Do New Hospital Price Transparency Regulations Reflect Value in Arthroplasty?

Taylor D'Amore, MD; Graham S. Goh, MD; P. Maxwell Courtney, MD; Gregg R. Klein, MD


J Am Acad Orthop Surg. 2022;30(8):e658-e663. 

In This Article


Increased transparency of the costs and quality of healthcare services could enable patients and providers to make value-based decisions. Notwithstanding, this information should be easily accessible, clinically relevant, and appropriately risk-adjusted. In an attempt to improve information asymmetry, the CMS recently implemented a hospital price transparency policy on January 1, 2021. However, it remains uncertain whether these published charges are truly value-based because no studies have conducted such an investigation. This study found that most hospitals were not fully compliant with the new CMS-mandated reporting of shoppable services information. Although 93% of the hospitals published some form of pricing information, most frequently the gross charge for TKA or THA, only 20.8% of the hospitals reported all pricing elements required by CMS. More importantly, there was no correlation between published mean inpatient charges and CMS-adjusted complication or readmission rates.

The reasons for the underreporting of pricing information are likely multifold and vary from hospital to hospital. From a logistical standpoint, many hospitals are often understaffed, and the total amount of time and personnel costs required to compile this information could have made the implementation of these policy changes unfeasible for hospital systems with financial struggles.[12,13] When examining only ambulatory surgical centers, the administrative cost of implementing price transparency measures could cost up to $60,000.[14] Moreover, not all hospitals may have the information in an accessible format.[14] Another additional barrier would be the financial implications of publishing payer-specific rates, because the release of this information could place a hospital at a disadvantage when negotiating reimbursement rates with insurance companies.[14] For instance, hospital A may have negotiated a higher rate of payment from insurance company Y compared with hospital B. After the release of this information, insurance company Y may be prompted to decrease payments to hospital A. In support of this explanation, Mehta et al[14] found that the most frequently reported barrier to adopting price transparency measures at ambulatory surgical centers was discouragement from another hospital, practice, and/or insurance company. Consequently, these factors may account for the low percentage (27.7%) of hospitals that reported payer-specific prices. It is important to note that our decision to limit the analysis to the top 101 orthopaedic hospitals may not assess the full breadth of compliance (or lack thereof). Orthopaedic surgery tends to be a financially beneficial subspecialty for hospital systems, and we postulate that hospital systems with large orthopaedic practices are better off financially. Consequently, if less highly ranked hospital systems were analyzed, it is possible that the rate of compliance would be even lower than what was determined in this study.

The concept of "price gouging" is not new in medicine, with studies showing up to a 12-fold increase in the price of services compared with what hospitals would accept from Medicare.[14] In our study, the mean inpatient charge for TKA and THA ranged from $14,717 to $195,264. One important consideration when evaluating the effect of price transparency is that the "gross charge" listed for a particular procedure is often very different from the actual reimbursement each hospital receives from CMS or a private payer.[15] Of the hospitals that reported reimbursement rates, the minimum and maximum payer rates for THA and TKA were $16,140 and $57,949, respectively, whereas the mean CMS reimbursement was $20,299. From the patient's perspective, listing of the "gross charge" for a THA or TKA is not necessarily tied to their out-of-pocket expense and would only prove to be useful if paying out of pocket or out of network.[14] Because a patient is often responsible for a certain percentage of the hospital bill, the payer-specific rate is likely the more relevant pricing metric that would affect them directly. In this regard, the CMS price transparency requirement has largely failed to address the disconnect between hospital charges and actual out-of-pocket costs. Requiring hospitals to publish this information does not provide useful information for the patient and may even be detrimental to a patient's ability to interpret pricing information.

Because healthcare financing continues to evolve and more pricing information is made available to patients, a growing responsibility lies with the consumer to seek out this information and make informed decisions that would maximize the value of their care. Studies have shown that younger, healthier patients and those enrolled in a high-deductible insurance plan are more likely to search for pricing information for a variety of procedures.[16] Semigran et al[17] recently surveyed members of a preferred provider organization about their experiences with an online price estimator. Although the authors noted that patients had a positive opinion on the concept of price transparency, two main barriers to incorporating price shopping into their medical decision-making process were identified. First, most insurance plans are constructed in such a way that finding lower-cost care does not change out-of-pocket costs. For this reason, searching for pricing information may not directly benefit the consumer. Second, respondents placed a greater emphasis on factors such as quality of care and loyalty to current providers over cost.[17] If price transparency is going to change how patients choose their medical services and providers, patients need to be willing to seek out this information.

For patients who do elect to compare prices for elective hip or knee replacements, the use of DRG codes as the primary means of reporting pricing information may be confusing for the general public. THA and TKA are included in DRG 470, which is listed as Major Joint Replacement or Reattachment of Lower Extremity Without Major Complication or Comorbidity. It is plausible that a consumer may not associate this diagnosis code with a hip or knee replacement because the description does not include the words "hip" or "knee." Instead, a patient may pick a completely unrelated DRG code, such as DRG 489 Knee Procedures Without Principal Diagnosis of Infection Without Major Complication or Comorbidity. Similarly, a patient who attempts to review a full hospital chargemaster may be overwhelmed by the sheer number of pricing entries listed. As is the case with the use of medical jargon in clinical practice, the use of this terminology in price transparency documents may make the interpretation of data extremely difficult for patients.

Perhaps the most important finding of this study was that mean inpatient charges (range, $14,717 to $195,264) did not correlate with risk-adjusted complication or readmission rates, indicating that higher hospital charges did not reflect better value care. By contrast, it is more likely that hospitals with higher charges had merely negotiated better reimbursement rates with insurance companies. This is consistent with studies showing that insurers with a greater market share were able to negotiate lower prices with large provider groups, whereas large provider groups were able to negotiate increased payment per office visit compared with small provider groups.[18] Similar to our findings in the CMS population, a recent review of the IBM MarketScan Research Database, which includes information on commercial employer-sponsored health insurance plans, found that higher payments to hospitals did not predict higher quality outcomes, such as lower complication rates, readmission rates, and length of stay, after uncomplicated hip and knee procedures.[19] Unlike hospital surgical volume, which has been shown to inversely correlate with complication rates and led to a shift in surgical cases from low-volume to high-volume centers,[20] newly published hospital charges are not a true reflection of value in arthroplasty care and hence should not be used to encourage the redistribution of patients from one high-volume center of excellence to another.

This study had several limitations. First, data were obtained from publicly available information that was time-sensitive. It is possible that some hospitals did not have the information ready by the January 1, 2021, deadline mandated by CMS but have since updated their websites with the required information. Nonetheless, we conducted the search on March 25, 2021, to give hospitals an additional 3 months of buffer time to prepare this information. Another limitation was that we were only able to analyze the relationship between hospital charges and complications or readmission rates for the Medicare/Medicaid population for each hospital because these clinical outcomes were publicly available on the CMS website.[10] Although this population represents greater than 60% of all patients with arthroplasty[21] in the United States, privately insured patients make up a unique population who may undergo a different perioperative course after total joint arthroplasty. However, multiple studies have shown that the clinical outcomes of total joint arthroplasty are not influenced by the type of insurers; hence, our findings likely remain generalizable to the broader arthroplasty population.[22,23] Finally, limiting the analysis to the top 101 hospitals on the USNWR 2020–2021 rankings could have led to selection bias and skewed our findings. These top hospitals likely achieved this higher ranking because they had low readmission and complication rates. It is possible that if a broader snapshot of hospitals were evaluated, there could be more variability in complications and readmissions resulting in different trends with charge data. Because hospital volume has also been shown to correlate with complication rates after THA and TKA,[20] future studies should aim to determine the relationship between hospital volume, published charges, and clinical outcomes to come to a more definitive conclusion on whether the new CMS policy is truly value-based.