Photo by Vitaly Gariev on Unsplash
Washington has spent years debating healthcare costs without confronting the biggest one: hospitals. Thankfully, both lawmakers and private industry have taken the initiative to bring more transparency to hospital pricing. ATR applauds these efforts to make healthcare more affordable to the American people.
In February, President Trump signed the Consolidated Appropriations Act, 2026. Section 6225 of that law requires every off-campus hospital outpatient department to get its own National Provider Identifier (NPI) and bill under it. It must also attest that it complies with Medicare’s provider-based rules. The deadline for compliance is January 1, 2028.
Until now, CMS let off-campus locations bill under the main hospital’s NPI and, therefore, get paid the higher hospital rates for the same procedure. That gap let hospitals buy up physician practices and charge hospital facility fees for routine office visits, and neither payers nor patients could tell from the bill where the care actually took place. Medicare paid an estimated $2.7 billion extra and patients paid an extra $411 million out of pocket over three years because services that could have been done in a physician’s office were billed as hospital outpatient care.
Notably, the law applies only to Medicare. This change, however, has empowered the private market to follow suit. Today, Elevance Health announced new billing policies for its commercial, Medicare Advantage, and Medicaid plans. Under them, hospitals must report the physical location where care was delivered, Elevance will check claims against hospital addresses, and certain off-campus services will be paid at off-campus rates. Elevance is the first commercial payer to announce that it will require location data on bills and adjust rates to match. The company will phase the policies in through 2026 and 2027, ahead of the federal deadline.
Addressing hospital billing transparency is a long time coming. Since 2000, hospital service prices have climbed 281 percent – three times overall inflation and double wage growth. No other major sector, including the obvious ones like college tuition, childcare, and housing, has outpaced hospital care.
Hospital care accounts for one third of our national health expenditures while retail prescription drugs account for just 9 percent. In fact, hospitals drove 40 percent of the growth in national health spending between 2022 and 2024. In comparison, physician services accounted for 22 percent of growth and prescription drugs, 11 percent.
When confronted with these rising costs, hospital lobbyists and associations make the same claim over and over again: these are hard times, hospitals are barely getting by.
As the Paragon Health Institute demonstrated in a recent report, this is far from reality.
In 2023, a quarter of hospitals posted operating margins above 10 percent. For context, car dealerships typically operate on margins of 1 to 4 percent, real estate developers average 5.8 percent, and aerospace and defense contractors average 7.4 percent.
More than half of hospitals made a profit on Medicare with at least a third turning a profit on Medicaid. Further, hospitals collectively pulled in $18 billion in investment income in 2024, up 40 percent from 2023. Tax-exempt hospitals, meanwhile, borrow at interest rates 1.66 percentage points below taxable corporations, a subsidy baked into their nonprofit status.
So, did patients see any meaningful improvement in their care? Did nurses, the people who hold hospitals together, see raises that reflected it? No and no.
National patient-experience scores improved steadily in the years after public reporting began, but that improvement slowed to almost nothing – just 0.1 percentage points a year – by the most recent period studied. Between 2012 and 2019, average hospital CEO pay rose by more than 30 percent while registered nurse wages crept up by just 2.3 percent.
Instead of improving the lives of patients or investing in their essential workforce, two-thirds of hospital spending today goes to costs unrelated to direct patient care.
Hospitals have built a business model around opacity. They buy physician practices, bill routine visits as hospital care, and plead poverty when confronted. Section 6225 will help take that cover away. Further, the established transparency will enable private companies to deliver more affordable care to their customers, as it has for Elevance Health. All Americans should be excited about these changes. President Trump and congressional Republicans set a commonsense standard, and industry is using it to push back on hospital pricing without price controls or new spending. Other carriers should follow.