Pricing Transparency Creates Competition, Impacts Bottom Line

The issue of transparency in healthcare, particularly where pricing and payment information is concerned, has been widely debated for years. Is there a benefit to making this information readily available to the general public?

Physicians believe so. According to a recent survey conducted by The American College of Physician Executives, the majority of physician respondents (54%) not only support pricing transparency, they also believe it will improve the physician-patient relationship.

Why has it taken so long to come to this conclusion?

“[Pricing transparency] can be very challenging,” explains Al Fisk, MD, chief medical officer for The Everett Clinic in Washington state, and a member of the Council of Accountable Physician Practices (CAPP). “We probably have, out of 300,000 patients, between 500 and 1,000 different coverages. It can be pretty complex.”

But Fisk believes the slowness to adopt pricing transparency is also a cultural issue. He calls the healthcare industry the only segment of the US economy where, for at least the last 15 or 20 years, there’s been a blindness to cost.

“When you get a culture like that, the patients don’t know what the price is, and sometimes the providers don’t know,” he says. “But it’s time to change that.”

Demystification factor

On Nov. 1, The Everett Clinic announced it was posting prices for all of its most frequently used services. Price lists are available in all departments in which patients make appointments, as well as online at http://www.everettclinic.com/price.

“What we’re able to do is post just the baseline private fee,” Fisk explains. “And then if you want to know what your insurance will pay and you personally will pay, you call the business office and they put it through a computer program.”

Fisk also says that healthcare is “too darned expensive for most people in this country.” The prevailing belief is that transparency will begin to lead to a more competitive market, and patients will benefit from lower costs.

But, he cautions, making pricing more transparent is not as easy as flipping a switch.

“It took our business office and our accounting department about 9 months to get everything posted properly,” he says. “It takes some work. And you need a commitment that patients deserve transparency in price, and it’s our job to give it to them. Once we made that decision at the senior-most level, it took about 9 months.”

Meanwhile, back east…

Three thousand miles to the east, in accordance with the Massachusetts Pricing Transparency Legislation that went into effect Jan. 1, Atrius Health, also a CAPP member, is providing patients or prospective patients with an estimate within 2 business days of the cost of medical services that may be provided at one of Atrius’ medical groups.

The estimate will include the allowed amount or standard charge for anticipated professional services or procedures to be rendered. If available, the patient’s out-of-pocket expenses in the form of copayment, coinsurance or deductible will also be provided.

“Patients are taking on more and more of the expense of their healthcare, whether it's through premiums they pay at work, through larger copays or larger deductibles,” says Richard Lopez, MD, chief medical officer with Atrius Health. “I think that’s happening more in other parts of the country than in Massachusetts. But as that sort of steamrolls through the country, we’re going to see more interest on the part of patients for the cost of these services.”

Lopez believes that with the advent of tiered pharmaceutical products in the 1990s, physicians began to understand the impact of their practices in terms of the financial cost to the patient.

“Patients would say, ‘Thirty-five dollar copay? Isn’t there a generic?’ That dynamic didn’t exist before,” he explains. “This is sort of an extension of that, especially as these products and services put more of the burden of cost on the patient.”

Financial impact

Fisk says that he and his colleagues at Everett have been “pleasantly surprised” at the number of patients who have noticed the transparent pricing. As such, it could have a positive impact on a medical practice’s finances.

“We think our prices are going to be pretty competitive in the regional market here,” he explains. “So, you have transparency, your prices are competitive, I would like to hope that it will bring us more business. That it will be rewarding.”

Fisk pauses before emphasizing, “But we’re not doing this to make money. We’re doing it because we believe in transparency.”

Adds Lopez, “Anything physician practices do that engages the patient and builds trust will be positive for a practice’s growth, and that’s the financial bottom line.”