The lack of hospital price transparency has been an important factor that compromises hospital care price competition and care affordability. One of the goals of the federal hospital price transparency rule is to enable patients to compare the cost of services when making healthcare decisions.
The Centers for Medicare and Medicaid’s (CMS) hospital price transparency rule took effect Jan. 1. The rule requires hospitals to make pricing information publicly available for at least 300 common services and items, including the prices they negotiate with payers. They must present prices in two ways: as a machine-readable file with all items and services, and as a display of shoppable services in a consumer-friendly format.
Let me explain some of the benefits (for healthcare providers and consumers) that the new regulation may offer:
- Disclosing price information provides an opportunity to shop for low-price hospital care for self-insured employers, who should be responsible or supportive with their workers’ healthcare and will feel motivated to seek affordable options. Understanding the price before care, can improve their network design, create incentives, and build beneficiary support systems to steer patients away from high-price hospitals and navigate them to low-price, high-quality alternatives.
- In areas where high-price hospitals have substantial market power, individuals should seek locally structured risk pools instead of relying on their own geographically dispersed risk pools. Patients and consumers will use search and comparison tools to choose the provider of their preference, and this will open an opportunity to market share competition from providers working to keep existing patients and attract new consumers to their system. Competition is the most effective way to create value for consumers in every market.
- Hospital price transparency may also encourage new market entries by providers with efficient cost structures, such as physician-owned hospitals, ambulatory surgical centers, and other types of outpatient providers. New entrants can promote both price and quality competition in the local markets and create value for consumers.