Price Transparency: Challenges and Solutions for Hospitals

By David Shelton, Chief Executive Officer, PatientMatters
Twitter: @PatMatters

The call for healthcare price transparency is growing louder, with seemingly obvious benefits. Patients, knowing what they’ll owe, can make informed decisions about their care and how they’ll pay for it. Providers can build trusting relationships and increase the likelihood of getting paid in full for services rendered.

Progress, however, has been slow, despite the Centers for Medicare & Medicaid Services (CMS) requirement that hospitals publish standard charges online and update them at least annually. While the rule was well-intended, many hospitals complied by simply posting thousands of chargemaster rates. Not only is the information meaningless to most consumers, 58 percent of hospitals in a 2019 survey said it created more confusion. Patients, after all, don’t buy individual healthcare products and services; they buy bundles of supplies, services and providers for each episode of care. Deciphering line-by-line chargemaster rates into understandable estimates is a daunting task for providers, especially smaller community and critical access hospitals with limited resources.

Why providers struggle with price transparency
U.S. healthcare pricing is notoriously complex, multilayered and laden with variables such as physician-specific charges, discounts negotiated with insurers and individual patients’ health plans and deductibles. Oftentimes, according to one study, even physicians don’t know how much procedures or tests cost, nor do they consider costs when making medical decisions.

When discussing the need for price transparency, people try to simplify the problem by comparing healthcare to other businesses, saying no one would get their car fixed without an estimate up front, or buy a computer without asking the price. Traditional models, though, don’t apply when people’s lives and wellbeing are at stake. Price isn’t usually top of mind for someone seeking healthcare, and many people don’t think about how their insurance works until they need it. Before high-deductible health plans became commonplace, the average person’s out-of-pocket costs were relatively low, giving them little incentive to worry about the price of care.

Changing these economic fundamentals to increase price transparency will take time, but some experts believe it can reduce costs and add value for patients. In the meantime, hospitals can take price transparency steps of their own to empower patients to make more informed decisions, improve administrative efficiency and increase patient collections.

Price transparency practices in smaller hospitals
As U.S. consumers and governments push for more price transparency, some larger providers are going beyond chargemaster spreadsheets to publish average prices per case, fees by payer type, diagnosis-related group (DRG) charges and other patient-friendly data. Building and maintaining this information takes a serious commitment to technology, processes and patient services. In smaller hospitals where internal resources are stretched thin, these best practices can help improve price transparency quickly and cost-effectively.

Provide an online, patient-friendly estimation process. The best estimation processes implement sophisticated algorithms to determine patients’ out-of-pocket costs. They gather charges for all facilities and providers for each episode of care and calculate prices down to the physician level and DRG to account for variations such as physicians’ fee schedules. Patients should be able to input their health plan specifics to show what’s covered by insurance and how much they’ll pay. A toll-free phone line dedicated to estimates can supplement the process and serve patients who don’t have Internet access.

There is an important caveat to estimation processes. Hospitals may be tempted to buy or build a solution and think their price transparency work is done. But like other technologies, estimation performs well only when it’s integrated into everyday operations. If not used and maintained regularly, it will become less and less accurate, causing staffs to neglect it and patients to distrust it.

Establish a centralized pre-access center. The key to true price transparency is engaging patients in financial conversations as early as possible. Even if patients obtained an estimate online or by phone, pre-access center staff can help them register properly, confirm estimates, verify insurance, review deductibles and co-pays, determine patients’ propensity to pay and identify appropriate payment plan options.

Emphasize prior authorizations (PAs). Estimates and insurance verification are essential to price transparency, but without the payer’s PA to render services, patients and/or providers could face surprise bills. Hospitals should establish standard PA processes to minimize administrative work, ease patient frustrations, prevent delays in care and ensure timely payer payments.

Help patients understand how they’re impacted financially. Just as important as telling patients what they’ll owe for care are 1) helping them understand the overall financial impact and 2) finding a plan that fits their personal needs. By getting patients to agree to payment plans before services are rendered, hospitals can ease patient anxiety, increase collections and reduce bad debt.

Healthcare price transparency is here to stay and will gain momentum as more hospitals tackle the inherent challenges. For smaller hospitals looking to go beyond regulations to enhance the patient experience and improve financial performance, providing price transparency is a smart investment.