The challenges of healthcare price transparency

The push for greater price transparency in healthcare has become a movement. There is widespread belief that with access to information about the cost and quality of healthcare services, patients will be more cautious about their use of medical services and competition among healthcare providers will increase. But concerns remain about whether transparency can achieve its goals.

Transparency proponents say giving patients more information about cost will lead to lower costs and higher quality healthcare throughout the system. In fact, a recent analysis from the West Health Policy Center estimates that increasing price transparency in health care could save more than $100 billion over 10 years.

READ: How cost gives independent physicians an edge

Historically, price information has been difficult for patients to come by, but now such information is increasingly available. Insurers and independent vendors offer tools that show patients average prices in their area. Groups such as Castlight Health provide employers with sophisticated technology allowing employees to view a range of price and quality information about  local providers and to learn how much their care will cost based on personalized insurance information.

“What the users really want to know is how much they’re going to pay out of pocket,” says Jennifer Schneider, MD, vice president of strategic analytics with Castlight Health.

While most price transparency tools available to patients today lack this level of sophistication, the raw data required to power them are being made available at rates never before seen. The Centers for Medicare and Medicaid Services recently released another batch of claims data that enable comparisons of spending across the country. States are passing laws that require providers to post price information. Large employers, as well as organizations such as the Health Care Cost Institute, are partnering with insurers to develop tools that allow patients to tap into price and quality information.

Next: Market dynamics encouraging price transparency

Market dynamics encouraging price transparency

Because Americans traditionally have obtained health insurance through their employers, who picked up a large portion of their health insurance costs, patients have long been shielded from the true cost of their care. This has allowed a system of secrecy around healthcare prices to grow up. Even today, it’s very difficult, and in some cases impossible, for patients to get a straight answer when they pose the question to their doctor, “How much will this cost?”

“Today, bills are completely inscrutable, says James Caillouette, MD, surgeon in chief for Hoag Orthopedic Institute in Newport Beach, California. “Patients can’t tell what they’re paying for and there is no other industry where that is the case,” he says.

The tide is quickly turning, however, and patients are increasingly becoming consumers of healthcare rather than passive recipients. For physicians this means a growing imperative to begin thinking about how to make price and quality information readily available to their patients-not only for the services they provide but also for those to which they frequently refer patients.

“Everyone recognizes that it’s a challenge for many physicians to provide that kind of information to patients at the point of service,” says Bill Kramer, MBA, executive director for national health policy at the Pacific Business Group on Health. “But from the patient perspective they ought to know about that before they go for services, for lab tests, radiology, follow up or specialty visits.”

The expectation is that patients will continue to demand information about how much their care costs and what they’re getting for the price. That’s largely because they are being forced to take on more responsibility for the cost of their medical care through higher deductibles, copayments and coinsurance.

High-deductible health plans that require patients to pay thousands of dollars before receiving help from insurance are  the fastest-growing type of benefit design. According to a report from America’s Health Insurance Plans, the insurance industry association, as of January 2013, nearly 15.5 million Americans were covered by a high-deductible health plan, an increase of two million from the previous year.

That number is expected to grow in the coming years. That’s because employers increasingly are shifting costs to workers to keep their own costs down, and many health plans sold through the public insurance exchanges set up under the Affordable Care Act are high-deductible policies. 

It’s not only fair that physicians have price information readily available for their patients, it’s also good business, Caillouette says. “Our job is to deliver a great experience at the lowest cost possible. We have to be willing to compete on outcomes where the doctors that provide the best experience and best outcomes for patients…and do it in the most cost effective way will attract patients.”

Next: A rapidly-changing landscape

A rapidly-changing landscape

“The incentives to continue to perform services and be paid based on volume are still there and it can still be barrier to” price transparency, says Andrea Caballero, program director with Catalyst for Payment Reform in San Francisco, California. “That’s why Catalyst for Payment Reform is challenging payers to contract with physicians on value,” she says.

 Payers are increasingly doing just that.  Tiered and narrow provider networks are already showing up on insurance exchanges, and although some insurers have said recently that they are increasing the number of providers in their networks, narrow networks are likely to become a fixture of insurance policies as a way of managing cost. “We’ll see more of that and price is an element,” Kramer says.

In addition, large employers, such as the supermarket chain Safeway and the California Public Employees’ Retirement System have instituted reference pricing. Under this model, employers establish a base price for certain services. Employees who choose providers charging above the reference price will have to pay the additional cost of those services.

Experts say reference pricing is not yet widespread, but is likely to become much more so in the coming years. That will place additional pressure on providers not only to know what their services cost but to compete on price and quality.

The challenge and opportunity

The growing demand for price transparency in healthcare presents challenges and opportunities for practicing physicians, experts say.  For example, incorporating price into  discussions with patients about their medical care represents a major shift for many physicians in how they practice. “There’s nothing in medical education that talks about cost,” Schneider says. 

Many physicians feel uncomfortable talking about price and would prefer not to, Kramer says. In addition, he notes, with primary care physicians so pressed for time, “it’s hard to imagine spending even another five minutes discussing cost.”

Caillouette, whose organization made a decision to publish its rates for orthopedic procedures on its website, acknowledges that it’s easier to provide a flat, global rate for knee and hip replacements than for office-based services. “We have not done this yet on the physician side because it’s far more complicated to do,” he says.

In reality, however, the push for price transparency will only grow, and physicians must figure out how best to provide that information to their patients.

Cabellero says there are advantages to doing so, not the least of which is high-quality customer service. “The more reviews people do on individual physicians and word of mouth spreads that they provide good service and information is a good thing,” for doctors, she says.

Schneider says that “exposing prices is hugely advantageous for providers because they can help their patients pay less money, and they can make more money if they’re bearing more of their risk in such an ACO model.” In addition, she says, physicians can use the growing availability  of pricing information in their market to help negotiate their own fees with insurers. 

The bottom line, Kramer says is that “transparency is a tide that can’t be turned back. Patients expect it, and they’ll be frustrated by physicians who say they don’t know the price.”

The best doctors, he says, will embrace price transparency. “They’ll be proud to provide the information and patients will choose those physicians for their care.”