The Opacity Of Price Transparency

The success of price transparency initiatives requires that prices be defined using a common payment methodology. In this article, we explore how coding schemas and pricing approaches varied in five major markets in the United States in 2024. We investigated how frequently inpatient and outpatient payment were based on the use of Medicare Severity Diagnosis Related Group (MS-DRG) or Healthcare Common Procedure Coding System (HCPCS) codes with fixed prices versus alternative methods, such as per diem revenue codes or a percentage of billed charges for all services. We estimated that fixed-price MS-DRG or HCPCS methods were used for a preponderance of services in only 48 percent of inpatient contracts and 53 percent of outpatient contracts in 2024. Within markets, carriers seldom used fixed-price contracts for all hospitals. Similarly, most hospitals were not paid using fixed-price methods by all carriers. These results suggest that price comparisons by consumers, employers, academics, and other stakeholders face significant barriers because of the heterogeneity of payment methodologies. Moreover, efforts to promote price transparency will also need to confront the heterogeneity in pricing approaches when trying to present prices across different hospitals.