Price Transparency Reveals Hospitals Create Lower Cash Rates

A recent study meant to reflect price transparency compliance shows that organizations' cash prices are often lower than payer-negotiated rates.

Discounted cash prices for common hospital services were often lower than the payer-negotiated rates for the same services, according to a recent study published by the Journal of the American Medical Association.

According to the study, "the more expensive services were less likely to be disclosed, which might suggest strategic disclosing decisions. Some hospitals set their cash price comparable to or lower than their commercial-negotiated price."

The authors of the study said their findings contradicted their expectations as they expected the cash price to be more costly than negotiated commercial prices.

For example, the study found that 38.4% of hospitals had cash prices below their median negotiated commercial prices for liver function tests. Similarly, 68.5% of hospitals in the study set cash prices below their median negotiated commercial price for cesarean deliveries.

Though the study was released to reflect compliance with the price transparency law, it found that compliance remains inconsistent since only 922 of the 5,395 hospitals studied disclosed both their cash and commercial negotiated prices in 2021.

Once more organizations disclose prices to comply with the price transparency rule, the cross-hospital variation of cash prices will likely increase, the study said.

Just a few days after the January 1, 2021, compliance deadline for the price transparency law, Becky Greenfield, a partner with Wolfe Pincavage, told the HealthLeaders' Revenue Cycle Podcast that none of the hospitals she had investigated were fully compliant with the rule yet.

Not much changed as the year progressed. In February 2021, a Guidehouse analysis found that roughly 30% of hospitals weren't compliant with either requirement of the CMS price transparency rule, and only 48% of hospitals were compliant with at least one element of the machine-readable file requirement.

Most recently, a February 2022 study published by PatientRightsAdvocate.org showed that only 14% of hospitals are fully complying with CMS' price transparency rule even though we are now in year two of the legal requirement.