Healthcare Price Transparency: Understanding the Cost-Pricing Relationship (White Paper)

This article is based on awebinarby Deb Gordon, healthcare executive and author of the book, “The Health Care Consumer’s Manifesto: How to Get the Most for Your Money,” and Pat Rocap, Director of Cost Management Services at Health Catalyst, titled Healthcare Consumerism and Cost: Dispelling the Myth of Price Transparency.

The federal government’sfinal ruleonprice transparency该法案于2021年1月1日生效，这促使医疗机构越来越重视在接受治疗前向消费者披露价格。卫生系统在规划其价格透明度战略时，必须了解消费者的压力和期望，并计划弥合其成本与向患者收取的费用之间的差距。

然而，消费者级别的价格透明度在医疗保健领域一直没有发挥作用。护理服务的复杂性和流动性使得价格的确定和理解比在其他消费环境(如超市)更复杂。卫生系统必须认识到其商业模式中价格透明度的重要性，并将其成本与传递给客户的价格联系起来，以使医疗保健消费者在其他日常交易中获得他们期望的同等水平的价格透明度。

Why Healthcare Price Transparency Matters to Consumers

As healthcare moves away from a fee-for-service model, patients are responsible for larger portions of their medical bills, with deductibles and higher out-of-pocket costs increasingly common. With growing financial responsibility, the American public wants to understand more about the healthcare market and what drives consumer costs.

Additionally, healthcare’s role in the national economy makes the industry’s financial well-being a significant concern for the U.S. population at large. Healthcare is an essential contributor to the overall U.S. economy, with the national healthcare spend comprising almost20 percentof the gross domestic product. In 2019, before the pandemic, the estimated gross spend was $3.8 trillion, with hospital expenditures accounting for $1.2 billion of that amount. Beyond healthcare’s national social and economic impact, the industry also affects local economies and daily lives, as healthcare providers are often a community’s largest employer.

Why Healthcare Needs a Consumer Lens on Price Transparency

With growing public interest in healthcare charges, health systems must take a consumerism approach to pricing, enabling healthcare to succeed as a working market and allowing consumers to make economically rational choices. Consumer confidence, or lack thereof, and experience in the healthcare system, directly impacts the industry’s bottom line, as the public will avoid medical care when they don’t know the financial outcomes.

For example, more thantwo-thirdsof Americans report concern about receiving a surprise medical bill, and 68 percent have gotten one. These unexpected charges cause confusion and anxiety that lead many individuals to forgo medical care.

Furthermore, consumers want to understand their financial responsibility for healthcare but are too often unsuccessful. According to aPublic Agendasurvey in 2017, of57 percentof Americans who have not tried to find price information before getting care but would like to know the prices, 51 percent indicated they didn’t know how to do so. Additionally, 70 percent of Americans said it was a good idea for clinicians and healthcare staff to discuss prices with patients before ordering tests or procedures or referring patients to specialists (even though only 28 percent reported having such price conversations).

From the consumer perspective, a lot of healthcare prices don’t add up. For example, a sling that sells online for $10 may cost $30 at a hospital or clinic. This price gap might not make sense to the consumer unless they understand that, in the healthcare setting, the sling’s price also reflects the overhead cost of the facility, administration, services, providers, and more.

For consumers, price transparency, in healthcare and otherwise, means the seller lists the price on products or services. Price transparency gives the consumer a basis for making a comparison, and therefore a judgment, about what purchases make sense to them. For example, a supermarket offers various products with the charge to the consumer clearly marked, allowing the buyer to choose between options knowing what they’ll pay at the register.

The Complexity Behind Healthcare Price Transparency and Consumerism

Healthcare consumers, however, frequently have the opposite of the supermarket experience. While purchasing healthcare services is much more complex than groceries, as consumers, patients need and expect a similar level of price transparency as the supermarket. For most individuals who go into a healthcare encounter, choose a health plan, or evaluate a service, the healthcare “market” they enter doesn’t resemble their other consumer experiences (e.g., the price-transparent supermarket). In no other common encounter does the buyer agrees to a purchase—especially a potentially large one—without knowing the price.

The central challenge to achieving healthcare consumerism and price transparency is that the industry doesn’t know the cost of its services. Providing transparency is complex, as healthcare’s countless services and codes rarely, if ever, correspond directly to a specific price. Furthermore, price depends on the service, the provider, the insurer, and where the patient is on their deductible with a particular plan.

Closing the Provider Cost and Price Transparency Gap

In January 2021, price transparency final ruling solidified hospital price transparency requirements, further closing the gap between provider cost and consumer price. The rule aims to make it easier for consumers to shop and compare prices across hospitals and estimate the cost of care before a healthcare encounter. Healthcare organizations must now share their priced items and services on their websites in two different ways:

• A comprehensive machine-readable file with all items and services.
• A list of shoppable services in a consumer-friendly format.

The machine-readable file contains gross charges, discounted cash prices, payer-specific negotiated charges, and de-identified minimum and maximum negotiated charges. The consumer-friendly display of shoppable services includes a collection of at least 300 services that a healthcare consumer can schedule in advance (70 of which are CMS defined). Shoppable service lists must contain plain language descriptions of services and group them with ancillary services, proving the discounted cash prices, payer-specific negotiated charges, and de-identified minimum and maximum negotiated charges.

In place of the consumer-friendly shoppable services, organizations can offer aprice estimatorvia their website. The estimator must display 70 CMS-defined items. These items are non-emergent, planned care. Estimators can include self-pay, particular insurances, and de-identified minimum and maximum of negotiated charges.

For example, using the code for amajor joint replacement(如髋关节或膝关节)，MS-DRG 470，消费者可以在医院网站上输入自付。价格透明条例明确规定，机构为其员工职位提供专业服务。在MS-DRG 470示例中(图1)，评估人员将生成医院的费用(例如在住院期间所有医院服务的通用账单表单上)。评估人员还将显示调整后的费用，以及患者在自费情况下需要负责的项目。

Steps in the Right Direction Leave Room for Improvement

Conspicuously absent in some online price resources, such as the above estimator example, are physician details, leaving room for improvement. An estimator might display “outpatient surgical professional” but doesn’t specify whether this means the surgeon, anesthesiologist, or another clinician. This lack of specificity leaves the risk for surprise billing, as the consumer doesn’t know which professional the estimator includes.

The estimator also omits other professional services, such as radiology or pathology. Those two items, especially radiology, will be part of a joint replacement procedure in a hospital. For transparency to succeed from a consumer adoption perspective, pricing information needs more clarity.

Other details the consumer might not access on the price estimator include pre- and post-procedure services—where those take place and what’s involved. Potential post-discharge scenarios for a joint replacement include a brief skilled nursing facility stay, physical therapy, and medications. The price estimator doesn’t have these post-discharges prices, so they’re in addition to what the consumer pays before discharge.

How to Bridge the Healthcare Cost-Price Gap

为了继续缩小医疗保健价格理解方面的差距，组织需要充分了解其成本，并将这一洞察传递给消费者。住院费用是指为病人提供服务的所有支出;提供者然后制定费用(或价格)来覆盖提供服务的成本。消费者价格是指由患者负责的医疗服务提供者收取的费用。The Complexity of Healthcare Cost

The provider has to construct charges, or prices, to cover those costs of its services, which is where thechargemaster(Figure 2), also known as a charge description master (CDM), comes in. The chargemaster is a comprehensive list of an organization’s billable procedures to a patient.

Due to U.S. reimbursement regulations (CPT coding, HCPCS coding, ICD-10 procedure coding, and the common diagnosis procedures), the chargemaster is a complicated listing, making transparent healthcare pricing more challenging. Structuring the chargemaster in alliance with coding regulations is so involved that the billing department sometimes loses that individual item’s cost.

In addition to chargemaster challenges, healthcare too often silos its costing systems, basing costing around the general ledger. Organizations use departmental cost-to-charge ratios or relative value units attached to charge codes that may not reflect today’s healthcare business. Digital health technology, from the EMR to a cloud-based data platform (e.g., Health Catalyst’sData Operating System (DOS™)), has made more costing insights available beyond the general ledger.

When Organizations Know Their Costs

了解成本的组织可以确保他们的费用与病人收费一致，并透明地分享他们的定价驱动因素。卫生系统必须打破成本藩篱，了解活动如何推动成本，以发现真正的成本并实现价格透明度。

For example, the operating room (OR) is rich in costs and different service lines. From a traditional, siloed cost perspective, OR physicians appear to bring in more money, as their service charges are higher. But a health system must also consider why OR charges are higher. Are they using more expensive medical supplies? Are they using more labor? Or are they taking longer in the operating room? Only by evaluating these elements behind the charges can organizations accurately understand their costs.

Price Transparency as the Root of Better Healthcare

Health systems must bridge the gap between cost and price to meet today’s consumer expectations and remain viable in an environment in which shrinking margins make every dollar count. Organizations that understand their services’ true cost can transparently share prices with consumers to earn their trust and thereby build last relationships. Also, by understanding their services’ true cost, health systems build practices and processes that remove variation and waste, further positioning themselves for ongoing improvement and market leadership.

Additional Reading

Would you like to learn more about this topic? Here are some articles we suggest:

1. Healthcare Price Transparency: Three Opportunities for Transformation
2. Charge Capture Optimization: Target Five Hotspots to Boost the Bottom Line
3. The 2021 Healthcare Financial Forecast: What to Expect, How to Prepare
4. The Top Three 2020 Healthcare Trends and How to Prepare
5. The 100-Percent Solution to Improving Healthcare’s Operating Margins