Third Party Negotiated Pricing in Rural and Urban Hospitals

Research center:
Lead researcher:
Research staff:
Project funded:
September 2021
Anticipated completion date:
August 2022

The Centers for Medicare & Medicaid Services (CMS) Hospital Price Transparency Final Rule mandated that hospitals publish third party negotiated pricing by January 1, 2021. This would enable consumers to find out how much hospitals are paid by insurance companies for medical services. However, many hospitals have been slow to adopt the new price transparency rules. This is unsurprising, as a similar CMS rule requiring the release of machine-readable chargemasters by January 1, 2019, had less than half of all hospitals in compliance 18 months after the rule took effect. Nevertheless, a growing number of hospitals have published machine-readable pricing lists which can now be used for research into rural-urban differences in pricing.

Few studies have examined whether hospital pricing differs between rural and urban areas. Studies focused on revenue from surgical services have found that rural and critical access hospitals were less likely to provide surgical services and that this has a negative impact on hospital profitability. However, rural hospitals that do offer surgical services may still receive less revenue compared to urban hospitals. For example, the median total Medicare payment for cervical spine surgery was 10% lower for rural hospitals compared to urban ones. It is unknown if this difference in Medicare payment would also generalize to negotiated prices for other services. Rural hospitals may have less leverage to negotiate high prices from insurers, which would lead to lower prices in general, though it is also possible that rural hospitals will charge more than metropolitan hospitals for some services to compensate for decreased revenue from surgical procedures.

The purpose of the current study is to determine how pricing differs between rural and urban hospitals across an array of procedures, from inexpensive routine procedures to more lucrative surgical procedures. This will provide insight into the impact of insurer reimbursement rates on the financial health and stability of rural hospital networks, an issue that impacts local and state policy makers. It will also provide value for members of rural communities by providing information about the impact of living in a rural area on pricing for medical services.