Healthcare pricing transparency is the first step in helping consumers understand how much medical services will cost before they purchase them.
You might wonder what exactly healthcare pricing transparency is and who it impacts.
We'll look at what healthcare pricing transparency is, who it impacts, and how it will affect the future of healthcare.
What is Healthcare Price Transparency?
Healthcare price transparency helps consumers feel better prepared and informed about the cost of healthcare services or items before they receive them.
Unlike other services, healthcare is more personal, expensive, and confusing for consumers. It often includes decisions that can have a lifelong impact on their health.
Because consumers have difficulty researching and comparing healthcare costs, it is difficult for them to navigate the services and benefits available to them easily.
According to the Centers for Medicare & Medicaid Services, since January 1, 2021, every hospital in the US is required to provide pricing information about the services and items they provide. Hospitals must provide this information clearly in two ways:
- As a comprehensive machine-readable file with all items and services.
- In a display of shoppable services in a consumer-friendly format.
Hospitals must post standard charges for a minimum of 300 shoppable services that can be planned ahead of time. They must also describe any other services that are typically provided.
Why is Healthcare Price Transparency Important?
Healthcare price transparency is essential because medical billing has historically been too complicated for the average patient to understand.
A recent Harris Poll has some alarming insight on how medical billing impacts patients and when and how they seek medical care.
- 53% of those polled said they avoided care because they were unsure how much it would cost.
- 60% of those surveyed said they had gone to appointments, uncertain if they could afford the visit.
- 68% said they didn't know how much an appointment or treatment would cost until months later.
- 85% think that it should be as easy to compare prices for medical services as it is to do with other services.
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Benefits of Price Transparency in Healthcare
Price transparency in healthcare is similar to transparency between consumers and businesses in other industries: it helps to build trust between the patient and the medical provider.
The easier it is for a patient to understand the cost and reimbursement of medical services before they are provided, the better the patient can be prepared for those upcoming expenses.
When patients get medical bills with unexpected expenses, this can negatively impact their budgets and economic situations. It also can make them reluctant to seek medical treatment in the future.
Disadvantages of Price Transparency in Healthcare
One disadvantage to billing transparency in healthcare is that once patients have a quote from a medical provider, they could then go comparison shopping with other providers.
Many fear that patients shopping around for their healthcare could drive down overall healthcare costs.
Another disadvantage of price transparency in healthcare is that it isn't always easy to implement and track. For example, how much will their out-of-pocket costs change if a consumer changes plans?
When a doctor quotes a patient on one diagnosis and that diagnosis changes is an example of how difficult it can be to post and quote a price.
Who Benefits from Healthcare Price Transparency?
The biggest beneficiary of healthcare price transparency are employers providing coverage to approximately 160 million employees and their dependents.
Understanding insurer-negotiated prices would allow self-insured employers to demand lower prices and improve networks through larger providers.
It would also allow employers to develop reference pricing for shoppable services, which are healthcare services scheduled in advance by a consumer. Reference pricing allows an insurer or self-insured employer to select the price it is willing to pay for health care services.
Those employees who choose to get care from a more expensive provider would pay their standard cost-sharing fees from the difference between the reference price and the allowable charge.
This system could incentivize consumers to seek lower-cost providers to avoid the additional costs. It would also pressure providers to offer lower prices so consumers would be more likely to choose them.
How Will Healthcare Price Transparency Disrupt the Healthcare Market?
Cost-cutting pressures following pricing transparency will disrupt normal business operations for hospitals by putting more pressure on salaries and wages.
It will also put more extensive healthcare systems with high fixed costs or the inability to quickly alter their operating and cost structures at a competitive disadvantage to smaller, more agile competitors.
How Will Price Transparency Impact Healthcare Spending?
Many believe there will be a reduction in excess healthcare spending because publicly accessible price information would drive providers to offer more competitive pricing. However, the extent to which patient consumers will comparison-shop for healthcare as they do for other goods is still being realized.
It is unlikely that a consumer-directed initiative alone will change healthcare spending trends.
Consumers will still have to understand the price information and use it effectively in their decision-making process.
How Will Healthcare Price Transparency Affect Consumers and Providers?
Healthcare price transparency advocates believe it will lower health costs by increasing competition between providers and allowing patients to shop around. Insurers are also implementing pricing transparency and other initiatives like reference pricing to help incentivize consumers to select low-cost providers.
Since January 2019, providers have been required to post list prices online. Medical providers also have to disclose insurance-negotiated prices. In turn, insurance companies also bargain with providers for lower negotiated prices.
There is some concern that providers could use transparency as a tool for collusion in raising prices together as a cartel. This leverage could make it easier for them to negotiate prices with insurance companies.
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Adopting Healthcare Price Transparency Will Improve Your Healthcare Services
Healthcare price transparency will help consumers be better prepared and informed about the cost of healthcare services or items before they receive them. It will also help build trust between patients and their medical providers.
Because medical billing was so complex for many people to decipher in the past, with many significant, unexpected charges, many people opted to skip medical treatment.
Consumers who know beforehand what they will spend and are not hit with surprising charges later are more likely to purchase. And to buy goods and services more frequently.
The ability to shop around puts pressure on insurance companies and healthcare systems to lower healthcare costs. It also forces healthcare systems to be more efficient and customer-centric in a new, more competitive marketplace.
A more transparent, competitive healthcare services marketplace results in improved care at lower prices.