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Price transparency is the ability for consumers to access provider-specific information on the price of healthcare services – including out-of-pocket costs − regardless of the setting in which they are delivered.

But healthcare does not operate like other industries – consumers do not necessarily have access to the price of services.

Costs for the same exact medical service can vary significantly from provider to provider; it is challenging for consumers to ascertain information in order to compare providers based on two important factors: price and quality.

Making insights on healthcare prices and quality obtainable will help consumers compare costs, choose physicians who truly have high value, as well as plan for the financial implications. This will also support policymakers to hold healthcare providers accountable for creating appropriate prices.

Public reporting on the standard of care started out approximately fifteen years ago. However, attempts to make costs transparent only started over the last several years. Strides have been made on both fronts, but there are still serious holes in what information is accessible.

Why Employers are Concerned

Demand across the United States for increased transparency in health care is coming from employers and other health care purchasers who need access to information on provider cost and quality.

There are a number of reasons why they are pressing on. For starters, additional transparency uncovers variances in price and quality, which helps employers identify low-value providers.

Secondly, an employer has a more informed capability to direct employees to high-value providers through narrow networks, reference pricing, or centers of excellence programs.

As workers have the burden of high-deductible health plans (HDHPs) and other new health insurance products, they need to understand value (price + quality) when making healthcare decisions.

There is growing evidence that high healthcare prices are one of the main contributors to rising healthcare spending. Some providers are paid significantly more than other providers in the same geographic vicinity for the same exact medical care.

According to FamiliesUSA, “one reason is that healthcare prices vary so much is because insurers negotiate prices directly with individual providers, and providers who have greater market power or brand recognition can often negotiate significantly higher prices. This method of setting healthcare prices means that there is little connection between the price of care and the quality of that care.”

Consumers and employers oftentimes cannot get sufficient data regarding the negotiated prices. However, there are occurrences when consumers can gain access to providers’ retail prices — they are also known as “chargemaster” prices. These prices may not be insightful to uninsured consumers as they are not accurate estimates of the prices paid by health plans or of what insured consumers pay for care out of pocket. Ultimately, consumers and payers often overpay for care that may not necessarily be higher quality.

Transparency in Price and Quality is Shifting

Price and quality transparency is gaining momentum, but there is still an opportunity to offer a better experience for consumers and employers while they do their due diligence and make decisions on healthcare:

  • Consumer-facing tools with quality and price information are on the rise. 53% of employers reported offering a transparency tool in 2016, while up to 84% could be offering tools by 2018. Also, most major national health plans provide tools to members.
  • Many consumers across America are uninformed that prices vary by provider, much less that pricing information is available. This may explain why studies indicate utilization of tools offered by health plans or employers is low. There’s definitely an opportunity here for educating those who are impacted.
  • Access to tools are available to consumers who have insurance through larger health plans as well as employees who work for large organizations. So far there are seven states that make price and quality information available to the public.

Price and Quality Transparency Leads to High Value Healthcare

Purchasers will be equipped to secure higher value care once they are educated about the variation in price and quality. And then, by integrating price and quality into benefit and network design, purchasers can take next steps:

  • Inquire with contracted health plans if they will provide a demonstration of the transparency tools offered to members. Find out what data they have available on how their users benefit from the tools.
  • Something to take into consideration is deciding if a transparency tool provided by a 3rd party, independent vendor would be a better fit.
  • Combine a transparency tool with benefits that motivate consumers to look for higher value care. Some examples include a high-deductible health plan with a health spending account (HSA), reference the cost for services or procedures when consumers have a say in the decision making process (e.g. mammograms or joint replacements), or enticement to secure care from centers of excellence.

In our next blog post, we will discuss the future of healthcare transparency and how it may ultimately lower costs for consumers.

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