The data would like a word, 2025 edition

Back in 2023, CMS highlighted a promising trend in the rate of hospitals publishing price transparency data. Nearly two years later, a lot of hospitals have done just that …and a bunch of other stuff has happened: more regulations have gone into effect, a new administration is influencing price transparency, and our understanding of what the data can do has only deepened. But is all this work doing anything?

Let’s take a walk in Price Transparency Research Park and explore what academics and industry experts are seeing as a direct result of price transparency.

It will come as a surprise to absolutely no one that they’re seeing a lot. Turns out, that’s sort of the point.

Studies reveal price disparities between providers

Our friend Ge Bai, professor of Accounting & Health Policy at Johns Hopkins, and coauthors  John (Xuefeng) Jiang Max Jiang published a study in late December 2024 looking at all industry measurements of price transparency’s success so far. Bai and her coauthors found that price transparency was revealing important disparities in healthcare that could be used to inform policy and practice.

“For example, prices at physician-owned hospitals are one-third lower than those at competing hospitals in the same market. Hospital prices for colonoscopies are more than 50% higher than those at ambulatory surgery centers in the same county. Additionally, cash prices are often lower than insurance-negotiated prices in the same hospital, even for unshoppable services like trauma activation fees.”

Knowing how prices behave across markets allows you to make decisions that affect your entire business, not just one item or service.

Bai and authors suggest that for price transparency to achieve lower costs for patients, we need further reform of insurance regulations and to address the uneven provider playing field to ensure all parties have appropriate skin in the game. Bai says, “Price transparency has strong bipartisan support and broad appeal to voters because it simply makes sense. It is a necessary catalyst to jumpstart the transformation of our healthcare system into a competitive, fair, and patient-oriented one that leverages American dynamism to organically address unsustainable healthcare spending.”

We couldn’t agree more.

Studies show raising profits are a result of higher prices at hospitals

Authors Derek Jenkins, Sasathorn Tapaneeyakul, and Vivian Ho of Rice University recently published a paper titled, “Prices Versus Cost: Unpacking Rising US Hospital Profits.” In it, they examine the relationship between prices and commercial operating costs and profit. One might think that higher prices would in turn, equal a higher commercial profit. Jenkins and authors found that yes, that’s true... with one crucial understanding of cause and effect:

“Hospitals with higher inpatient prices may have marginally higher costs than lower-price hospitals, they also earn substantially higher commercial revenues per adjusted discharge, leading to higher profits. Hospitals with higher outpatient prices earn significantly higher profits compared to those with lower prices....our results suggest that high prices are not simply a response to high operating costs; rather, they are associated with larger hospital operating profits. To promote affordability in the health care system, negotiated rates for health services should remain a priority for policymakers."

Understanding how inpatient prices fair vs outpatient allows you to better strategize your rates across services.

Studies show that trauma activation fees are no longer a viable funding strategy

Authors Kirstin Woody Scott, Pooja U. Neiman, Mitchell Mead, Angela Chisolm, Andrew M. Ibrahim, Eileen M. Bulger, and John W. Scott recently published a paper titled, “Trauma Activation Fees Vary Widely Across Us Trauma Centers.” In it, the authors explored trauma activation fees for all Level I-III trauma centers nationally and across payer types.

They found that while trauma activation fees are intended to help trauma centers cover the cost of providing life saving care, this strategy isn’t working to improve centers or the patients’ themselves.

“Trauma centers that were larger, metropolitan, located in the West, and associated with proprietary (investor-owned, for-profit) hospitals had higher trauma activation fees. Unmerited variation in trauma activation fees may suggest that the current funding strategy is equitable neither for trauma centers nor for the severely injured patients who rely on them for lifesaving care.”

What does it all mean?

Well, a lot! To all us healthcare nerds here at Turquoise Health, it shows us that price transparency isn’t just for business intelligence–it’s crucial to understanding the entire healthcare landscape. No other industry has been so uniquely opaque since its inception. To successfully break apart the system and rebuild a better one, we need to be able to examine anything and everything. We need to know which provider types at what rates are seeing what effects. We need to know what is no longer serving its purpose. Data reveals more than just the highest cost item or service. It shows you how the market at large is shifting.

The absence of cost allowed healthcare to balloon into an unhelpful spending machine. All the players, from providers to payers, patients and employers, all the way to the government, are losing in the status quo. Studies show it, and, let’s be honest, most of us know it to be true. As we move into 2025, demystifying healthcare will only become more important for the entire industry.