Why price transparency in healthcare is complex and contentious

by Paul Thompson

Transparency in healthcare is a hot and complex topic. Increasing efforts to create a more open healthcare system and gain meaningful cost transparency have been attracting attention from the president and the U.S. Congress.

On November 15, 2019, President Trump signed an executive order on price transparency in healthcare, with the objective of pushing down costs by giving patients the information they need to shop around. The U.S. Senate is also heading toward price transparency with a bill introduced by Senator Ron Wyden (D-Ore).

For patients, price transparency means having enough information to understand the net cost of healthcare services when selecting providers and hospitals. For the past decade, health plans have made good efforts to make the costs of care more transparent to patients so they can make best use of their coverage, especially for those patients with a high-deductible plan. Despite these efforts, transparency of healthcare costs remains poor in most cases, and what information patients are able to get is generally not useful for decision making.

The need for greater price transparency is apparent when one compares the cost of a simple procedure, even in the same area. In one study done in the San Francisco Bay area (PDF), the cost of a colonoscopy varied by as much as $800 within a 10-mile radius.

But while price transparency is important for patients, it is far from easy to achieve. Consider the colonoscopy example. While patients will use the term colonoscopy and believe it is the same for everyone, that’s not the case. One procedure may be a simple use of a colonoscope, limited anesthesia and a review of results. The other may involve a colonoscope, general anesthesia required due to physician recommendation, and polyp excision. The cost will inevitably be significantly different.

Furthermore, the rates for all of the procedures differ by doctor, by hospital, by site of service and by insurer. An additional factor complicating cost estimates for the procedure is that anesthesiologists are often not part of the health plan’s in-network provider panel.

Achieving true insights

There are other logistical barriers to enabling price transparency. To get a true insight into what each procedure would cost, those procedures’ costs need to be calculated against the patient’s benefits in real time. More generally, transparency requires significant analytics work applied to large claims datasets.

Perhaps one of the biggest barriers to price transparency is how it affects payers and providers. Reimbursement rates are negotiated between payers and providers and are considered competitive trade secrets. Providers fear that if one insurer finds out that another is paying less, every insurer will demand lower rates as well. The reverse is true with health plans.

While price negotiations and the impact that transparency may have on competition remains a contentious issue, the real benefits of transparency lie in providing patients with meaningful insights. For that to happen, it will be necessary to combine price information with quality data from providers, since price on its own is fairly meaningless without data demonstrating what patients have paid for and the outcomes.

Despite the issues and concerns, healthcare organizations will have to find ways to meet the requirements around transparency, while achieving high-quality care.

Paul Thompson is the general manager for DXC’s Commercial Healthcare Payer segment. He is responsible for the execution of DXC Payer segment vision through strong P&L leadership, technology innovation and implementation, and strategy execution. Prior to assuming this role, Paul was the chief strategy officer for the Healthcare and Life Sciences Group.

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