Survey: Healthcare Consumers Want Health Costs Up Front

Pricing transparency is becoming a critical factor when patients evaluate hospital care and choose providers, according to a new survey.

TransUnion found 80% of patients said the availability of up-front cost estimates would influence their choice of a healthcare provider, the same percentage as said bedside manner was a key factor. The survey was released Tuesday as financial managers from across the country gathered in Orlando at the Healthcare Financial Management Association’s National Institute.

“As consumers become more sophisticated in understanding healthcare costs, providers must be prepared to answer financial questions they were rarely asked 10 or even 5 years ago,” said Gerry McCarthy, president of TransUnion Healthcare.

That means hospitals need to be able to provide accurate pricing information up front, including details of an individual’s expected out-of-pocket responsibilities. TransUnion is on the front lines of that effort. Their suite of healthcare services includes an estimation product that uses hospital charge data, patient information, and the patient’s insurance status to calculate estimates that hospitals can then provide to patients.

In an interview, McCarthy said this benefits hospitals because patients are more willing to pay their bills on time when they have a firm understanding of the costs prior to a given procedure. Furthermore, he said, many providers are beginning to use the estimates to seek up-front payments, thus moving the collections effort to the beginning of the transaction.

Yet, it’s still a work in progress. Only 30% of patients in the survey said they were offered a pre-treatment cost estimate. While that’s up from previous years, it pales in comparison to the 85% of respondents who said pre-treatment cost estimates are helpful. More than half of respondents (55%) said they’re sometimes or often confused by medical bills and 61% said they’re sometimes or always surprised by their out of pocket costs.

The survey also found a geographic disparity in the availability of pre-treatment estimates. In the 17 most-populous states, 31% of respondents had received front-end cost estimates. In the 17 least-populous states, only 26% had. Nearly half of those small-state residents (47%) said it was somewhat or very difficult to get up-front cost information. However, 51% of Californians and 47% of New Yorkers said it was somewhat or very easy to get the information.

Part of the reason for the disparity is competition. McCarthy said hospitals in highly competitive markets are seeing increased customer demand for pricing transparency. But he said hospitals in more rural areas tend to lag behind, likely due in part to a lack of technical capabilities or a lack of resources to implement pricing transparency at the same time they are struggling to implement Meaningful Use requirements for Electronic Health Records.

While patient demand is likely to be an increasing issue for hospitals, McCarthy said there’s another force that is spearheading the trend.

“Payers are actually driving transparency more than anyone,” he said.

Transparency helps incentivize shopping around, which helps lower the cost for insurers. Shopping around is particularly beneficial for the increasing number of patients with high-deductible plans.

However, the survey found that the willingness to shop around isn’t limited to those with high-deductible plans.

As evidence, McCarthy pointed to a survey question related to the pending King vs. Burwell decision, which the Supreme Court is expected to release in the coming days. The case centers on whether people who bought insurance using a federal government marketplace are entitled to subsidies, or whether the law limits those subsidies to people in states which set up their own exchanges. If the court limits the subsidies, more than 6 million people could lose their subsidies and be unable to afford their health insurance premiums.

Yet, the survey found that such a Supreme Court ruling would likely influence the thinking of millions more Americans. The survey respondents were a sampling of the insured population in general, and yet more than half (51%) of respondents said they would look for new providers if the Supreme Court strikes down the subsidies in the 34 states. Thus, even people whose insurance wouldn’t be directly affected by the ruling said it could prompt them to shop around.

McCarthy sees this as evidence that King vs. Burwell is getting more people to think about the affordability of healthcare on the consumer level.