Hospital pricing rule is a step in the right direction

It seemed like a good idea: “Since so many people are frustrated by healthcare pricing that can seem secretive and arcane, let’s require hospitals to make their prices public.”

And that’s exactly what the federal government did with the rule that went into effect on January 1, which requires hospitals to post their prices on their websites. And the result? A backlash that was swift and vigorous. Hospitals, benefit providers, patients, elected officials, and more slammed the rule as likely causing more problems than it solves.

I think they’re overreacting. True, the rule is not delivering the benefit its authors had hoped, but it’s also not as worthless as its critics suggest. Eventually, I believe it will be seen as a necessary step toward real transparency in healthcare pricing.

True transparency

Hospitals traditionally have kept their price lists (their “chargemasters”) out of the public eye, mostly because too much transparency was bad for competition and would limit their ability to negotiate effectively with third-party payers. Complicating matters further is the fact that the prices they did negotiate weren’t “final” consumer prices. This is because other factors, such as a patient’s specific coverages, the patient’s deductible, and more, meant that the question, “How much does this procedure cost?” was usually answered with, “It depends.”

Now that the price lists are available, consumers have discovered they’re not very user-friendly. While some area hospitals have links to pricing posted prominently on their websites, others have buried them as hyperlinks beneath multiple layers of webpages. Most lists are incredibly long and filled with abbreviations, numeric codes, and jargon. Open the list of one Central Indiana hospital and you’ll discover more than 160,000 costs organized in no apparent order. Another area hospital organized costs a little better, but they’re fairly indecipherable – searching under “Cardiology Unit002,” for example, you’ll find that the price for “Collect bld from picc ven nos” costs $50.70. And so on.

So where does this leave us?

On the one hand, no better than before. On the other hand, it has put a sharper focus on healthcare cost transparency, and that’s a good thing. It also has highlighted some of the solutions that are available. Many hospitals have complemented their chargemaster lists with cost calculator tools that allow consumers to enter pertinent information – including insurance coverage, deductible amounts, and more – to get accurate cost estimates. Health plan TPAs and insurers offer similar cost calculators tailored to their customers. Meanwhile, I’m sure scores of tech wizards are working to develop programs and apps aimed at this problem.

What might work going forward

I think the best solutions will come from collaborations between high quality healthcare providers and payers that connect end users with better decision-making tools (see below for examples we see in the market). With the technology at their disposal, they could create systems that allow consumers to check prices based on a wide range of factors and variables. And with the data at their fingertips, they could create dynamic price lists that respond to the rapidly changing marketplace.

The result would be price lists that are tailored to each hospital and accessible in a real way to consumers. Think of it this way: Major shoe companies produce their shoes and sell them to distributors and retail outlets. They might have price controls in place, but they negotiate different deals with different retailers, resulting in different prices for consumers from store to store. Other factors could still affect the price a consumer pays: store discounts, shipping costs for online retailers, and so forth. Despite all of these factors, the consumer can always find a final price before ordering the shoes.

Solutions in the interim

We believe the chargemaster rule is pushing us toward that kind of solution. No, it isn’t the transparency we all want. It isn’t the solution. But it is progress, much-needed progress. Until the transparency utopia arrives, employers who build multi-year strategies that focus on cost containment, employee education and engagement, and a smart mix of well-being efforts will find themselves as winners with both their budgets and workforce. At FirstPerson, we use a unique discovery process, called ResultsBuilder, to help our clients plan long-term strategies and create success for their organizations. Click here to learn how it works.

In addition to carrier or TPA-specific resources, the following tools and solutions are useful to employers and their employees:

  • Rx pricing transparencyGoodRx and OneRx are free tools that allow consumers to see what retail price is in the market alongside the discounts provided.
  • GrandRounds is a fee-based tool historically available to larger employers (1,000+ employees) but now coming down market. It allows employees to search for high-quality providers to drive better health outcomes.
  • Healthcare Bluebook includes both a free and fee-based tool, which is all tech enabled. It borrows its name and concept from the automotive bluebook, and it allows employees to search for providers based on cost and comparative pricing in the market.

In summary

Admittedly, delivering health care isn’t like selling shoes, but the way pricing is set isn’t that different. As such, it’s possible to create a system that allows consumers to know a final price before purchasing a service, as long as healthcare providers and payers come together to deliver transparent pricing solutions.

What they lack is the motivation and will to make this happen. To get that into place, we need consumers to get into the game more. They need to demand legitimate and workable transparency.

The good news is that consumers who are more tuned into healthcare pricing will be more attuned to their health, and they will be more inclined to seek out high-quality care at a reasonable price.