A Deeper Dive into Price Transparency

There is a major shift towards price transparency in the healthcare industry, following a broader consumer demand for visibility. Charge, cost, and price information, available in digestible formats, cater to consumers with purchasing mindsets. Overall, price transparency initiatives should help cut costs and improve quality, although opponents of some price transparency initiatives argue otherwise. Regardless, in today’s current state, consumers often cannot determine the cost of procedures and services before delivery, and providers, facing their own challenges, cannot provide appropriate cost estimates. Healthcare reform is trending towards price transparency as an answer to both those problems. 

Major Price Transparency Initiatives 

The Trump Administration recently rolled out a hospital price transparency executive order, mandating that HSS and several other agencies increase transparency for patient benefit. Trump said that this order will “fundamentally change the healthcare market” by requiring hospitals to “publicly disclose amounts that reflect what people actually pay for services in an easy-to-read format.” 

Some industry experts are in favor of this executive order. Increased control over the development and impact of price transparency laws should decrease healthcare costs. 

Opponents of this order, including the American Hospital Association, Federation of American Hospitals, and America’s Essential Hospitals, argue that disclosing a negotiated rate between insurers and hospitals will not benefit patients at all. Rather, this disclosure would ultimately hurt patient access to care by reducing the total number of choices available in the marketplace. 

Healthcare CEOs and c-suite executives are unsure that the new price transparency proposal will have its planned effect. A survey by Advis, a national healthcare consulting firm, gathered data from 161 executives and revealed a few key findings: 

  • Many respondents — 54% — don’t think consumers will shop for healthcare like they do for other services. 
  • Sixty-four percent of executives surveyed don’t believe the recently proposed price transparency changes will go into effect at all. 
  • And, almost half of the organizations surveyed have taken no action to prepare for this proposal.

Regardless of the skepticism pervasive in the industry, the attempt to push down this new order mirrors a larger change: price transparency is increasingly important and expected. 

Beyond the hospital price transparency rule, state legislatures are requiring all-payer claims databases (APCDs) to gather healthcare data surrounding price and quality. There is an ongoing debate regarding the necessity and success of APCDs; the ideal outcome being a space for consumers to compare cost and quality. 

Why This Matters to Patients

Consumers want all available information about everything they buy, and healthcare is no exception. Seventy-five percent of patients look at price transparency ahead of care access. The true benefit of price transparency — albeit the most obvious — is that patients can make truly informed decisions about their own healthcare. 

Price transparency is especially important regarding high-demand, lower-cost services, since those are most commonly delivered. But, cost data isn’t the only important piece of information for patients. Ideally, health systems will eventually include publicly reported relevant data and patient safety scores. With true price transparency, patients can easily identify high-value services where cost and quality intersect perfectly. 

How patients engage with their technology will also drive market changes. Providers and insurers are struggling to provide patients access to real-time information via smartphones, computers, or any other internet-connected hardware. This achievement — accessible data from anywhere — would be a true milestone in transparent healthcare. 

How Transparency Will Affect Providers 

In conjunction with legislative changes and patient demand for visibility, hospitals must create a strategy for price transparency keeping in mind the following: 

  • Today’s consumers expect pricing information online in a real-time platform accessible from anywhere. 
  • Providing out-of-pocket cost estimates is nonnegotiable — offered either while the patient is at the office or digitally. 
  • Identifying and targeting high-volume services to track and offer transparency is a sector of healthcare with a guaranteed impact. 
  • Providers must also have policies and procedures designed to enhance and enable training. Educating staff on cost changes, what is included in the estimate, incoming medical bills, and overall financial responsibility is key to helping a patient understand what they will actually pay. 

As it stands now, some price transparency initiatives are already in place. More than half the states have enacted laws to address surprise medical bills, some which are already regarded as successful. In New York, for example, in the event of a surprise medical bill, both providers and payers submit an amount and a third-party arbitrator determines which payment offer is just. After implementing this law, the number of surprise medical bill complaints in New York dropped significantly, indicating a favorable outcome. 

The benefits of price transparency stretch beyond the provider-patient relationships. Self-insured employers are improving relationships with healthcare providers using price transparency as leverage. Similar to consumers, employers’ lack of success providing healthcare at the best cost can be attributed to their blindness surrounding healthcare prices. Due to gag clauses, or simply an outright refusal to share negotiated prices, employers are often deprived of key price information. 

Finally, more bundled pricing strategies may arise as a result of price transparency. As to not overwhelm a patient with the cost of minor procedures and care, it may benefit providers and hospitals to approach service from a bundled offering perspective. A total joint replacement, for example, can consist of pre-operative care and planning, surgery, post-operative care, and other services like physical therapy. Providing the total cost of care is generally easier for the provider and more digestible for the patient. 

There are a variety of approaches to satisfy price transparency, cost containment, and quality healthcare — all at the same time. Guided by legislative and regulatory action, hospitals and providers are working to merge the appropriate technology, access, and information. Controlling and monitoring the innovations surrounding price transparency could also guide potential models for the future of healthcare.