3 major challenges of healthcare price transparency

The lack of price transparency in healthcare threatens to erode public trust in our healthcare system, but this erosion can be stopped.

As consumers become more involved in their healthcare and take on more responsibility for paying for it, there has been a major push for more price transparency in the industry. Providers and payers have responded to that demand. However, there is still significant work to be done.

Below are three of the current challenges to price transparency in the healthcare industry.

Difficulty locating information
Viewing price information is important to consumers and is only becoming more critical as their responsibility for covering the cost of their medical care increases.

A majority (56 percent) of consumers have tried to find out how much their out-of-pocket costs would be before getting medical care, according to a survey by Public Agenda. The survey also revealed people with higher deductibles are more likely to seek price information before getting care. Sixty-seven percent of those with deductibles between $500 and $3,000 had sought price information before receiving care, while 74 percent of those with deductibles higher than $3,000 had.

Although it is clear consumers want to see and compare healthcare prices, many don't know where to find the information. Of the 2,010 Americans polled for the Public Agenda survey, 50 percent of those who had never checked a price were unsure how to find price information.

Those results are in line with a March 2014 report from the nonprofits Health Care Incentives Improvement Institute and Catalyst for Payment Reform, which found 90 percent of states do not provide sufficient healthcare pricing information to consumers.

CPR and HCI teamed up to review state-specific laws focused on price transparency for healthcare, related state regulations regarding price transparency, and state-mandated price transparency websites. Each state was awarded an overall grade based on those three components. The highest grade issued was a "B," which both Maine and Massachusetts received. Forty-five states were issued a failing grade.

Some states, such as Oregon, are taking steps to improve transparency. In March, the Oregon Association of Hospitals and Health Systems announced it had developed a new price transparency initiative calling for a new state-run website displaying median prices for procedures. The initiative will also offer tools hospitals can use to provide good-faith estimates to self-pay and out-of-network patients.

On a national level, the American Hospital Association has also developed a toolkit to help hospitals improve how they communicate pricing information with patients and their community.

Even though it isn't mandated, many providers and payers are making pricing information available. Other entities, such as the Health Care Cost Institute, a nonprofit healthcare research organization, have also developed consumer pricing tools.

Earlier this year, HCCI launched a website, guroo.com, for the purpose of helping consumers become more informed about the price and quality of healthcare services. The website gives consumers a better idea of the baseline price for more than 70 common health services based on actual prices from some of the nation's largest insurers and providers. The estimates provided on the website are calculated using the anonymous claims data on more than 40 million Americans. There are several insurers participating in the initiative and providing the prices they pay to providers, including Aetna, Assurant Health, Humana and UnitedHealthcare. HCCI expects more payers to join this year.

Meaningless prices
Without a link to quality data, prices are many times meaningless to consumers. In March, Leapfrog Group CEO Leah Binder, wrote in a Wall Street Journal editorial that while prices are important, the information needs to be accompanied by quality data to have any meaning. She cited a report published in the Journal of Patient Safety that found 97 percent of consumers surveyed preferred hospitals with the highest safety grade. The report also found that pricing information was relevant to consumers but less important to them than the information on safety and quality.

Ms. Binder said the prices consumers see can seem absurd. "The same services can be priced five or 10 times more at one facility than at another down the street, for no apparent reason," she wrote.

Like Ms. Binder, a recent HFMA report concluded that although price information is important for consumers to have, it is vital they receive information on the quality and safety of services as well.

Possibility of inflated costs
Ms. Binder said that many consumers believe "high-end pricing correlates with high-end quality," which is not the case in the healthcare industry. If consumers believe a high price correlates with better quality, they might go to the high-price providers based on an incorrect assumption that they are receiving high-quality care. "Without good quality ratings, pricing becomes a proxy for quality, and can drive costs upward," Ms. Binder writes.

However, according to the Public Agenda survey, that scenario isn't likely. Seventy-one percent of Americans do not think higher prices indicate better quality of care and 63 percent do not think lower prices are typically a sign of lower quality care, according to the survey

Prices alone may also mask suffering, according to Ms. Binder. "A price-only report might show you how much a knee replacement might cost at Hospitals X, Y, and Z, but it won't tell you that Hospital X has twice the infection rate of Hospital Y, and that's going to cost you — money, and possibly your life."

Looking forward
Much has been done in recent years to improve price transparency in healthcare. However, there are still limitations on the information available. A 20-page report from HFMA on price transparency in healthcare provides a simple conclusion on the issue.

"The lack of price transparency in healthcare threatens to erode public trust in our healthcare system, but this erosion can be stopped. Patients are assuming greater financial responsibility for their healthcare needs and in turn need the information that will allow them to make informed healthcare decisions. Price is not the only information needed to make these decisions; as this report has noted, price must be presented in the context of other relevant information on the quality of care. But it is an essential component. The time for price transparency in health care is now."

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