It’s been more than a year since hospitals were legally put on blast to reveal the reasoning behind overinflated healthcare costs.
Jan. 1 marked the first anniversary of the Hospital Price Transparency Rule, which required every hospital operating in the U.S. to provide a machine-readable file with pricing information for all items and services, along with a consumer-friendly format for people to shop on.
More than a year later, only 64% of hospitals have been deemed sufficiently compliant by Turquoise Health, a company that builds software and data products that promote healthcare price transparency. While there’s still progress to be made, the last year has offered important insights into the costly U.S. healthcare system.
“We spent the better part of 2021 aggregating all this data from hospital websites, cleaning it up, and making it usable for consumers,” says Marcus Dorstel, head of operations at Turquoise Health. “All these prices were kept secret and hidden away — so to have these prices available is a really big change for the industry.”
The Hospital Transparency Rule is meant to turn the status quo on its head by ensuring consumers have pricing information before they even step foot in the hospital, explains Dorstel. Centers for Medicare and Medicaid Services are even penalizing hospitals that do not comply — larger hospitals can now stand to lose as much as $2 million per year in fines.
According to Turquoise, the top five compliant states of 2021 were Minnesota, Hawaii, South Dakota, Michigan and Maine, averaging between a 59% and 66% compliance rate, meaning these hospitals provided a machine-readable file and consumer-friendly platform with pricing information available to the public. On the other hand, North Dakota, Texas, Washington, Louisiana and Colorado ranked at the bottom, with anywhere between 24% and 28%.
“If you’re looking state by state, you can see the differences in legislatures and health systems that are predominantly in each state,” says Dorstel. “Some of the major differences stem from a big health system that dominates a state taking a certain stance or strategy around transparency.”
For example, South Dakota has two health systems, Sanford and Avera, which make up two-thirds of the state’s 66 hospitals, and both made an effort to have compliant files after the transparency rule went into effect. On the flip side, large health systems in Texas did not act until the latter half of 2021.
Turquoise also compared healthcare prices across states for common services, such as ER visits, abdominal CAT scans, knee meniscus repairs and diagnostic colonoscopies. Results showed that Texas, Arizona, South Carolina, California and Tennessee had the most volatile pricing, meaning their prices widely varied between the same services.
“If you think about it from the patient’s perspective, this means two patients could walk into a hospital, get the same procedure and pay wildly different prices because they have two different insurance plans,” Dorstel says. “The same patient with the same insurance plan could go to another hospital five miles away and again see a significant change in what they owe.”
Health insurance companies do impact just how much a hospital is charging for a service. For example, UnitedHealthcare had an average rate of $4,007 for an ICU room, while Atena landed at $3,481. This $526 difference multiplies with each day spent in the ICU, amounting to a loss of over $1,500 if someone stays for three days, which is the average period for the ICU.
“Providers on the hospital health system side can use this data to have more negotiating power,” says Dorstel. “You’re no longer going into negotiations without knowing what your competitors paid or what similar services cost in other Metro areas of a similar size.
This could potentially mean hospitals in areas with a lot of competition will see a drop in prices, but there’s no guarantee that this trend will be seen consistently or universally in the U.S. Still, the data provided by the hospitals will allow consumers to investigate and negotiate their medical bills.
This could potentially give consumers much-needed power over their healthcare bills. The Medical Billing Advocates of America estimates that three out of four medical bills have errors, while data from the American Hospital Directory revealed that non-profit hospitals on average charged patients seven times the cost of service and for-profit hospitals charged 12 times the actual cost.
And since medical debt makes up 58% of debt collection in the U.S., every penny counts. Johns Hopkins estimates that hospitals have sought nearly $72 million in lawsuits against indebted patients — this includes non-profit hospitals who are required by the Affordable Care Act to have financial assistance policies while preventing them from “extraordinary debt collection.”
“Use this pricing data to negotiate with the hospital,” says Dorstel. “If you see some big bill worth thousands of dollars, look up what insurance companies pay hospitals for that service. You can be a savvy consumer of healthcare.”