Healthcare is the only industry in which consumers are completely unaware about the price of a service they are purchasing until after the fact, when the medical bills arrive. Patients, however, want transparency regarding the expected costs of office visits, diagnostic tests, imaging studies, surgical procedures, hospital services, and more.
Unfortunately, determining the amount an individual patient will have to pay is significantly more complex than knowing the price of a single service. Health insurance companies negotiate rates with contracted providers within their network. These rates vary from one provider to another and from one facility to another. Rates also vary by product lines such as self-insured or fully-insured commercial plans, Medicaid and Medicare.
Additionally, this is complicated by the patients’ deductibles, co-pays, coinsurance, and annual out-of-pocket maximums. Often, the physician or other provider may not know what tests or procedures they will order until after seeing the patient. These additional procedures and costs must be identified and factored in by the individual based on their own personal circumstances to calculate the total cost of care for any specific medical problem.
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What would truly be helpful to patients and their families is being able to determine the costs and make informed decisions about their care. For example, a patient may need an MRI, but the cost of the MRI will vary depending on whether it is performed at a free-standing imaging center or a hospital imaging center. When the patient, and the provider, know the difference in cost, they can decide together which option is better.
Price transparency is a step in the right direction
In the United States, price transparency mandates were developed to help consumers become smarter shoppers and choose the healthcare that best meets their needs.
Hospital health transparency:
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- The Centers for Medicare and Medicaid (CMS) issued a rule in January 2021 to improve transparency in health care costs by requiring hospitals to make their prices readily available for consumers
Health plan price transparency:
- Effective July 2022, a federal rule requires health plans to disclose the negotiated prices they pay physicians and facilities for each item and service they provide
The implementation of hospital price transparency has been a challenge. The Office of the Inspector General issued a report online on November 8, 2024. The report outlined a sampling of 100 hospitals to see if they met the Hospital Price Transparency (HPT) rules. They then extrapolated this data to 5,879 hospitals in the United States. They found that 46% did not comply with the HPT rules. This is due to several factors, including lack of standardized data collection and analysis, multiple contracts with health insurers and CMS, and complicated, standardized reporting requirements.
Beginning in January 2024, health plans were required to provide cost-share estimates for all covered services for their members. Many health plans have introduced online price transparency tools for their members, but these tools can be difficult to use and may not always reflect current pricing.
Price transparency is a step in the right direction, but it is not enough. Patients also need to be aware of the quality of care they receive from any given provider or healthcare facility.
Transformative change will happen by combining cost, quality and efficiency measures
One of the most critical parts of becoming a smarter healthcare shopper is determining the quality of care being provided. Price transparency does not address this. In fact, shopping on price alone may lead consumers to select care at facilities they would not have chosen if they knew about the risk of poorer outcomes such as increased readmission rates or hospital-acquired infections.
Many studies have shown that 25% to 30% of health care costs in the United States is spent on tests and procedures that are unnecessary. Price transparency does not necessarily protect consumers from shopping for care that may not be necessary and could have been avoided. What is the cost of an MRI that isn’t needed, especially when it leads to further testing or a procedure that isn’t necessary?
Cost alone is not sufficient in determining the best care. For some people, cost may be the primary factor when choosing a provider or facility. However, combining cost, quality and appropriateness of care is a much better indicator of the highest value providers in a geographic area. Choosing the best provider based on quality and value could save consumers more money than price shopping for procedures they may not even need.
Additionally, studies have shown choosing a high value provider results in not only cost savings but also improved outcomes and lower mortality. For example, a 2022 study out of Norway found that one standard deviation increase in general practitioner quality resulted in a 12.2% decrease in a patient’s two-year mortality risk. By incorporating quality, appropriateness, and efficiency scores along with price transparency on their provider finder tools, health plans would transform the provider selection process for their members. These types of provider quality scores can be obtained from a third-party entity based on sound scientific measures using accepted standards of care guidelines from the specialty societies.
Looking beyond the provider selection process, combining price transparency with quality, appropriateness, and efficiency scores will transform how providers evaluate and improve their own practice patterns. For example, providers could:
- Review their own cost, quality, appropriateness and efficiency scores
- Modify their behavior, if necessary, based on these scores
- Refer their patients only to high quality specialists
Making it actionable – the final piece of integrating price and quality transparency
Accurate price estimates alongside provider quality is the real “transparency” the industry needs, but neither are helpful if not actually utilized and made accessible in the processes and places that patients and providers already access. Asking a patient to look through complex data when they already have limited knowledge and trust in the resources available to them or asking providers to enter yet another portal or dashboard is unrealistic. Making this data more accessible doesn’t have to be complicated and should be done with the goal of disturbing as few current workflows as possible. That can look like embedding it into member provider directories for patients and EHRs and internal heavily used dashboards or even printable referral lists for providers.
Just as we highlighted the challenges with price transparency from a data accuracy and data complexity problem, there is also an accessibility problem: it is currently published in hard to read and hard to interpret machine readable files that meet regulatory requirements but are far from actionable to the people who need it most. While there are isolated examples of successful implementations, the industry will not see the outcome improvements and cost savings opportunities associated with this powerful data until it’s implemented into everyday workflows and regularly accessed which would effectively pressure-test its usability and accuracy at scale.
Photo: sinemaslow, Getty Images
Roki Chauhan, Chief Medical Officer at HealthCorum, was a board-certified family physician and practiced for fifteen years before transitioning to system leadership. Roki served as a Medical Director of Quality at Providence Health Plan of Washington and as Chief Medical Officer of Premera Blue Cross where he was responsible for senior corporate medical leadership, strategic planning and implementation of clinical programs. His primary passion has been improving quality and reducing unnecessary care in healthcare. He has actively worked with physicians in developing physician reports that demonstrated to them how they could improve quality and better manage healthcare costs.
An epidemiologist and innovative leader in clinical development, Beth Carvette, VP Clinical Analytics at HealthCorum, leverages multiple datasets and classification systems to define algorithms that support programs and metrics to improve health outcomes and optimize value in healthcare. She formerly was in clinical analytic leadership roles at RowdMap, Cotiviti, Health Dialog and Anthem BCBS. Beth’s career has included an impressive track record of ensuring provider scoring processes and methodologies not only reflect the latest industry and clinical best practices, but also highlight providers who produce the best outcomes and deliver the highest value.
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