Healthcare consumerism, an ongoing movement toward more transparent institutions and consumer control of their expenditures, and the emergence of high-profile cases of over-aggressive healthcare institutions bilking insurers have fueled calls for greater price transparency in the industry. But, like any other business, hospitals and health plans need to consider the trade-offs of cooperation versus competitive advantage in the context of pricing transparency mandates.
Hospitals and health plans are required to publish their standard charges in a machine-readable file, and to make these prices available on a web page in a consumer-friendly format. They must also disclose their negotiated rates with payers also known as allowed and billed amounts for 500 of the most common services and items to help consumers shop for affordable care.
Despite these requirements, only 14% of hospitals are currently in compliance with the new mandate. In the current marketplace, hospitals face substantial fines for noncompliance with pricing transparency rules, a financial burden that many organizations will not be willing to bear, even in the name of consumer empowerment.
But, if transparency is to work as intended, it needs to provide consumers with useful information that will influence their decision-making. Unfortunately, existing online price resources lack sufficient clarity to be useful. For example, a service estimator might display “outpatient surgical professional,” but it is unclear whether this means surgeon, anesthesiologist or other clinician. As a result, consumers may end up surprised by medical bills for procedures that are not included in the estimator’s estimate.
More sophisticated price transparency tools rely on data from hospital electronic health records and payer claims databases to produce more useful estimates of what patients should expect to pay for an in-network hospital stay. However, these systems can also yield inaccurate or incomplete estimates because the data is inconsistent. Moreover, even when the data is accurate, the estimated costs may be misleading because of the complexity of the pricing structure in healthcare.
Transparency advocates argue that if more detailed pricing information is widely used, the competitive forces created by its availability will encourage providers to lower their rates. However, a recent RAND See the information study found that the evidence on this is mixed at best (Fung et al., 2008).
A more promising strategy is to focus on quality transparency instead of cost transparency. This approach offers the potential to simultaneously reduce costs and improve outcomes by encouraging consumers to choose low-cost, high-quality healthcare. For example, the public reporting of readmission, complication and healthcare-associated infection rates could lead to a significant reduction in the costs and harms associated with hospital stays. The research supporting this possibility is robust, but it remains to be seen if the results can be replicated at scale by leveraging existing hospital-based quality measurement, incentive and reward systems. In the meantime, the increased transparency provided by these initiatives should spur innovation that can address gaps in the quality of patient care and the affordability of healthcare services. Readmissions and complications are expensive; reducing them is a good thing; but there may be better ways to do so than simply requiring that hospitals publish their prices.