Healthcare Price Transparency: Three Opportunities for Transformation
With health systems, payers, and CMS contributing to the complex process of setting and understanding medical pricing, healthcare price transparency has been an ongoing challenge for healthcare organizations. However, as of January 1, 2021, health systems must publicly provide price transparency information or face steep consequences. Failing to adhere to the new legislation can result in publicized penalties, corrective action plans, and monetary punishments.
Although the current price transparency legislation is subject to change based on new political influences, healthcare organizations should still prioritize price transparency because it empowers patients throughout the care process and increases the trust a patient places in a health system. Better transparency means patients are empowered because they are more informed about price and quality of care and will most likely adopt a consumer-driven approach to future care decisions. The consumer mentality in healthcare opens the doors for increased competition between health systems, tantamount to organizations losing patients and revenue to competitors if they fail to consider a consumer-driven approach to pricing in their transparency strategy.
To comply with the new CMS-backed price transparency legislation, health systems must provide standard charges via machine-readable files and a consumer-friendly display of shoppable services. Meeting these rigorous healthcare price transparency standards demands that health systems have robust price transparency technology (e.g., the Vitalware Hospital Price Index) that can organize and display an organization’s chargemaster, list of shoppable services, and a list of all services. Along with the price transparency technology, health systems must develop and communicate a defensible pricing strategy (DPS) to convey the reasoning behind the cost of care.
Healthcare Price Transparency Provides Three Key Opportunities
With the price transparency technology and DPS in place, health systems are not only prepared to meet CMS’s cost requirements, but they can also use price transparency to take advantage of three critical opportunities:
#1: Satisfy Increasing Patient Interest in Cost of Care
As patients become more involved in their care, they become more engaged in understanding the cost of care. In the past, patients often went to the most accessible or recommended provider with little investigation. Now, patients conduct in-depth internet searches to compare different health systems, provider ratings, procedure alternatives, and cost. Just like a consumer shops for the best deal on a car, a patient now shops for the best deal or outcome for some procedures. As healthcare costs continue to rise, patients only grow more curious and committed to learning about their options, becoming highly educated and more in control of their care.
The changing reimbursement landscape that requires patients to pay more out of pocket for procedures is also piquing pricing curiosity. Paying more for care incentivizes patients to understand what type of care they receive and the associated cost. In short, when patients have to pay, they review and scrutinize every charge on a bill and inquire about the reasoning behind the price.
#2: Earn Patient Trust—A Short- and Long-Term Imperative
Although the new healthcare price transparency legislation requires health systems to share pricing structure, providing patient-friendly information around cost structure is also an opportunity to create and deepen patient trust. Price transparency can increase trust between patients and health systems by helping patients understand what they are paying for.
For example, rather than receiving an explanation of benefits (EOB) after a high-charge procedure, health systems can provide cost information before procedures. With a proactive approach to cost disclosure, health systems give patients time to financially prepare, research payment options, and select the right payment plan. Price transparency also avoids confronting a patient with surprise bills after a procedure, fostering trust between the patient and the health system. For example, when a patient receives a bill from a health system or payer, he might be confused about the amount and why he owes anything. In many instances, the patient has already met his deductible and paid the co-pay, yet he still receives a costly bill that he doesn’t understand and didn’t expect. Explaining the bill before the procedure—and especially before the patient gets the bill—ensures the patient that the health system is doing everything it can to help the patient pay for the procedure and understand the financial ramifications if the patient cannot pay.
Providing thorough information about the pricing model and DPS in simple terms also builds patient trust. For example, if a patient is going to pay for a knee replacement, she wants to understand every subitem (e.g., inpatient charges related to hospital stays and any associated fees) within the total procedure cost. She might shop around to learn more about a health system’s reputation and outcomes and might even be willing to pay more based on higher ratings. If the pricing information is clear and defensible (every line item within the cost makes sense and has an easy-to-understand reason), patients are more likely to trust what the health system charges for care.
When more health systems provide price transparency, patients will know which hospitals charge less money for certain procedures. This insight incentivizes health systems to drive down cost and deliver quality care, another benefit for patients. Additionally, health systems can use price transparency to their advantage by showing patients the fair prices they charge for care compared to market prices, increasing a patient’s willingness to trust the health system.
Organizations also have more incentive to be upfront about cost, and in some cases, offer discounts for cash payment, to avoid situations where patients do not or cannot pay the cost after a procedure. With unpaid bills, health systems have no way to go back and create a financial plan, increasing the chance of incurring bad debt. When patients know the cost before the procedure and have time to select a payment plan, they are more likely to pay their bill.
#3: Create the Optimal Patient Experience
A key component of delivering an excellent patient experience—thereby building a loyal patient base and future referrals—is sharing cost information up front. The patient experience includes how a health system and its team members treat patients when they’re at the hospital and how an organization provides thorough information about the cost of care. Informing patients about procedural costs and payment options is critical in treating patients with the highest quality of care and setting patients up for the best outcomes.
Pricing transparency gives patients an active role in their care process, allowing them to explore options and choose the best-suited health system or provider rather than letting a referral from a primary care provider direct where they receive care. When patients understand their role in their health and care plan, they collaborate with the care team and share accountability, and the team focuses on providing the patient every opportunity to attain optimum health—a foundation for building an excellent patient experience.
Healthcare Price Transparency Sets Patients and Health Systems Up for Success
Price transparency has been an ongoing conversation as healthcare organizations strive to understand what a patient needs to know to make informed care decisions and the best way to pay for care. With a strong price transparency strategy, health systems can provide every opportunity for patients to find the best care at the lowest cost. By publicly providing cost information, payment options, and sound justification behind procedure prices in advance, health systems comply with the new healthcare price transparency legislation and improve their relationship with their patient populations.
The new legislation can be a hurdle for some systems lacking the technology and pricing strategy. Still, it can be an opportunity to engage patients throughout the care process, deepen patient trust, and provide the ideal patient experience. An effective price transparency strategy sets both health systems and patients up for success, increasing the likelihood that patients will return to the same facility for future care, refer family and friends, and drive more business to that health system.
Would you like to learn more about this topic? Here are some articles we suggest:
- Healthcare Relief Funding: Five Steps to Maximize COVID-19 Dollars
- Healthcare Revenue Cycle: Five Keys to Financial Sustainability
- Reduce Bad Debt: Four Tactics to Limit Exposure During COVID-19
- An Effective Financial Response to COVID-19: Three Ways to Leverage Data
- Activity-Based Costing in Healthcare During COVID-19: Meeting Four Critical Needs