The University of Massachusetts Amherst

A doctor looks at a touchpad in a patient's room. Credit: Getty Images
Research

Are Hospital Price Transparency Regulations Reducing Health Care Costs for Consumers?

UMass Amherst and University of Toronto awarded grant to examine both the intended and unintended consequences of the new regulations

It’s hard enough to be sick or need surgery or hospitalization. But, for the past few decades, the bill for health care services often has added insult to injury as consumers were blindsided with soaring and unexpected costs. Now, a study co-led by a University of Massachusetts Amherst health services researcher is examining the impact of recent federal efforts to make health care costs more transparent and affordable.

Michal Horný, assistant professor of health policy and management in the UMass Amherst School of Public Health and Health Sciences, and Alex Hoagland, a health economist from the University of Toronto, are exploring the dynamics of hospital pricing in the commercial health care sector and documenting both the intended and unintended consequences of the new regulations. Their research is funded with a $300,000 grant from Arnold Ventures, a philanthropic foundation dedicated to supporting evidence-based policy solutions that maximize opportunity and minimize injustice for all Americans.

The Hospital Price Transparency Rule (2021), the Transparency in Coverage Rule (2020) and the No Surprises Act (2022) were aimed at driving down costs by making health care prices available upfront and preventing unexpected or “surprise” bills for people with private insurance. The hospital price transparency rule, for example, requires hospitals to list insurer-specific negotiated prices, as well as cash prices, for some 300 shoppable services – from X-rays and lab work to joint replacement surgery and colonoscopy – so that consumers can shop around.

Michal Horný

A price transparency approach relies on the expectation that publicly disclosed commercial prices will help patients, employers and health plans. In theory, the ability to shop for health care should pressure hospitals to reduce their prices.

Michal Horný, assistant professor of health policy and management in the UMass Amherst School of Public Health and Health Sciences

 

“A price transparency approach relies on the expectation that publicly disclosed commercial prices will help health care buyers, such as patients, employers and health plans,” Horný says. “In theory, the ability to shop for health care should pressure hospitals to reduce their prices.” 

However, the researchers note that because health care products are complex and often uncertain until care is actually delivered, patients may receive – and then be billed for – a different bundle of services than the one for which they originally shopped. 

“What happens to pricing in unexpected situations?” Horný ponders. “For example, a pregnant person may select a hospital for giving birth based on a comparison of prices for vaginal delivery, but they may ultimately receive a Cesarean section due to labor and delivery complications.”

The study will examine three key questions. First, have the regulations affected the hospital prices of the shoppable procedures? Second, was the effect different for routine services compared to ones needed for unplanned complications? And finally, what are the impacts on hospital competition and price negotiations between hospitals and insurers?

The researchers are also examining the question of whether hospitals in competitive markets might cut the prices of some “shoppable procedures” to attract patients but simultaneously raise the prices for health care that can’t be planned.

“Hospitals may respond to price-sensitive consumers by lowering prices of a few common services but subsidize their revenue through increased prices for unexpected or emergency services,” Horný says. “This could result in reduced price competition for the most complex — and hence, most costly — medical procedures.”

The researchers are also examining the effects of the transparency rules on the complex arrangements between hospitals and insurers. “The legislation may impact the way insurers design their networks of providers, covering only a few hospitals for expensive emergency care and reducing access for patients,” Horný explains. 

It’s possible, then, that price transparency regulations could have the unintended consequence of negatively affecting lower-income patients, who may bear the brunt of increased costs in emergency situations. “The impact might be greatest on the patients who had the bad luck of experiencing clinical complications, as these patients would be burdened not only by the adverse health consequences of the clinical complication but also by increased medical bills, potentially forcing some patients into medical debt,” Horný says.

The researchers will create a policy memorandum based on their findings that will explore different approaches to effective hospital price regulation. “We hope our findings will enable policymakers to design effective policies aimed at reducing health care spending, preventing medical debt and enhancing health equity,” Horný says.