Hospitals are slow to comply with CMS' price transparency rules—here's why

The data: Only 9% of patients are aware hospitals must make the prices of their treatments and procedures accessible on their websites, per a new survey by Peterson-KFF Health System Tracker.

How we got here: Both small and large hospitals are failing to comply with the CMS’ price transparency requirements—which is likely why consumers don’t know they should be able to easily find the costs of treatments online.

• The CMS mandated hospitals to display cash prices and payer-negotiated rates for their services by January 2021.
• However, as of June 2021, 83 out of 100 randomly sampled hospitals were not abiding by these requirements.
• It’s likely hospitals don’t want to deal with the heavy admin work involved in posting these rates, especially since the CMS has been slow to penalize noncompliant hospitals as promised (by publicly naming those who fail to comply on the CMS website or fining them $300 a day).

What’s next? Noncompliance with the CMS’ pricing rules may be a more financially beneficial route for hospitals for two key reasons:

1. $300 daily fines are a drop in the bucket for well-funded hospitals. For example, the Mayo Clinic posted $13.9 billion in total 2020 revenues, despite revenue drops amid the pandemic. A $300 daily penalty would be less than 0.004% of its annual revenue. And Mayo Clinic isn’t even the largest hospital system in the US: Hospital systems like Ascension serve nearly 2 million patients, while the Mayo Clinic treats around 1 million patients.
2. Exposing payer-negotiated rates could put hospitals at risk of losing massive contracts with payers. This sort of transparency means commercial payers like Humana or Cigna can determine if they’re paying hospitals too much for a certain procedure. They could ultimately demand their hospital partners to lower the price of certain services, which would be more damaging to hospitals’ revenues than a $300 daily fine or being named as a noncompliant on the CMS website.

We don’t expect to see major hospitals racing to offer tools like cost estimation calculators on their sites anytime soon. Unless the CMS begins to criticize noncompliant hospitals publicly or increases its monetary penalty, most hospital executives won’t feel the urgency to prioritize a mandate that could harm deals with payers or their budgets: For example, one health system exec estimated the financial burden of complying with price transparency rules to be $64,000 per hospital within its network, or a total of $832,000.