Fair pricing laws don't degrade care provided by hospitals

A right-of-center think tank has concluded that legally compelling hospitals to adhere to fair pricing laws (FPLs) when they treat uninsured patients does not degrade the quality of care they provide.

"We find no evidence that FPLs lead to worse health outcomes," said the report, which was issued by the American Enterprise Institute in the District of Columbia. "FPLs are not associated with increases in mortality, medical errors, or readmissions. Nor do we observe changes in the appropriate use of high-cost, high-tech medical procedures. Thus, FPLs appear to do more to generate efficient care, rather than lower quality care." 

Fair pricing laws usually prompt hospitals to not collect payments from uninsured patients with low incomes, and cap collections at commercial payer rates for those with higher incomes. Six states--Minnesota, New York, California, Illinois, Rhode Island and New Jersey--have such laws on their books, according to the report. The American Enterprise Institute suggested that FPLs are the equivalent of catastrophic insurance coverage.

Other states are pressuring hospitals to lower their charges. In Florida, Gov. Rick Scott has asked hospitals to disclose their prices, what they are paid by insurers, and create a mechanism to dispute their bills if they are being overcharged. Although Scott has a contentious relationship with hospitals in the Sunshine State, other states such as Maine and South Carolina, have recently posted a database providing limited hospital cost information to patients who want to try to shop for their care.

The report did conclude though that average lengths of stay for uninsured patients dropped 7 to 9 percent within a couple of years of an FPL being mandated. It also concluded that mortality rates were slightly lower for uninsured patients, although the study suggested that may be because the hospitals are less likely to pursue aggressive care pathways that are more risky in the short term.

"Our study provides strong evidence that providers do respond to financial incentives, but suggests they do so by forgoing relatively low-value care," the report said.

To learn more:
- read the report (.pdf)