The Battle for Fair Hospital Pricing Continues 

By Consumers for Quality Care, on January 24, 2024

More and more, consumers are going to great lengths to avoid seeking care at their local hospital, Bloomberg reports. The out-of-pocket costs of seeking care at a hospital can be high, and moreover, that cost is often unknowable for consumers, thanks to a lack of price transparency from America’s hospitals. In the end, many consumers cope with this uncertainty by choosing to delay care. This not only hurts their own health outcomes but also increases their cost of care later on. 

For Jen Villa, a teacher in Monterey, California, visiting any of her county’s three hospitals on her salary is unaffordable. In 2018, when she went into labor, she and her partner drove 45 minutes in the dead of the night, past several area hospitals, until they reached the one hospital that they could afford.  

The three hospitals in Monterey County are among the most expensive in the country. Villa, who earned a salary of $71,000 in 2018, was offered an insurance plan that would have covered visits to one of these three county hospitals. But there was a catch: The plan came at a cost of $10,000 per year, an amount that she couldn’t afford. “We are teaching your children,” she said, “and we can’t come to your hospital.”  

In the end, Villa and her husband took the advice of Kati Bassler, president of the local teachers’ union. Kati often recommends that her teachers save money by driving outside Monterey to give birth . The savings are immense. In Monterey, the cost for delivering a baby is $40,000, more than double the U.S. average. Thankfully, after Villa gave birth in Santa Cruz County, she owed the hospital just $2,500. That amount is not insignificant, but it’s still far less than she would have owed had she given birth in Monterey. 

The U.S. spends more on health care than any other country, with hospitals taking the largest share. But now, with federal hospital price transparency laws in effect, consumers are learning to shop around for the best price. A Bloomberg News and Rand Corp. analysis found that if consumers are willing to travel just 5 miles from a hospital, they can often find less expensive facilities with similar quality ratings. And if they’re willing (and able) to drive up to 30 miles away, they are likely to find an even less expensive competitor..  

Large employers, who collectively pay billions of dollars in health care costs for their workers, want to see health care costs in American go down. They have good reason to push for reforms to lower costs for themselves and for consumers. Some are calling on Congress to strengthen price transparency rules and to foster more competition among hospital systems. “The market is not functioning and there needs to be some form of government intervention,” says Elizabeth Mitchell, CEO of the Purchaser Business Group on Health, which represents large companies like Walmart and Boeing.  

She has a point. Over the years, hospital systems have gotten bigger as they’ve merged and consolidated and acquired their competitors. The bigger the hospital, the more market power it has, and studies show that consolidated hospital systems use their market power to charge consumers higher prices. Just four percent of hospitals are in competitive markets. And although hospitals cite rising expenses to justify their rates, the National Academy for State Health Policy found that hospitals could charge lower rates and still break even. 

This study would not have been possible without the federal hospital price transparency law, which is making it easier for consumers (and researchers) to compare prices. Still, more reforms are needed to improve price transparency. CQC urges government officials to strengthen price transparency laws, to enforce these laws more vigorously, and to continue scrutinizing consolidation among hospital systems throughout the United States.