Price transparency pressures

The issue of price transparency has been bubbling beneath the surface for some years but it boiled up last winter and has stayed top-of-mind ever since.
Steven Brill’s article, “Bitter Pill,” published in TIME magazine in February caused an uproar in the healthcare community and in the country generally. The article examined the high cost of medical bills and exposed the randomness and wide variety of pricing.

The issue of pricing is a touchy one in the healthcare industry, but the pressure is on for providers and payers alike to be transparent.

The federal government has been pushing the industry for transparency, and nearly half the states in the country have enacted price transparency laws.
In the spring, the Centers for Medicare & Medicaid Services published nationwide charge data showing how much Medicare pays for services in different markets. The data, collected from more than 3,000 hospitals, represented more than 7 million discharges (the 100 most commonly billed) for inpatient prospective payment system payments in 2011. CMS said that it would publish more pricing data in the future in the hopes that it will spur consumers to become more engaged.
“What I know to be true is when consumers can easily compare the prices of goods and services, producers have strong incentives to keep those prices low,” said Health and Human Services Secretary Kathleen Sebelius during a May teleconference about CMS’ release of pricing data.
Not everybody believes that offering prices to consumers will be helpful to them.

“The complex and bewildering interplay among ‘charges,’ ‘rates,’ ‘bills’ and ‘payments’ across dozens of payers, public and private, does not serve any stakeholder well, including hospitals,” said Rich Umbdenstock, president and CEO of the American Hospital Association in a prepared statement released after CMS’ publication of charge data. “This is especially true when what is most important to a patient is knowing what his or her financial responsibility will be.”
But there are resources developing across the country to help consumers figure out the pricing complexities. Some state governments have created pricing websites, and private companies are popping up everywhere to offer pricing comparison data and tools.

As more of these companies, and the states, put healthcare pricing out in the public domain, providers and payers who have been reluctant to reveal their prices will be disrupted – maybe even so much that they’ll be forced to lower prices.

“(Hospitals) are very interested in getting your business, and if people are getting colonoscopies and diagnostic work somewhere else because it’s so much cheaper and they lose all that traffic, they will change their pricing,” said Randy Cox, the creator of Pricing Healthcare, a price comparison website.

Most providers are not going to proactively cut their prices, said Nick Newsad, a senior associate at Colorado-based Healthcare Appraisers, but as people making cost comparisons take note of the huge pricing differences between hospitals and many freestanding facilities offering the same services and they chose the lower prices, providers will be forced to make pricing changes.

While many providers and payers will reveal their prices only when they have no other choice, some are already doing it, Newsad said, and are showing positive results with improved collections and efficiencies.