The Paths to Price Transparency

Karen Minich-Pourshadi, for HealthLeaders Media , November 13, 2012
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This article appears in the November 2012 issue of HealthLeaders magazine.

The vast pricing disparities in healthcare have long been known by those in the field, but with the increasing prevalence of consumer-directed health plans—now estimated at about 13% of those covered by employer-sponsored plans—patients are now insisting on greater price transparency to help them make informed financial decisions about their care. Legislators and regulators, too, have pushed for more access to data, leading to an estimated 41 states implementing some form of price transparency (some voluntary, some involuntary). Though finding the best strategic approach remains a twisted path for financial leaders to navigate, some are finding footing through patient pre-encounter teams and cost modeling.

Complicating the providers' effort to deal with transparency is that consumers often do not fully grasp the complexities of the information and the uncertainty of the amounts payers will approve.

"There's a lot of confusion that we see come from the patients about comparing our prices to others in the community. Patients need to call to get clarity around the prices even if they are posted. And educating them about what is going into those numbers is what makes the prices truly transparent," says James Dregney, CFO at Lakewood Health System, an independent, integrated rural healthcare system in Staples, Minn., consisting of a 25-bed critical access hospital and primary care clinics across the region.

Posted prices on hospital websites are still estimates, however. A provider only has the ability to verify its prices based on its own historical claims information, and posted numbers won't take into account a patient's insurance verification. Also, regardless of whether an organization posts a price on its website or provides one in an estimate, it cannot ensure what payers will approve post-service, which makes giving patients a firm price in advance nearly impossible.

While providers grapple with how to create a formula to price a given service with some accuracy, payers have begun using their own pricing data to steer patients toward providers that charge less for procedures.  For instance, Anthem Blue Cross and Blue Shield of Connecticut launched what it calls "SmartShopper," which allows its members to compare prices among hospitals and doctors, and the insured receives cash rebates for choosing lower-cost providers. Cigna also launched a tool that goes beyond pricing information and offers members information about quality, board certification, industry designation of physicians, outcomes, cost-efficiency measures, and even an evaluation of how physicians perform compared to their peers. Blending price and quality data is ultimately where transparency is headed, but getting there is challenging, explains Jim Chase, president of Minnesota Community Measurement, a Minneapolis-based collaborative (including medical groups, clinics, physicians, hospitals, health plans, employers, consumer representatives, and quality improvement organizations) that has been working to bridge the data gap between payers and providers to improve healthcare transparency.

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