Encountering Hurdles on the Road to Pricing Transparency

When it comes to pricing transparency, the healthcare industry should be in a copasetic state. That’s far from the reality.

With the proliferation of high deductible health plans, consumers are now responsible for a larger share of their overall healthcare bill—and, therefore, want to understand exactly what they are paying for. At the same time, the Centers for Medicare and Medicaid Services (CMS) is enforcing regulations enacted under the Affordable Care Act that require hospitals to disclose standard charges for medical procedures via the internet.

As such, when it comes to pricing transparency, the healthcare industry should be in a copasetic state. That’s far from the reality, though.

Our ability as an industry to have true cost transparency has been pretty slow to materialize, and although CMS is trying to push us ahead by requiring hospitals to post their costs, consumers are not really in a position to understand what they are paying for healthcare services.

Here are some of the obstacles standing in the way of true price transparency:

Simply supplying information is not enough to crack the transparency juggernaut. Publishing a hospital cost does not equal true consumer cost. We still have a lot of work to figure out how we get pricing information into some sort of format that will make it possible for consumers to understand it and react to it. We’re moving in the right direction, but we still have a long way to go.

The problem, according to Price Transparency in Healthcare, a report published by the Healthcare Financial Management Association (HFMA), is that despite the fact that consumers “have an urgent need for meaningful and transparent price information,” they are dealing with “a marketplace in which price—a fundamental driver of consumer behavior—is often unknown until after the service they purchased has been performed.”₁

As such, healthcare organizations should try to provide relevant pricing data. Consumers traditionally have only cared if an MRI, for example, is $100 less at a particular provider location if it has an impact on their personal checkbook. If it only has an impact on their health insurance company, it doesn’t seem to resonate as well with them.

Indeed, pricing transparency initiatives should shift away from offering insight into standard hospital charges and instead work to share out-of-pocket cost information, according to HFMA. “In our view, effective price transparency should involve the release of information that is clear, accessible, and actionable so that consumers easily can determine the cost of their premiums, deductibles, copayments, and non-covered services (out-of-pocket costs), prior to purchasing health insurance coverage as well as receiving medical services. This will allow consumers to make meaningful comparisons to help inform patient-centered care choices,” the report said.₁

Many players are involved. For example, when providing care for a heart attack, joint replacement, chronic health issues or other conditions, multiple providers could be involved in the provision of that care. So, all of these providers need to work toward the ability to offer consumers coordinated access to a full cost picture for that entire episode of care to help consumers begin to understand the true cost of healthcare.

Competitive concerns could prompt organizations to shy away from providing access to pricing information. There has been a fear voiced by some that if there are three health systems in a city that start sharing cost information, will consumers start to receive care from the cheapest location or will they all go to the most expensive location thinking more expensive must mean better quality? And would the other two facilities go out of business? The standing fear has been that if this does happen, the community could suffer as accessibility to care could become limited.

Consumers might opt out of care if they have access to cost information. With financial information in hand, another concern is that consumers might choose to forego care in favor of saving money. So we might start to see health deteriorate as a result of transparency.

As such, healthcare organizations need to put considerable thought into exactly what services they provide cost information on. Consumers in an outpatient/non-urgent care situation, with the right information, can make more informed decisions. In the case of an emergency, once stabilized many questions arise, for example: Should providers tell patients, ‘You had a heart attack, and if you stay to complete the remainder of your treatment it will cost you $20,000’? Or should they just focus on the patient’s health without providing the cost information?

Pricing information cannot be provided in a vacuum. It’s important for payers and providers alike to not only offer insight into costs but into quality data as well. It is a well-known and research proven fact that healthcare quality outcomes vary and must be part of the decision making for consumers to reach the most informed decision. To truly succeed, healthcare organizations need to provide comprehensive information to consumers – not just isolated data points around cost alone.

Consumers are demanding user-friendly technologies. Payers and providers can improve transparency by using cost estimation tools to provide consumers with comprehensive pricing information. Years ago, many payers were using these tools and a very small number of their members would use them. Now, however, healthcare organizations are revisiting cost estimation tools but are trying to provide consumers with more engaging technologies more like an app that allows “real time” engagement with an expert versus a website. And they’re hoping to get some uptake.

While consumers are seeking cost information and healthcare organizations are being prompted to provide it, myriad challenges loom—making it difficult for consumers to truly understand their financial obligations. To bridge this gap, healthcare organizations should consider working with experts who can help them understand the strategic value of cost transparency, then focus on the people, processes and technology that can help them create and sustain an effective cost transparency program.

 

References
₁HFMA, Price Transparency in Healthcare. https://www.hfma.org/transparency/