Exploring Healthcare Price Transparency for the Consumer Experience

February 01, 2024 - Shop in any store or for any service, and you will be able to look at the price tag or at least request a quote, but in healthcare, that level of price transparency is unheard of.

Rather, patients go into most healthcare encounters not knowing what it will cost them due to a combination of opaque pricing on the part of providers and sometimes unclear payer benefits.

The issue of healthcare and hospital price transparency has come to the forefront in recent years as the rise in high deductible health plans has led to surges in patient financial responsibility. With patients unable to predict how much healthcare will cost them, they are faced with the decision to risk a costly medical bill or forego care altogether.

That reality, coupled with a need for a better healthcare consumer experience, has led to regulatory pushes to require more price transparency.

Still, the public hasn’t quite seen the fruits of those regulatory pushes, which include hospital price transparency rules from CMS. Despite the concept of healthcare price transparency entering the industry zeitgeist, it’s been mostly carrot and little stick, leaving consumer efforts to better understand the cost of care before getting it out of reach for now.

What Is Healthcare Price Transparency?

According to CMS, price transparency in healthcare means “Americans know the cost of a hospital item or service before receiving it.”

Under the CMS Hospital Price Transparency final rule, hospitals are required to provide price transparency for the items and services they provide in two ways:

• As a comprehensive machine-readable file with all items and services. The file must include gross charges, price discounts for those who pay in cash, payer-specific negotiated charges, and deidentified maximum and minimum charges.
• In a display of 300 shoppable services in a consumer-friendly format. The display must use plain language to describe services and must describe discounted cash prices, payer-specific negotiated charges, and deidentified minimum and maximum negotiated charges.

The federal agency said providing price transparency will give healthcare consumers the opportunity to shop around for services and price compare across facilities. This is best done for planned procedures, like elective surgery or a birth.

These regulations went into effect on January 1, 2021.

Hospital price transparency takes up most of the conversation when discussing price transparency in healthcare, in large part because price transparency in other settings is not yet required. CMS indicated that it began with hospital price transparency because it is one of the costliest sites of care.

However, patients face financial barriers to care in more than just the hospital setting. Cost is a big deterrent for patients accessing all kinds of care, including preventive services, mental health services, and prescriptions. Being able to provide a cost estimate in these areas may also be key to providing a good financial experience.

Patients Demand Price Transparency

Price transparency in healthcare is fundamental to a good financial experience. With patients footing the bill for their healthcare now more than ever, it is incumbent upon healthcare providers—mainly hospitals, at this juncture—to give them an estimate of that cost.

The stakes are high for healthcare price transparency. When patients don’t know how much a procedure or service will cost them, they may not get it, even if they need it. A 2022 poll from Ribnik research found that 44 percent of patients delayed care access because they didn’t know how much the service would cost them.

Meanwhile, for hospitals and provider organizations responding to trends in healthcare consumerism and working to build a good reputation, price transparency is a key piece of the financial experience that heavily influences the overall healthcare experience.

Survey data shows that patients are demanding price transparency. In a January 2024 Marist Poll conducted on behalf of Patient Rights Advocate Inc., 94 percent of respondents said healthcare organizations—that includes hospitals, doctors, and payers—should be legally required to disclose all of their prices online in an easily accessible place.

This makes sense, given the context of healthcare consumerism. Patients are responsible for more of their medical expenditures under high-deductible health plans, so they want to know which provider will give them the best value. This means patients need to know how much a service will cost before accessing it.

Price Transparency Out-of-Reach for Consumers

But although patients near-unanimously back the theory behind healthcare price transparency, that theory isn’t coming to fruition. Between hospitals and healthcare organizations struggling to give patients cost estimates that account for payer status and to estimate fluctuations in price based on the acuity of the encounter, as well as limited patient engagement with price estimates, many efforts fall flat.

That could be due in part to low patient awareness about the price transparency efforts afoot.

In June 2021, just six months after CMS began mandating hospital price transparency, only 9 percent of US adults knew of the regulations, according to a KFF Health Track poll. By the time the 2022 Ribnik survey went out, that number had risen to two-thirds.

It will be incumbent upon healthcare providers and their payer partners to ensure patients are aware of the price transparency tools that are available to them and underscore the importance of using them. The Ribnik survey indicated that price transparency tools could have more utility if they also include data about other factors that are important to patients when selecting a clinician: location or distance to home, clinical quality, and appointment availability.

Beyond public awareness, compliance with the Hospital Price Transparency rule has been less than impressive.

When the rule went into effect, compliance was dismal; an August 2022 report showed compliance was just at 16 percent. This was true even at the nation’s highest-ranked hospitals. Rice University’s Baker Institute for Public Policy showed that only 35 percent of the nation’s 20 highest-rated hospitals were in compliance with the CMS rules as of June 2022.

There’s been some improvement on this front. An April 2023 report from Turquoise Health showed that compliance was increasing, with more than 84 percent of hospitals having published pricing data as of Q1 2023, compared to 65 percent in Q4 2022. Over 5,300 hospitals had a machine-readable file, up from less than 2,000 during the first quarter of 2021.

Compliance could be slated to increase as CMS adds enforcement to its hospital price transparency regulations. In 2023, the agency added more teeth to the rule that it said it hopes will increase adherence to the requirements and improve patient access to pricing data.

Price transparency is falling short not just in the hospital setting but also in nearly every healthcare setting. This issue may be explained by the lack of regulatory pressure in healthcare settings outside the hospital. Because there are no requirements for price transparency in ambulatory settings, it may simply be less common.

There is scant data outlining how many ambulatory providers, or other non-hospital providers, are working to offer price transparency, but there are some insights into the challenges of doing so.

In 2021, researchers wrote in JAMA Network Open that physicians in primary care, gastroenterology, and rheumatology struggled to provide drug cost estimates to their patients, with only around a fifth being able to do so. In fact, around eight in ten physicians provided an inaccurate drug cost estimate.

Physicians still had these challenges even when they had access to a patient’s health insurance information. This is likely due to the extremely complex nature of cost-sharing models within insurance plans, the researchers suggested.

Providing cost estimates for services, products, and medications makes good business sense for all healthcare organizations. Not only does it help certain providers, like hospitals, comply with federal regulations, but it also allows all providers to keep up with trends in healthcare consumerism.

The movement of patients assuming more financial responsibility increases the urgency of the effort to provide price transparency for healthcare services and prescription drugs and medical devices. As noted above, patients want insights into the cost of care in a way that is usable, accurate, and understandable. For many providers, this will mean finding the right price transparency technology to enable this.

Leading Healthcare Price Transparency Tools

Healthcare price transparency tools offer a system by which clinicians and organizations can provide a cost estimate to patients. In many cases, these tools use the organization’s chargemaster prices and the patient’s insurance information to provide this estimate. Some of the leading vendors (listed alphabetically) in this space include, but are not limited to,

• Change Healthcare
• Healthcare Bluebook
• Kyruus Health
• RevSpring
• Surescripts (prescription medications and real-time benefits check)
• Turquoise Health
• Waystar
• Zelis

These technologies are increasingly being rolled out as a feature within the revenue cycle suite. For some vendors, the price transparency tools are provider-facing, and they allow clinicians or office staff to discuss patient financial responsibility with consumers. Surescripts, for example, offers real-time benefit check for the prescribing provider, enabling a discussing about the cost of the medication.

In other cases, the tools are consumer-facing and they allow patients to price compare across different providers to make an informed decision about care access. Health payers often utilize tools like this, letting their members look up the cost of care at different covered providers to enable price comparison.

Regardless of the format, providers selecting a price transparency tool should prioritize not just accuracy but also patient-centricity. Particularly with consumer-facing technologies, tools that use plain language to make the price estimate clear and easy to understand will stand out from the crowd.

Integration with existing technologies, good vendor relationships, and cost are also key considerations when making a technology purchase.

Although price transparency tools are key for actually delivering on price transparency promises and regulations, these technologies are fallible. For one thing, price estimates usually do not account for unforeseen complications. A patient may get an unexpectedly high bill if they experience complications that require extra services.

For another, patients might not always use the tools to pick the lowest-cost care. A December 2022 literature review in Health Economics Review showed that price transparency tools did lead to lower healthcare spending in certain settings, like for lab or imaging services.

But transparency tools aren’t leading to reduced overall spend when looking at highly rated facilities, mostly because patients are choosing the brand name over the lower cost, a phenomenon the researchers referred to as the reputation premium in healthcare.

Policies to overcome these issues, like requirements to add quality information to price transparency tools and to limit clauses prohibiting the sharing of negotiated prices, could be effective for improving these tools.

When providers and hospitals adopt effective tools for offering healthcare cost estimates, it increases the odds that patients will actually use them, resulting in more engaged and empowered consumers. Folks who know the cost of care before accessing it may be more likely to pay their bills on time and seek the right kind of care from a provider who meets their needs.

In the end, this is a win-win for hospitals and health systems looking for healthy margins and satisfied patients.