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Decoding Healthcare Price Transparency – Part II

Eric Keeney
Are you a patient or a consumer? 

In part one of my new blog series about Decoding Healthcare Price Transparency I touched on a family’s troubling story about a costly ER visit and how there is some momentum building in state governments and their legislative initiatives to address the factors that contribute to this problem. For my second post in this series, I’m exploring some of the inherent challenges that are preventing healthcare patients from being real healthcare consumers. This notion of a consumer and how that is different than a patient can be better understood by looking at a key part of economic performance: consumer sovereignty. This is when individuals have the spending power to buy and influence what is produced, as opposed to a command economy where goods are produced per state mandates. In that latter case, there is no consumer sovereignty.  

While there is much debate about the state of healthcare in economic terms and the role of the consumer, I advocate that moving towards more consumer sovereignty via price transparency is a key part of patient engagement and improving the overall customer experience in healthcare. Ultimately, if the patient were truly a consumer with visibility and the power to choose, they would choose more cost effective and higher quality healthcare options in conjunction with their provider. This freedom of choice is a key tenet of consumer sovereignty and it cannot exist without price transparency .

Price Transparency Headwinds (another Nor’easter)

In today’s healthcare marketplace there are many forces working against price transparency:

  • Fragmented state legislation, or a complete lack thereof
  • Health system and health insurer opposition
  • Highly variable reimbursement rates, even across locations in the same network
  • Complicated insurance plans and coverage options
  • Health information technology challenges 

These forces are great and work against the patient’s ability to have clarity in the cost of procedures at the point of care. Here is a snippet from a recent LinkedIn post that illustrates the challenge:

“Calling for a knee MRI price….."do you know your deductible?" Yes, 6,650$.  She says "oh, wow.  Well, the good thing is that we have a HUGE discount for [your health plan] so that will help a lot" - Professional fee of $175.00.  A "no insurance rate of $2,498 or with the hugely discounted rate it's $405.21.  (there's a 25% discount off the no insurance rate if I want to pay cash) *OR, I can just go to RMI [local imaging services provider] locally and pay $270.00 out the door.”

Clear as mud. So, if you’re willing and able to put great effort into doing research and making phone calls, it’s possible to determine pricing in today’s system. But is that really transparency?

Pushing Back Through the Cracks in Legislation 

It’s often argued that price transparency is uniquely challenging in healthcare for two reasons: First, the unpredictability of emergency care. And second, the often-cited estimate that only 10% of healthcare procedures are “shoppable.” At least, this is a cop-out. At worst, it’s propaganda from big healthcare. 

Take for example the situation in Ohio[1] where a proposed law that would require a good faith estimate of non-emergent services has received considerable push-back from providers and health systems alike. Their resistance hinges on the argument that the extra time it will take to create a cost estimate will delay care. That may be true without the partnerships or supporting technology in place. But, you could argue that their real objection is that transparency into healthcare prices across patient settings, locations and provider networks would expose the highly variable reimbursement rates and the business deals behind them—effectively airing the industry’s dirty laundry and competitive business decisions. 

Certainly, there’s a case to be made for protecting these business arrangements as a way to hold down costs. But whether that’s enough to justify degrading competition in the marketplace and consumer choice remains to be seen. Shades of Carnegie and Rockefeller, anyone?

Wait, What Costs What for Who?

Further muddying the waters when it comes to price transparency in healthcare, health insurance plans have taken on a life of their own to craft comprehensive coverage and clarity around shared costs. This aspect of health insurance has made it exceedingly difficult for patients to fully understand their out of pocket costs, especially as they apply that to an episode of care that involves multiple treatments, providers and locations. This complexity impacts the patient, but also providers’ abilities to sort out exactly just how much a procedure will cost for any given patient’s health insurance plan with any number of possible payors.

Should providers be on the hook for a fair estimate of cost to patients when the health insurers own the coverage and thus the complexity of terminology and ultimately the insurance plans themselves?  There are few incentives for either group to solve this issue.

[1] https://khn.org/news/price-transparency-in-medicine-faces-stiff-opposition-from-hospitals-and-doctors/

Stacking It All Up 

Putting these pieces together should give you an appreciation for the complexity in healthcare prices and the forces working against simplifying that structure. Legislation, provider-payor business relationships, complex member cost sharing structures—all factors in the business and policy challenges to price transparency in healthcare. These challenges stack up to degrade or eliminate the patient’s ability to have consumer sovereignty, and operate as just one of many broken cogs in the healthcare machine. 

Check back soon for part three, when I will explore some of the data challenges working against price transparency.