The Biden administration on Monday proposed sharply higher penalties for larger hospitals that don’t make their prices public.

The proposal would also clamp down on the use of special coding embedded in hospital webpages that prevents Alphabet Inc.’s Google and other search engines from displaying price pages in search results.

The Wall Street Journal reported in March that hundreds of hospitals had embedded code in their disclosure webpages that kept them from being indexed by the search engines.

Under the proposal, the Centers for Medicare and Medicaid Services, the federal agency responsible for enforcing rules requiring hospitals publish their prices, is seeking to raise penalties as high as $2 million a year for large hospitals that fail to make prices public. Large hospitals are those with more than 30 beds.

The proposed penalty is a sharp increase from the $109,500 maximum a year per hospital under existing rules. For hospitals with 30 or fewer beds, penalties remain the same.

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The proposed provision comes after many hospitals failed to publish their prices as required by federal rules that took effect this year, undercutting policy makers’ goal of boosting competition and choice through transparent pricing.

As of Monday, data from price-transparency startup Turquoise Health Co. shows no usable pricing data from 32% of 4,885 acute care, children’s or rural primary-care hospitals.

The company’s database includes another 10% of these hospitals with prices that fall short of requirements.

“With today’s proposed rule, we are simply showing hospitals through stiffer penalties: Concealing the costs of services and procedures will not be tolerated by this administration,” Health and Human Services Secretary Xavier Becerra said.

Hospital trade groups pushed back on the proposal. “More stringent penalties for noncompliance with rules whose potential effects even the administration cannot quantify is the wrong direction for this policy,” said Bruce Siegel, chief executive of America’s Essential Hospitals, a trade group of hospitals in underserved communities.

The American Hospital Association said interpretation of the rules is uncertain and higher penalties were concerning.

CMS issued the proposal after the Journal reported spotty compliance with publishing prices, including hospitals embedding code in their websites to conceal prices from searches. Some hospitals said the code was an error and removed it.

“ ‘Concealing the costs of services and procedures will not be tolerated by this administration’ ”

— Health and Human Services Secretary Xavier Becerra

The proposed rules said hospitals used various methods, including so-called blocking codes, to make it harder for people to search for and download pricing data. The proposal would require hospitals to ensure that prices can be accessed by automated searches and that files can be directly downloaded.

Federal regulators in April issued similar guidance for health-insurance companies, which must comply with price-transparency rules in 2022. The guidance said insurers shouldn’t use website coding that omits healthcare-pricing data from search results.

Where hospitals do post prices, the Journal has found wildly different prices for the same service in the same hospital, with the uninsured often paying the highest prices.

The price-transparency rule, which took effect Jan. 1, required hospitals for the first time to disclose the confidential prices negotiated with health insurers.

The Trump administration, which issued the rule, said that greater transparency would boost competition and help control rising U.S. health spending.

Hospitals opposed the rule from the start, losing a legal challenge last year to block it.

Some healthcare experts said the rule’s initial penalty—$300 a day for each noncompliant hospital—may not be enough to convince large, well-financed hospital systems to make prices public.

Cheryl DeMars, chief executive of a nonprofit group of 285 employers in Illinois, Wisconsin and Iowa called the Alliance, said hospitals haven’t been motivated to comply by existing penalties, leaving employers without valuable information to hold hospitals and insurers accountable for prices they negotiate for consumers.

“This is information that employers will be able to use to better understand not only the price differences between hospitals, but also how good a job their health plan is doing negotiating on their behalf,” Ms. DeMars said.

The White House this month called for HHS to support the rule. A CMS spokeswoman said the agency has sent about 125 warning letters since April 20 and will continue to enforce the rule as necessary.

Under the proposal, hospitals with more than 30 beds would face penalties of $10 a day, per bed, with a maximum daily penalty of $5,500.

Of the 2,037 hospitals that appear to be out of compliance, 1,441 have 30 or more beds and would be classified as large under the proposed regulation and subject to higher penalties.

Under the proposed regulation, their annual fines for continued noncompliance would total more than $1.4 billion, according to a Journal analysis of Turquoise Health data.

Write to Melanie Evans at Melanie.Evans@wsj.com, Anna Wilde Mathews at anna.mathews@wsj.com and Tom McGinty at tom.mcginty@wsj.com