes that they lack agency. Unfortunately, hospital markets – which market and sell a variety of products and services to consumers and employers – have historically lacked such transparency. In 2019, Executive Order 13877 directed multiple federal agencies, including the Department of Health and Human Services (HHS), to require the disclosure of negotiated rates and expected out-of-pocket costs for shoppable services, defined as “common services offered by multiple providers through the market, which patients can research and compare before making informed choices based upon price and quality.” The order noted that 90% of the 300 highest-spending outpatient categories were considered shoppable. As part of the CY2020 hospital outpatient prospective payment system and ambulatory surgical center payment system annual rule, the Centers for Medicare and Medicaid Servies (CMS) required hospital disclosure of gross and payer-specific negotiated charges for a total of 300 services, including 70 mandatory shoppable services with the hospital selecting an additional 230 services. The 2020 implementation of CMS’s price transparency for shoppable services came with civil monetary penalties of $300 per day per penalty, subsequently updated in 2021 by the Biden Administration for CY2022 to both increase with scale and cap, now registering up to $5,500 per day. Initial compliance was poor despite CMS’s extension of the compliance deadline to Jan. 1, 2021, with researchers demonstrating that 75 of the 100 highest revenue hospitals were noncompliant with at least one major requirement. Another study also showed that 55% of hospitals had not posted a machine-readable file. A broader 2022 study of 5,239 hospitals showed 729 or 13.9% had a machine-readable file but no shoppable display, 29.4% or 1,542 had a shoppable display and no machine-readable file, and 300 or 5.7% had both. Unfortunately, 50.9% or 2,668 hospitals had neither. A November 2024 HHS OIG report demonstrated persistent, significant noncompliance with the hospital price transparency rule, with 37 of 100 hospitals in service complying with one or both of the components of the rule, and analysts noting room for improvement in industry compliance and regulator enforcement. Transparency of hospital facility fees remains a critical arena for policy improvement. Regulators, including CMS and state bodies, should require transparency of hospital outpatient department facility fees, a critical consumer protection issue. While health policy experts can parse the technocratic payment regulatory policy difference between a facility billing on the physician fee schedule versus those billing as hospital outpatient departments, it is unrealistic to expect a consumer to know if a clinic is greater than 250 yards or less than 35 miles from the original hospital site and whether it was acquired and billing as an off-campus hospital outpatient department prior to Nov. 2, 2015. Recognizing national news reports regarding the lack of hospital price transparency of facility fees, policymakers should also encourage the Federal Trade Commission to investigate hospital marketing practices around facility fees to ensure that consumers are appropriately informed. Read the full testimony here. Dr. Brian Miller is an associate professor of Medicine and Business at Johns Hopkins University, and a nonresident fellow for the American Enterprise Institute. *The opinions expressed in this column are those of the author and do not necessarily reflect the views of HealthPlatform.News.
