Hospital Prices for Most Services Less than Payer-Negotiated Rates

According to a JAMA Network Open study, discounted cash prices for hospital services often cost less than negotiated commercial prices between hospitals and payers. However, not all hospital prices for self-pay patients have been disclosed, researchers revealed.

The study analyzed cash prices and payer-specified negotiated prices for CMS-specified hospital services at 922 hospitals. 

Researchers expected the cash price to be more costly since it is determined unilaterally by the hospitals, instead the findings contradicted those expectations.

Researchers found that 38.4 percent of the hospitals set their cash prices below their median commercial negotiated prices for liver function tests. 

Additionally, 68.5 percent of the hospitals set their cash prices below their median commercial negotiated rates for cesarean delivery.

The findings also showed that the proportion of hospitals that set their cash price below all of their commercial negotiated prices ranged from 7.1 percent for manual urinalysis tests with examination using a microscope to 25.0 for cesarean delivery.
Across all services, only 0.6 percent to 4.3 percent of hospitals set their cash price equal to their lowest commercial negotiated price.

“Cash prices can affect the cost exposure of 26 million uninsured individuals and concern nearly one-third of US workers enrolled in high-deductible health plans, who are often responsible to pay for medical bills without a third-party contribution and thus are interested in having access to low cash price,” the report states.

The study was released in light of the new Price Transparency Final Rule effective on January 1, 2021.

The Price Transparency Final Rule implemented by CMS requires hospitals in the US to disclose cash prices for 70 standard medical services to increase hospital care affordability and promote price competition between hospitals. 

Hospital compliance with the price transparency rules remains inconsistent, with only 922 of the 5,359 hospitals reviewed by Turquoise Health disclosing their cash and commercial negotiated prices for 70 CMS-specified services.

“As evidenced by the negative correlation between the median cash price of a service and the number of hospitals disclosing a price for the service, more expensive services were less likely to be disclosed, which might suggest strategic disclosing decisions,” the researchers stated in the study.

“To the extent that more hospitals will disclose prices to comply with the Hospital Price Transparency Final Rule, the cross-hospital variation of cash prices will likely increase.”

In order to increase hospital compliance with price transparency requirements, CMS announced they will increase penalties for non-compliant hospitals under the Calendar Year (CY) 2022 Hospital Outpatient Prospective Payment System (OPPS) and Ambulatory Surgical Center (ASC) Payment System Final Rule.

The Final Rule will penalize smaller hospitals with 30 or fewer beds a civil monetary penalty of $300 per day for non-compliance. Hospitals with a bed count greater than 30 will receive a penalty of $10 per bed.

CMS states that hospitals could be responsible for paying a maximum of $2 million if they fail to meet the requirements.