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Readers Write: Creating Clarity from Confusion: The Importance of Healthcare Price Transparency

May 16, 2018 Readers Write 5 Comments

Creating Clarity from Confusion: The Importance of Healthcare Price Transparency
By Rajesh Voddiraju

Rajesh Voddiraju is founder and CEO of Health IPass of Oak Brook, IL.


Picture this. It’s Saturday night and you’ve decided to try a new restaurant. You pick up the menu, only to discover that there are no prices listed for any of the items. When you flag down a member of the wait staff to inquire about the cost of an item to order , their response is to shrug and say, “I’m sorry, but we aren’t authorized to tell you the prices of our menu items. You will have to have to contact the company that prints the menu to to find out about that.”

You have no idea who to call or what to expect. However, you are hungry, so you order a hamburger, which seems like a safe, economical choice, only to be billed $50 for it weeks later. Of course, had you known the hamburger would cost $50, you might have ordered something else or even found a different restaurant, but now you are stuck paying an unexpected bill. How long would a restaurant with these businesses practices stay open? Not very long, that’s for sure.

Yet this is exactly the situation patients face when they enter most healthcare provider offices. There is no menu of medical procedures with prices clearly labeled. Patients are essentially presented with a choice—face the unknown of paying for healthcare or forgo it altogether.

This lack of price transparency is one of the reasons that people avoid regular preventative care, which in turn leads to a higher incidence of preventable disease. The chain reaction goes on from there. The ultimate effects of uncertain healthcare costs are more far-reaching and devastating than most Americans realize, to the detriment of patients, providers, and the healthcare industry as a whole.

The clear loser in land of opaque healthcare pricing is the patient. Just as the aforementioned diner is left feeling frustrated and helpless by a menu without prices, so too is the uninformed healthcare consumer. The main difference between the restaurant scenario mentioned above and the plight of the healthcare consumer is while a restaurant with such questionable practices would undoubtedly go out of business, the lack of price transparency in healthcare has been considered the status quo.

For years, Americans have grown to accept that medical billing and payment was a mysterious and complex process where prices were kept secret and the ability to review and evaluate the cost of care prior to treatment was non-existent. Fortunately, state policymakers have begun to recognize the urgent need for greater price transparency in healthcare and are beginning to enact legislation that mandates medical providers publish their prices for some of the most common procedures and treatments offered.

For example, at the state level, Colorado Senate Bill 65 went into effect January 1, 2018, requiring hospitals to post self-pay prices for their most common procedures and treatments. Health and Human Services (HHS) Secretary Alex Azar is leading the federal charge toward greater healthcare price transparency as evidenced by his comments at the May 2018 World Health Care Congress, which stressed the importance of lowering drug costs, the consideration of new healthcare models, and free-market forces as a determinant for value-based care. If this trend towards price transparency in healthcare continues to gain momentum, American healthcare consumers will be more informed to make smarter decisions about their care and extract the highest amount of value from out-of-pocket expenditures.

With greater healthcare price transparency, patients go from confused and frustrated to supported and empowered. Informed healthcare consumers are better able to plan and budget for major medical expenses. In addition, when patients are aware of costs, they are more likely to meet their healthcare financial responsibilities, meaning less crippling patient medical debt that burdens the entire system and increased revenue for providers, allowing them to keep their doors open.

As the healthcare industry becomes increasingly consumer-driven, increased price transparency has yet another important function for medical providers – it has become a major piece of the patient retention puzzle. Providers build trust when they are upfront about the cost of care, leading to better, more sustainable positive relationships between patients and provider.

Due to factors such as the 24-hour news cycle and the escalating use of social media, Americans have become more aware of healthcare system deficiencies and weaknesses that inhibit the effective and affordable administration of care. As healthcare costs skyrocket, patients and legislators alike are searching for ways to increase the quality of care. The push for greater price transparency into the cost of care is partly grounded in the move towards value-based care that rewards quality rather than the traditional model of fee-for-service that incentivizes providers to call for tests and procedures that may not be necessary. Price transparency plays a key role in the transition to value-based care because the transition relies on patient access to all care-related data, including medical records and costs.

Price transparency has more than just an educational value for the patient. It has the power to actually lower the cost of healthcare. According to the Robert Woods Johnson Foundation, “Health economists and other experts are convinced that significant cost containment cannot occur without widespread and sustained transparency in provider prices.”

The bottom line is that the modern healthcare consumer refuses to remain captive in an enigmatic healthcare system with a seemingly arbitrary cost structure. Just as the restaurant at the beginning of this article is likely doomed to go out of business due to its suspicious business practices, providers who fail to adapt to changing consumer expectations will suffer negative consequences. Changes are on the horizon for all healthcare providers as healthcare policy begins to catch up to public demand. Savvy healthcare providers will see the writing on the wall and implement healthcare price transparency now, before it becomes a mandate.

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Currently there are "5 comments" on this Article:

  1. Price transparency is only part of the solution. The analogy given in this article is not quite sufficient in portraying the situation faced by providers or patients.

    Let’s go back to the restaurant. However, this time let’s also acknowledge that you are not choosing it because it is new or different. Rather it is the only restaurant in your community. All other restaurants are an hour or more away and not convenient to get to. It seems every day the news is reporting that another restaurant is closing which limits your choices even further.

    Of course if the prices were available you might decide to travel out of your way to another restaurant. So, we will imagine that in this case the self-pay prices are now clearly posted not only on the menu but also on the restaurant’s website. This is certainly much more convenient. As a consumer you can now choose a restaurant that you believe is offering a better value for the dollar.

    The first problem you encounter though is that these self-pay prices still seem incredibly high for the product you will receive. In your opinion everyone’s burgers are overpriced! Fortunately, there are Groupons available for almost all of the restaurants. In fact, most diners are using government-issued Groupons. Using these definitely seems to bring the prices down to a more manageable level for you. As it turns out though you are not eligible for the government-issued Groupons. So, you purchase a commercially available Groupon that still seems to offer a fairly good deal. You decide to drive the extra distance to a restaurant that appears to provide the best deal on burgers. Unfortunately once you are seated you quickly learn that your Groupon had some provisions you weren’t completely aware of. It turns out that to receive the full value of the Groupon you must have already used it before. Since this is the first time you are using this Groupon this year you will still have to pay almost the entire self-pay price yourself. Good news is that if you continue to buy burgers at restaurants using this Groupon you will eventually receive that full value! So, knowing the price wasn’t entirely helpful by itself. You had to also understand how your Groupon worked.

    The next problem you encounter was not price related. On your long drive home from the restaurant you begin to feel the early symptoms of stomach problems. You barely make it home in time to avoid an embarrassing situation. You do some research and realize you should have also been looking at the quality scores of the restaurants. This is not as easy as it sounds though. There are many sites that you can use to view these restaurant scorecards. When you compare the results from one site to another you find that they vary wildly for the same restaurant. Furthermore, rather than simply posting which restaurant has the best burger the metrics that are posted are confusing and myriad. You are not really sure how you are supposed to benefit from these sites.

    As you recline in your living room that evening pondering your day’s adventure you feel neither supported nor empowered. If anything the situation now seems more confusing and frustrating than it did when prices were not published. You like the fact that you can now see them of course but you still long for a system that makes more sense and is easier to navigate.

  2. I absolutely hate when non-clinical people compare healthcare with any other industry. My question – how would this restaurant change its business model if it is mandated that anyone who comes in through a special side door, has to be given free burgers.

    It is not the cost transparency that is causing the problem, it is the cost bloat. The costs are higher than anywhere else. And, let’s not forget the fact that someone’s extra cost/waste is another person’s income – be it pharma industry or doctors.

    When people compare medication costs between US with other countries, they find the difference and talk about it. How many are ready to ask why there is a significant difference between salaries/incomes of doctors across countries?

  3. I agree with the first two comments. As a person with a $3k deductible, I’d also like to find a solution. Price transparency (esp. under a Republican free-market regime) would seem to be a no-brainer. I empathize with providers who negotiate with many many plans, each with their own waivers, etc, to give “a price for every procedure/ bundle, etc”, and therefore price transparency is a nontrivial problem for them. And, I don’t want them to publish their fictitious “list price”. As a cash-strapped buyer that just wants to know what I will billed when my PCP orders a dermatology test for a sunspot that I’ve had for 10 years, what am to do?. For the experts reading: what is the answer? My first inclination is to at least publish the Medicare price (you know, that program that all readers of this blog own – and knows that price). Agreed, it may not be the price I pay, but I would at least have some sense of the value/ outcome trade-off. And who knows? – maybe I can even use that as a basis for negotiation (their list is $2,000, Medicare pays $700… will my community hospital take $1,200 cash?). Talk is cheap – what is the solution?

  4. This restaurant analogy has at least one accurate thing in common with hospitals in that their annual operating profits are usually in the single digits.

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