IU Health CFO Jenni Alvey's message to healthcare execs: We still have work to do on price transparency

"Price transparency has been touted as a way to reduce healthcare spending, but there’s one big problem: It has rarely worked." -JAMA Forum, Aug. 22, 2019

"Everybody's had the experience of going into a hospital  … and you have no idea what it's going to cost. That is simply not fair to the American people." -CMS Administrator Seema Verma, 2019

As I encounter skepticism like this over healthcare pricing, I can't help but agree. Finding an effective price transparency approach is one of the most difficult and expensive tasks in front of healthcare providers today. It seems we are all reacting to what the government, payers and employers want, instead of realizing these are our prices and messages to manage.

As a 16-year-old cashier at Kmart, I saw the power of pricing firsthand with the retailer's pledge to match the lowest prices of its competitors. You can also see the absurdity of not being upfront about consumer pricing in the YouTube video "If Air Travel Worked Like Health Care."

Shortly after becoming a vice president of revenue cycle almost a decade ago, I had a memorable conversation with our system CFO who asked my opinion of price transparency. I blurted out, "It would be too complicated for us to publish our prices." He looked at me and asked: "Then don't you think you should do something about that?"

Those words have remained with me through our journey at IU Health to increase transparency into pricing. 

I've learned that healthcare pricing is fraught with emotion and is unlike many other consumer pricing decisions. Women are happy to price shop for a mammogram that's preventive, for instance, but not if they've found a lump and need to quickly know if it is cancer. Situational needs, along with the trust patients place in referrals from their doctor or other providers, often drive consumer behavior in healthcare far more than any price transparency tool, however well designed.

In building a price estimator at IU Health, we have tried to keep such intangibles in mind. We also can't ignore economic considerations such as price inelasticity, complicated billing practices, complex insurer-provider arrangements and major quality variances in healthcare delivery. One way we can deal with these complexities is to educate consumers about newly available price and quality information, and how it can work to their benefit.

At IU Health, to confront the complexities, we assembled a team of experts to create a price estimator. Over several years of use, the price estimator has caught on among patients and now provides more than 50,000 price estimates annually. Approximately 80 percent of our estimates are provided the same day as requested and 95 percent are provided within 24 hours. The estimates are also accurate to within 5 percent of the actual patient cost.

The estimates provided to patients have been enhanced to include all care costs, not just the facility bill. In the next 12 months, we plan to further refine our estimator to include proactive estimates electronically pushed to patients; redesigned easier-to-understand bills; automatic interest free payment plans or prompt pay discounts; and mobile apps with automatic registration and self-guided scheduling. 

Challenges persist, of course, sometimes caused by attempts to help patients that end up adding complexity. For example, reference-based pricing can put patients on the hook to pay a higher price, while payers sometimes enact rules with conflicting information from physicians. Recently, I spent hours on the phone trying to understand why my teenage daughter's prescription was changed, only to realize it was an insurer's cost-management decision to substitute a lower-priced drug without first discussing the choice with the patient and doctor.

It’s cases like this, even within my own family, that show we still have plenty of work to do make healthcare pricing work more effectively for patients.

More articles on healthcare finance:
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CommonSpirit extends timeline for $2B cost savings plan by 12 months
CMS unveils relaxed repayment terms for COVID-19 loans: 5 details

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