How Can Price Transparency Impact The Healthcare Industry?

Patient financial responsibility is the greatest challenge of healthcare industry. For a long time, healthcare experts have argued that price transparency will help patients in making informed healthcare decisions thereby decreasing healthcare costs.

In August 2018, CMS stated in its updates to the Inpatient Prospective Payment System (IPPS) and Long-Term Care Hospital (LTCH PPS) final rules that price transparency will become a nationwide industry standard.

With effect from January 1, 2019, hospitals across the country are responsible for full price transparency. As per the IPPS and LTCH PPS rules, hospitals must list their prices online in a “machine-readable format.”

CMS approach to enforcing price transparency

Previously, hospitals were required to make their prices publicly available, but not necessarily in a digital format. In the new rule, CMS has mandated that these new price transparency resources be in a machine-readable format. CMS analyzed public comments on the most efficient way to achieve this. Finally, CMS called on all hospitals to list their chargemaster prices on a publicly-available Excel spreadsheet. The searchable spreadsheet will make it easier for patients to use.

Hiccups in the existing approach by CMS

Many questions have been raised about this approach.

  • Critics claim that charge master prices are not ideal for patients. Between insurance, subsidies, and other payment design, patients usually pay less than chargemaster price.
  • The feasibility of an Excel spreadsheet having all prices is a big question.
  • As more organizations publish their price transparency lists, more difficulties may come to light.

How can price transparency help patients?

  • Digital price transparency will enable patients to more easily access this information.
  • Price transparency will enable patients to make more informed decisions about care access that minimize their out-of-pocket costs and total expenditures borne by Medicare and Medicaid.
  • Increased price transparency will improve the patient experience of care.
  • Although price transparency itself cannot lower healthcare costs, but it may create market pressure that in turn lowers patient costs.
  • Additionally, price transparency will allow patients to choose the best care option for their needs.

The healthcare industry is still debating about the efficacy of price transparency. Healthcare price transparency tools have already made their mark in the healthcare industry. Do such tools improve patient experiences with healthcare or cut costs? How can organizations reconfigure these tools to increase its effectiveness?

Can price transparency reduce healthcare costs?

According to a 2016 study published in Health Affairs, it was found that price transparency tool actually increased out-of-pocket outpatient spending by about $59 per patient. The researchers suggested that it must must have been due to low patient awareness or perceived need of the tool.

Moreover, cost compare tools did not show many meaningful areas for cost savings.

Other studies have also shown similar results. A 2017 report by the American Journal of Managed Care found that though patients liked the idea of a cost comparison tool, they saw little use of the tool. They either forgot to use the tool before seeking care or did not see any use because they were already beyond their deductible or saw consistent copayments at their doctor’s office.It also touched on the idea of patient loyalty. Although patients could use price transparency tools to find a less expensive care option of equal quality, a sense of loyalty kept them going to their current clinicians.

Payers who offer price transparency tools have also had little luck with the tools. A 2017 report published by Health Affairs found that although scanning a cost compare website could result in 14% cost cuts for imaging services, only 1% of patients actually use the tool, making it of little use.

What do industry professionals say?

Although price transparency tools are not currently impacting the rising healthcare costs, these tools still have the potential to reduce spending and improve patient experience.

If properly utilized, cost compare technology should help patients cut their own healthcare spending because they know the lower-cost providers to visit. Patients with access to a price transparency tool have the opportunity to compare cost and quality and make their preferred treatment selection based on that data. Ideally, this will lead patients to a lower-cost option.

Clinics have little incentive to lower their costs when patients do not know how much they’ll pay before they receive the service. But if all clinics knew patients were visiting a high-quality facility with substantially lower costs, area competitors could be forced to change their prices, as well.

How can organizations make price transparency work?

Making price transparency tools that are attractive and usable for patients will be critical for delivering on the promise of cost compare. Simply offering a price transparency tool will not lower costs. Patients must actually use these systems to select lower-cost care.

As the healthcare industry continues to place more financial burden on patients, it will need to adopt strategies that help patients. High copay and high-deductible health plans have put patients in the role of the healthcare consumer. Price transparency tools are a key retail-style engagement strategy that will help consumers make better decisions about where to access care.

But in order to make those price transparency tools effective, industry leaders must keep the patient at the center of their design. Making a usable cost compare tool that uses simple language and factors in metrics that are important to patients will be integral going forward.

 

Reference

https://patientengagementhit.com/news/myhealthedata-patients-over-paperwork-key-in-cms-final-rules

https://jamanetwork.com/journals/jama/fullarticle/2518264

https://patientengagementhit.com/news/price-transparency-tools-receive-tepid-patient-reactions

https://patientengagementhit.com/news/4-patient-engagement-strategies-to-improve-patient-retention

https://www.healthaffairs.org/doi/full/10.1377/hlthaff.2016.1636