Price transparency and staying competitive

As part of the recent MGMA 2020 conference Les Jebson, executive director of clinical business operations at Texas A&M, gave a presentation on new price transparency rules.

Shortly after the presentation he sat down for a conversation with Medical Economics about transparency and how smaller practices can stay competitive as retail behemoths enter the health care space.

The interview has been edited for clarity and length.

Medical Economics: What is pushing the price transparency movement?

Les Jebson: I think it's really multifactorial. There are national movements going on, that have been going on for some time. One is the consolidation of all of the insurance companies. The payers are now down to a handful of payers, which gives them tremendous scale. On the provider side, health systems continue to merge at an increasingly large rate to try and combat that or counter the insurance consolidation. So those are influencing it.

But I think the biggest thing is that healthcare is ripe for disruption, I know we use that word a lot, but the pushing back of high deductibles, and a new generation of consumers. It's that generation of consumers that have become accustomed to Uber and Airbnb, and asking these questions, why not? Why can’t I know the price of this service ahead of time? Or, what can I expect my out-of-pocket expenses to be? Can I pay cash for this?

Generationally, we just in my career, we've never dealt with individuals or patients that have that have been that way. But this is the new movement of that generational consumer, I would say 45 years and under, are asking these questions, and they're not loyal to any provider, and they're a lot more loyal to price sensitivity and perceived value.

MedEc: Do the transparency regulations recently put into place also apply to private practices?

LJ: They do not, not at this time. So, in referencing the Trump and the federal government rules, the aim was for January 2021, hospital systems have to list their charge masters or their fees, somewhere on their website, and part of my talk at the MGMA was sharing that, hey, this is happening on the hospital side, they will take a fine, and they'll take a financial penalty daily, if they don't comply, and I think they're going to have a hard time complying with the rules, the rules are to make sure that the fees are clear, easy to find, understandable, and machine-reported so you can download them.

So, I think it's going to be a bit of a mess to begin with. But the greater message here is this has started for hospitals now. Will physician practices come next? You know, and I don't know if it'll be a mandate federally, but I think what you'll see is the market itself is pushing towards pricing on websites ahead of time for practices. And I listed several examples during the talk of websites or of medical groups throughout the country that are already doing this.

MedEc: Have you heard about an appetite to codify a federal mandate on small-practice price transparency?

LJ: It's definitely going to be the market that drives this and in more competitive markets.Keep in mind, you look at healthcare services that typically are not covered:some facial plastics procedures, blepharoplasty, MI, with LASIK. And you see that those markets or those services have competed based on price and quality for several years now. And as a result, prices either have remained lower or resistant to inflationary adjustments, than insured covered services. So, I think that gives some insight as to more and more what's coming, and keep in mind the the payers are so big now that negotiating rates is very difficult. They pretty much set the rates that they're going to give you. So, it begs the question: why not start sharing those prices and what a patient can expect to pay out of pocket from a consumer-friendly standpoint?

MedEc: What could a small practice learn from something like LASIK?

LJ: Well, I think it depends on the type of services that the medical practice is providing. And again, when we talk about the smaller independent practices peppered throughout the country, or even medical practice that are that have been integrated into large health systems, I begged the question, and I welcome the feedback as well, is that what is wrong with putting the top 10 services you provide online with a cost estimation? What’s wrong with that.

If it's straightforward, that there's always going to be exceptions, or if you're looking at procedures, and something happened intraoperatively, or something that warranted additional codes and services being provided, and thus, the fees have changed. Sure, but for your top 10 bread and butter office visits or procedures that you perform, why not I put the package pricing on your website and let patients get a better understanding of what costs are going to potentially come in their way. This is years off before it becomes fully mature. But I'm absolutely convinced, hopefully, this little conversation today will be a timestamp as to my Nostradamus prediction, that pricing transparency will be the norm on medical practice and hospital websites throughout the country two or three years from now.

MedEc: What can a small practice do to stay competitive with retail behemoths entering the health care space?

LJ: Great question. And that one, I don't really know if I have a good answer to. Yeah, as you and I talked about, you know, Amazon, Google, and Walmart are entering the provider side of the equation, which is a fascinating move. And their value proposition is price. Just straightforward, low-cost pricing, whether it's a physical in person, primary care office visit or eye exam at a Walmart clinic, or if it's a telehealth visit through an Amazon health provider, their argument is convenience and price. This is where I think the next part of it is going to be the quality argument. So, if you and I are both physicians in the market, how could you and I compete against the Amazons or the Walmarts of the world? I think we will compete based on two things: relationships and community presence and quality.

Quality will be what sets us apart, I think from a competitive standpoint, now I'm not a marketing expert or a branding expert, so I don't quite know how you fully accomplish that. For me, I'm encouraging our practices to start listing our star ratings and our patient satisfaction scores on the homepage of our website, lead patients who are seeking to find a primary care physician. When they're shopping, here we're going to show that we believe that we provide one of the highest quality services at a competitive price in the market. So that's how we are trying to differentiate ourselves.

MedEc: Can we expect more outside actors like Amazon and Walmart to enter the health care field?

LJ: As long as health care costs keep going up. You know, in my presentation, I talked about Walmart, who has well over a million employees and has a physical presence in every state and 11 countries. I mean, they're huge. So, for North America, Walmart has gotten into the space because they're a large enough employer that they're routing and directing care, to predetermine providers to try and keep costs down. So, they're actively doing that on the side of their employees. Now very recently, I just shared that the Walmart has opened five clinics physically, mostly in the southeast in primary care, and they're entering it on the provider side as well. Ashley Furniture is a large employer. They've started sending their orthopedic procedures down to Mexico to save money, American hospitals located in Cancun and Tijuana.

So, yes, there are more and more companies that are taking an active role in managing their employee health costs. Why? Because any company, generally 65 to 70% of your operating costs are people and then you add your benefits on top of that, and healthcare premiums being the most expensive part of that, and that's why they're trying to tackle it.

MedEc: Is there anything else you'd like to add?

LJ: I would, for those watching (reading this), take a look at some of the up-and-coming health care consumer websites.