New federal regulations finalized Nov. 15 require hospitals to make public all the prices they negotiate with insurers and health plans, starting in 2021. The aim is to untangle the hospital marketplace with a wave of consumer-friendly information that will promote competition that leads to lower costs.

Hospitals are not happy, but advocates of well-informed, patient-centered health care should be cheering.

I am a professor of health policy at the Price School and Schaeffer Center at USC and have published several papers and worked with startups that aim to improve price transparency and consumer decision-making. I’m among those cheering.

Real numbers, real comparisons

Hospitals already post online their so-called standard or “chargemaster” rates for the thousands of codes used in their billing systems. Almost nobody actually pays these rates; they are intentionally inflated prices that give hospitals an edge in negotiating with insurers.

Under the new regulations, hospitals, which account for about one-third of all health care costs, also have to divulge the actual rates paid by health plans and insurers for those same codes.

To help consumers make apples-to-apples comparisons, hospitals will be required to go beyond the individual codes and post their negotiated rates for a list of 300 so-called “shoppable” services that consumers might examine before selecting a provider. This requires hospitals to link services that usually accompany each other, such as laboratory and pathology charges along with surgery.

As for insurers, there is still a two-month public comment period before new regulations become final. As drafted now, the new law would force insurers to disclose negotiated rates, as well as rates paid for out-of-network treatments. They would also have to give cost information to consumers in advance.

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