On January 1, 2021, the Centers for Medicare and Medicaid Services (CMS) implemented the Hospital Price Transparency Final Rule to promote price competition and improve hospital care affordability.1 Hospitals in the US are required to disclose, among other items, the cash prices and the payer-specific negotiated prices for 70 CMS-specified, high-volume common services; however, the compliance rate has remained low.1-3
Cash prices can affect the cost exposure of 26 million uninsured individuals and concern nearly one-third of US workers enrolled in high-deductible health plans, who are often responsible to pay for medical bills without a third-party contribution and thus are interested in having access to low cash prices.4-6 In contrast with the commercial price negotiated bilaterally between hospitals and insurers providing insurance plans, the cash price is determined unilaterally by the hospital and might be expected to be higher than negotiated prices. The relationship between these 2 prices, however, remains largely unexplored because of a lack of available data. Using decision analytical modeling and recently disclosed pricing information, we conducted a national analysis to compare US hospital cash prices with commercial negotiated prices for 70 CMS-specified services.
This economic evaluation was exempt from institutional review board approval because it did not meet criteria for human participant research, in accordance with the Common Rule. This study followed the Consolidated Health Economic Evaluation Reporting Standards (CHEERS) reporting guideline.
The 70 CMS-specified hospital services represent 74 unique Current Procedural Terminology (CPT)/diagnosis related group codes (4 services were represented by 2 codes). Cash prices and payer-specific negotiated prices for the 70 services were obtained from Turquoise Health, a data service company that specializes in collecting pricing information from hospitals.
For each service, hospitals that disclosed both the cash price and the commercial negotiated price were included in the sample. The following were calculated for these hospitals: (1) the median and interquartile cash prices and (2) the proportion of hospitals for which the cash price was lower than its median commercial negotiated price, lower than all commercial negotiated prices, or the same as the lowest commercial negotiated price. The Spearman test was used to assess correlations. Statistical significance was set at P < .001 (2-sided). Statistical analyses were conducted with SAS, version 9.4 (SAS Institute Inc).
As of July 1, 2021, 5359 hospitals had been reviewed by Turquoise Health. Of these, a mean (SD) of 922 (488) hospitals from 49 states had disclosed both their cash price and commercial negotiated price across the 70 CMS-specified services (Table). The number of disclosing hospitals and the service’s median cash price were negatively correlated (Spearman correlation coefficient, 0.39; P < .001). Cash prices varied substantially across hospitals for most services, as evidenced by large IQRs.
The proportion of hospitals that set their cash price below their median commercial negotiated price ranged from 589 of 1534 (38.4%) for CPT 80076 (liver function blood test panel) to 74 of 108 (68.5%) for CPT 59510 (routine obstetric care for cesarean delivery) (mean [SD], 48.7% [6.4%]). The proportion of hospitals that set their cash price below all of their commercial negotiated prices ranged from 103 of 1444 (7.1%) for CPT 81001 (manual urinalysis test with examination using a microscope) to 27 of 108 (25.0%) for CPT 59510 (routine obstetric care for cesarean delivery) (mean [SD], 13.7% [4.7%]). Across procedures, between 0.6% of hospitals (4 of 49 hospitals for CPT 49505) and 4.3% of hospitals (19 of 48 hospitals for CPT 90846) set their cash price exactly equal to their lowest commercial negotiated price (mean [SD], 2.7% [0.8%]).
Across the 70 CMS-specified services, only a mean of 922 hospitals in this economic evaluation had disclosed both their cash price and commercial negotiated price as of July 1, 2021. As evidenced by the negative correlation between the median cash price of a service and the number of hospitals disclosing a price for the service, 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.
To the extent that more hospitals will disclose prices to comply with the Hospital Price Transparency Final Rule, the cross-hospital variation of cash prices will likely increase. Because of its descriptive nature, this study was unable to identify factors or outcomes associated with the cash price variation. The results of this study, limited to 70 CMS-specified services, may not be generalizable to all hospital services.
In summary, cash prices determined unilaterally by hospitals are often lower than commercial prices negotiated between hospitals and insurers. Uninsured and underinsured patients who choose to take the cash price offered by hospitals might benefit financially.
Accepted for Publication: October 29, 2021.
Published: December 21, 2021. doi:10.1001/jamanetworkopen.2021.40526
Open Access: This is an open access article distributed under the terms of the CC-BY License. © 2021 Jiang J(X) et al. JAMA Network Open.
Corresponding Author: Ge Bai, PhD, CPA, Johns Hopkins Carey Business School, 100 International Dr, Baltimore, MD 21202 (gbai@jhu.edu).
Author Contributions: Dr Jiang had full access to all the data in the study and takes responsibility for the integrity of the data and the accuracy of the data analysis.
Concept and design: All authors.
Acquisition, analysis, or interpretation of data: Jiang, Bai.
Drafting of the manuscript: All authors.
Critical revision of the manuscript for important intellectual content: Jiang, Bai.
Statistical analysis: Jiang.
Obtained funding: Bai.
Administrative, technical, or material support: Bai.
Supervision: Makary, Bai.
Conflict of Interest Disclosures: None reported.
Funding/Support: This study was supported by Arnold Ventures.
Role of the Funder/Sponsor: Arnold Ventures had no role in the design and conduct of the study; collection, management, analysis, and interpretation of the data; preparation, review, or approval of the manuscript; and decision to submit the manuscript for publication.