87th LegislatureHealthcareState HouseHospital Price Transparency Mandate Passes Initial Vote in the Texas House

With a tiered system of penalties, lawmakers believe they can more consistently obtain compliance from hospitals in listing their prices.
May 19, 2021
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Imagine shopping for a house and then being told how much it costs only after the work is done. Texas hospital patients face this issue every day and the 87th legislature is looking to remedy it.

Legislation that would require hospitals to list their actual prices rather than estimated ranges passed the Texas House Wednesday on second reading by a wide margin. That bill, Senate Bill (SB) 1137, has already made it through the upper chamber and is among the lower chamber’s health care priorities.

Under SB 1137, hospitals must maintain a list of all standard charges and make them both easily accessible for the public and free of charge to access. Price disclosure must include the gross charge, the minimum and maximum negotiated charges, the discounted cash price, and the insurance negotiated rate.

“Transparency in health care is so critical because health care is the only sector of our economy where you can’t know what things are going to cost before you purchase them,” Oliverson told The Texan after the initial floor vote.

“That would be like if you were buying a car and you had to drive it for 30 days before I’d tell you what it was going to cost — you would never agree to that and yet that’s what people do with health care every day.”

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Furthermore, the prices must be updated at least once a year and maintained from location to location — meaning the price and related disclosures can vary between locations within an overarching hospital system.

If found to be not in compliance, a hospital could face an administrative penalty at an amount determined by the Health and Human Services Commission.

Unlike with nearly every other commodity or service, hospital patients are not provided the explicit cost of a procedure beforehand. They are given an estimated range instead.

For example, for an uninsured patient to receive a knee scope without an overnight hospital stay at Baylor Scott & White’s Sunnyvale medical center could cost anywhere between $21,988 and $70,798. The same procedure at the hospital’s Dallas Uptown location ranges between $7,397 and $32,908.

Parity is not exactly a staple in health care.

But, to some degree, varying prices make sense. Each patient is different and so the ancillary services accompanying a primary procedure may fluctuate final cost at the margins. Costs to operate medical centers in different areas of the state vary from one to the next. That all influences the end price.

Proponents of pricing transparency say this is all the more reason to disclose actual prices. This was top of mind for the Trump administration when its Department of Health and Human Services issued a regulatory rule mandating that hospitals provide actual prices in advance to customers or pay a fine for failure to comply.

The Texas bill has a tiered fine system based on an individual facility’s gross revenue.

That order was challenged in court by, among others, the American Hospital Association. The plaintiffs alleged the rule to be too costly and cumbersome to follow.

In the end, the D.C. Circuit Court of Appeals decided in favor of the rule, stating, “Requiring hospitals to disclose prices before rendering services undoubtedly qualifies as ‘traditional or ordinary economic regulation of commercial activity.’”

But since then, many hospitals have chosen to simply pay the fine — markedly similar to what many Americans did once the Obamacare enrollment mandate became effective — rather than provide prices.

An analysis by Health Affairs found that 65 percent of its sample of top hospitals across the nation were in some fashion noncompliant.

Currently, the federal government is fining non-compliant hospitals $300 per day — not exactly a prohibitive amount. Price transparency advocates have urged the Department of Health and Human Services to increase the fine to $300 per bed per day of violation.

That is the chief dilemma through which the legislature must steer: how to ensure compliance.

The tiered system, Oliverson pointed out, accentuates the penalties on the large non-profit hospital conglomerates — who have been the most consistent violators of the rule. For the largest hospitals, those grossing $100 million in annual revenue or more, the penalty for violation sits at $1,000 per day.

That is substantially more than the current federal penalty being levied and largely ignored.

Oliverson concluded, saying, “[Price transparency] is the single biggest thing we can do to reduce health care costs.”

The bill must pass again on third reading before being sent to the governor — and it appears likely to do so with zero opposition blossoming in the House.

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Brad Johnson

Brad Johnson is an Ohio native who graduated from the University of Cincinnati in 2017. He is an avid sports fan who most enjoys watching his favorite teams continue their title drought throughout his cognizant lifetime. In his free time, you may find Brad quoting Monty Python productions and trying to calculate the airspeed velocity of an unladen swallow.