We all know that the average American pays a heck of a lot for medical care. According to the Centers for Medicare and Medicare Services (CMS), we were paying $11,582 per person, for a national total of $3.8 trillion, in 2019. That constitutes 17.7% of our GDP. In an effort to address this, new CMS rules went into effect on January 1 that require transparency in pricing for certain procedures. The theory is that, armed with pricing information, patients will be able to shop around, and hospitals will have to price procedures competitively. So, are pricing transparency rules working? Turns out, it is hard to tell when compliance rates are low.
A recent survey of pricing for colonoscopies around the country found that only about 25% of hospitals were complying with the rule seven months after its implementation. With such poor compliance, President Biden issued an executive order in July that led to a proposal by CMS to increase the penalty for noncompliance from $100,000 to $2M. When the average hospital’s revenue exceeds $280M, even the new proposed penalty seems a pittance.
The survey noted a significant disincentives to publicly posting prices: hospitals where the procedure is more expensive might not post the price out of concern for driving down demand for the procedure at that hospital. Of course, this is precisely what pricing transparency rules are meant to do. And, obviously, a mere $100,000 penalty for noncompliance has not been enough to inspire changes.
Interestingly, of the mere 1,225 hospitals that posted colonoscopy prices, the highest priced hospitals – the top 10% – were largely concentrated in the Midwest and Appalachia. Notably, most of these hospitals are outside of major metropolitan areas, and many in states that have strong tort “reform” laws, that are supposedly in place to help drive down costs of healthcare.
Without taking a deep dive into the other 69 shoppable services specifically identified by CMS, this survey provides an example of the many hurdles we as healthcare consumers must still surmount if we really mean to bring down healthcare costs.
