Even facing hefty fines, many hospitals punt on price transparency. Why is that?

Seeking to uncover the rationale driving hospitals to flout compliance with CMS rules on price transparency, researchers interviewed hospital informants at 12 nonprofit institutions.

The team’s findings suggest fines, which took effect in early 2021, are not broadly decisive in shaping hospitals’ strategies for dealing with the price-transparency push.

Instead, many seem more concerned about their reputation, competitive edge and/or bottom line than about monetary penalties. 

This might help explain why a 2022 survey found only 14% of hospitals compliant with the rule.

That’s despite a hike in CMS’s noncompliance penalties from a mean of $110,000 per year in 2021 to a mean of $511,000 in 2022. Penalties in 2022 were not lenient, either, averaging 0.49% of total hospital revenue, 0.53% of total hospital costs and 1.3% of total employee wages, according to a 2023 study.

For the present study, Jessica Mittler, PhD, of Virginia Commonwealth University and colleagues conducted 45-minute Zoom interviews with 16 senior-level leaders from 12 hospitals spanning six metropolitan markets.

All but one organization were multihospital systems. Together, the 12 organizations represented a total of 81 hospitals.

Breaking their questions into two areas of interest—internal organizational factors and external market factors—the researchers found “extensive variation in organizational capabilities to comply,” the authors report.

Key internal factors included how closely the CMS rule aligns with the organization’s values and priorities and where the organization stands philosophically on the importance of price transparency.

Interestingly, the study authors note, all but one organization relied on consultants and vendors to some degree.

Further:

• Organizations with more confidence in their interpretation of the environment, including how peers or purchasers would behave, and greater clarity in their own organization’s position and goals, had more definitive initial strategic responses.
• In the first year, organizations’ strategic responses skewed toward compliance, especially for the rule’s consumer shopping requirements.

Mittler and co-authors had their study published this month in Health Services Research.

In their discussion, the researchers ask: “So why were hospitals’ [rates of] compliance with the price transparency rule slow during the first year? After all, the price transparency rule is a legal mandate.”

Their answer, in part:

Price transparency is a major shift in control that many organizations are reluctant to relinquish. In addition, task complexity of complying with the regulation is high, which affected the feasibility and pace of compliance, along with organizations’ ability to cope with COVID-19. Importantly, we observed that organizations expressed a tremendous amount of uncertainty about how various actors would behave and environmental conditions would change.

The study is available in full for free.