The price transparency train: Are all aboard?

August 25, 2021 / By Steve Delaronde

When you ask a health care provider for the price of a knee replacement, primary care visit, lab test or even a trip to the urgent care center, the most common (and honest) answer is “I don’t know.” This is the era of health care consumerism, but not knowing the price of a good or service before it is purchased renders price comparisons and informed decision making impossible.

Hospitals have been required to post list prices (aka chargemaster rates) on their website since January 1, 2020. New rules went into effect on January 1, 2021, that now require hospitals to add self-pay rates, as well as payer-specific negotiated rates to their websites. Beginning in 2022, health plans, as well as health benefit brokers, will have similar price transparency requirements. Will these requirements achieve its intended effect of helping patients obtain high quality care at a reasonable price?

Hospitals

While most hospitals have complied with some of the new price transparency requirements, a July 2021 survey reveals that only six percent of hospitals are totally compliant. Many have buried prices in obscure areas of their website or make it difficult for a search engine to locate them. Additionally, a Peterson-KFF brief reveals that it is not always clear whether professional fees are included in the price, whether there is a difference between the inpatient and outpatient price, and whether the price represents an estimate, average or single established rate.

Patient awareness of price transparency requirements is another concern. A May 2021 survey found that only nine percent of respondents were aware that hospitals are required to disclose prices on its websites. Patients don’t always know if they qualify for financial assistance either. One analysis found that 45 percent of non-profit hospitals routinely send medical bills to patients who qualify for charity care but don’t know it.

Health plans

If patient awareness does not improve, then the impact of price disclosure requirements for health plans beginning in January 2022 may have limited benefit in helping patients compare prices.  The use of price transparency tools by health care consumers has been disappointingly low. One study found that only 11 percent of families offered a price transparency tool used it in the 12 months following its launch, and only one percent used it at least three times.

Even when a tool is more readily adopted by patients, it doesn’t necessarily lead to lower health care costs. Patients may still be swayed by factors such as convenience when choosing a facility closer to home, or they may defer to their provider’s referral recommendation, even if it is more costly.

Health care brokers

A transparency rule that may make a difference in reducing health care costs is a little known requirement that was buried in the stimulus bill passed in December 2020. Beginning on December 27, 2021, health care brokers are required to disclose their compensation if they expect to receive $1,000 or more in direct or indirect compensation for providing their services. This applies to nearly every broker working with a fully insured or self-insured employer.

Brokers have portrayed themselves as agents of the employer when recommending health insurance plans and coverage options. In fact, most brokers receive commissions and other incentives from health plans to steer employers towards their plan. This creates an incentive for brokers to recommend plans that rewards themselves, even if it means the employer will pay more than they would by switching to another plan or product. Brokers are often paid a percent of total premiums, which creates the perverse incentive to recommend plans with the highest price tag.

Reason for hope

The goal of price transparency in a free market is to provide consumers with the necessary information to make an informed choice. The new transparency rules should theoretically equip individual patients, as well as employers, with the information they need to get the best available price.

Price transparency is only the first step, however, and represents one part of the value equation. Understanding medical necessity, as well as measuring and comparing quality, are the other challenges. What good is a 50 percent savings on a surgical procedure if 1) it was never needed in the first place, or 2) a lower cost procedure puts the patient at greater risk of complications?

Steve Delaronde is senior manager of product, population and payment solutions at 3M Health Information Systems.