The Importance of Price Transparency in Healthcare: Why Patients Deserve to Know

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The healthcare industry is notoriously opaque when it comes to pricing. This lack of transparency is one reason so many people cannot anticipate their healthcare costs and may need help with medical bills.

To combat this problem, new health policies have made cost information more accessible to consumers and stakeholders. But how can this change be realized?

Cost

Patients informed about medical procedures’ costs are better prepared to shop for the best deals and can avoid unnecessary or overpriced treatments. Price transparency also promotes competition among hospitals as they strive to lower their prices to attract and retain customers.

There are some concerns about healthcare pricing transparency. First, it may need to be clarified for consumers. Second, it may discourage patients from seeking care because they fear costs. It can lead to health complications and more expensive care.

Many providers are concerned that healthcare price transparency will drive up prices. This impact is likely less dramatic than in other industries, as healthcare services’ market dynamics are very different. For example, knowing competitive rates would allow insurers and self-insured employers to develop reference pricing for “shoppable” services (those that the consumer can schedule in advance). It could help to slow healthcare price inflation.

Quality

Many advocates believe that price transparency in healthcare will encourage consumer choice, leading to more cost-effective care. However, consumer choice in healthcare is shaped by several different factors. For example, patients typically choose a hospital based on their physician’s admitting privileges and the location of their medical practices, meaning that price transparency alone will not motivate consumers to become discernable shoppers.

Furthermore, the impact of price transparency will likely be mitigated by differences in pricing that reflect insurance coverage. As such, any initiatives that improve price transparency must consider making prices more meaningful for insured consumers (e.g., through reference pricing) to increase their effectiveness.

Overall, the evidence on whether or not healthcare transparency is effective at driving quality improvements is mixed. As consumers, we deserve access to trustworthy and up-to-date information that helps us make informed decisions about our healthcare. It is why we must continue to promote transparency in the healthcare industry, including allowing patients to compare costs and quality of care when making decisions about their health.

Ease of Access

As the market continues to evolve, it becomes increasingly critical that healthcare providers stay ahead of their competitors. They must anticipate and respond to consumer demands for pricing transparency to compete.

Providing access to detailed cost information allows healthcare consumers to be more prepared and confident when scheduling procedures or purchasing health insurance. It translates into increased financial wellness, reduced medical debt, and improved customer satisfaction.

Price transparency initiatives could help eliminate surprise billing, the leading cause of bankruptcy in the United States. Specifically, surprise billing occurs when patients are charged for services not covered by their insurer.

However, there are concerns that price transparency initiatives will make it harder for hospitals to negotiate with payers. It is because evaluating and weighing prices against clinical outcomes is complex. Consequently, it is unlikely that consumers will become discerning shoppers based on prices alone. Understanding consumer knowledge, attitudes, and behaviors will help organizations develop effective strategies for leveraging healthcare price transparency.

Trust

For healthcare consumers to feel prepared and involved in the decisions around their care, they need to understand cost estimates for items and services. However, unlike other consumer goods, healthcare services are complicated and expensive, involving personal decisions with life-long consequences. It makes transparency more challenging.

The good news is that public regulation can implement price transparency more reliably and fairly than individual clinicians and healthcare organizations can do on their own. Transparency initiatives backed by substantial supply-side leverage (such as insurer-negotiated prices and eliminating gag and MFN clauses) could transform healthcare markets.

The goal is to make healthcare costs transparent for everyone. It would pressure providers and payers to become more efficient and customer-centric in a competitive marketplace. It would lead to lower prices for consumers and employers. Then patients can choose the best care from a wide variety of providers willing to offer lower prices and better outcomes.