New Study Will Examine the Impact of Hospital Price Transparency Regulations
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Over the past few decades, health care prices have driven the nation’s health care spending growth and contributed to the increasingly pervasive unaffordability of care. The opacity of health care prices has prompted recent legislation such as the Hospital Price Transparency Rule, the Transparency in Coverage Rule, and the No Surprises Act, all aimed at driving down costs for consumers through improved health care price transparency.
But have these laws achieved their desired effect? In a new study, UMass Amherst Assistant Professor of Health Policy and Management Michal Horný and Alex Hoagland, a health economist from the University of Toronto, will examine the impacts of health care price transparency regulation. Armed with a two-year, nearly $300,000 grant from the philanthropic foundation Arnold Ventures, the researchers 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 study will examine three key questions: First, has the legislation affected the hospital prices of so-called “shoppable” procedures—those that can be scheduled in advance? Second, was the effect different for routine health care services compared to those needed only for addressing unexpected complications? And finally, what are the resulting impacts on hospital competition and price negotiations between hospitals and insurers?
“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,” explains Horný. “In theory, the ability to shop for healthcare should pressure hospitals to reduce their prices.”
However, the researchers note that because health care products are complex and often uncertain until care delivery, patients may receive—and thus be billed for—a different bundle of services than the one for which they originally shopped.
“What happens to pricing in unexpected situations?” asks Horný. “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 researchers are also examining the question of whether hospitals in competitive markets might lower prices for ‘shoppable procedures’ to attract patients but simultaneously raise the prices for emergency or unexpected services.
“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,” says Horný. “This could result in reduced price competition for the most complex—and hence, most costly—medical procedures.”
The researchers are also examining the impact 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,” explains Horný. Thus, price transparency laws could have the unintended consequence of negatively impacting 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.”
The researchers expect their findings will contribute to a better understanding of the dynamics of hospital pricing over time and document both the intended and unintended consequences of the recent health care price transparency regulations. A key deliverable from this research project will be a policy memorandum based on the research findings that will explore potential 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,” says Horný.
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Michal Horný, PhD, MSc (Co-Principal Investigator) is a quantitative health services researcher with more than 12 years of experience conducting research on health care spending, health care price transparency, and health equity using large commercial claims databases.
Alex Hoagland, PhD (Co-Principal Investigator) is a health economist with extensive expertise in quantitative methods and claims-based research focused on the cost of care.
Founded in 2008 by Laura and John Arnold, Arnold Ventures is dedicated to improving the lives of all Americans through evidence-based policy solutions that maximize opportunity and minimize injustice.