Hospital price transparency is clear as mud

You may have heard the news that hospitals are now required to post prices in a way that is easy for patients to find. There’s been a fair amount of media coverage championing these hospital price transparency requirements from CMS that went into effect on Jan. 1. This milestone regulation is in support of patients and reducing healthcare costs. Even Susan Sarandon has signed on as a spokesperson to make sure people are aware that it’s now their right to know hospital service pricing.  The mandate requires that certain hospitals must post machine-readable files of pricing for all items and services, as well as a display of at least 300 “shoppable” services in a consumer-friendly format.

Despite the media coverage, just one in 10 adults (nine percent) are aware that hospitals must disclose the prices of treatments and procedures on their websites, according to KFF Health Track. But it doesn’t matter much since research revealed that 86 of 100 randomly selected hospitals were not fully-compliant. Hospitals claim challenges they have in building and supporting this online data and say they are concerned about sharing negotiated rates publicly.

While the mandate has the right intent, it misses the mark.

The ugly truth about transparency

Healthcare doesn’t work like other consumer goods and services – payment models are messy and complicated. Regulations at the state and federal level are helping shine the light on care costs and providing new consumer protections, but posting JSON files online or ‘rack rate’ hospital costs at each organization’s website doesn’t help people. In addition, a recent survey shows most people don’t go to hospital websites looking for care costs, they go to their health plan. And even when they do, they are challenged when using hospital price transparency sites to access information and understand price variation. About 87.5% of people have some kind of health insurance and they need to understand their personal liability for planned services based on that coverage.

It’s got to be personal

More than half of Americans have employer-sponsored and individual/exchange insurance and they pay for care based on their unique insurance benefits and status. Hospitals don’t have those answers easily available. It’s their health plan that can confirm in-network coverage and expected out-of-pocket costs – and present all covered options. Most people can access cost information through their insurance company today, and another regulation from CMS (Transparency in Coverage mandate) requires that health plans provide out-of-pocket cost estimates for 500 covered items and services in 2023, and for all covered items and services starting in 2024. This presents an opportunity for hospitals to collaborate with health plans to meet the needs of people with insurance in a more effective way. And for health plans to address member needs earlier than the mandate to help people get cost-effective, quality care.

And, it isn’t just for those people with employer or individual insurance. Research shows that 90 percent of Medicare Advantage members want accurate out-of-pocket cost information before getting care too.

Healthcare is painfully complicated

Part of the reason delivering sticker prices is unhelpful and providing accurate estimates is so hard is that healthcare is extremely complicated. People may not know the exact procedure they may get before they arrive at an appointment. For example, you know you need an MRI, but is it with or without contrast? If you want to know what a surgery will cost, you may be able to locate check-in to check-out costs, but what about recovery? Do you need physical therapy and what will that cost?

Both health and healthcare are complex. People need meaningful information in context to the task at hand. For price transparency to be effective in lowering healthcare costs and empowering patients, it needs to be delivered with context for the health situation, actionable insights, and guidance to help people make smarter choices. Health plans are well suited to deliver this with their comprehensive health and care history data. Hospitals can collaborate with plans to bring these capabilities to their insured patients, not going it alone.

While it is great to see attention being paid to price transparency, let’s not get distracted by movie stars talking about rack rate pricing on hospital websites. That information doesn’t really tell people what they’re actually going to pay, so it’s at best confusing and at worst misleading and/or discouraging people from getting needed care. As an industry, we have an opportunity to provide helpful healthcare transparency and guidance to people wherever and whenever they need it. We can help people take control of their healthcare costs and plan ahead for the financial impacts. But it’s going to take collaboration between health plans and hospitals – to go above and beyond what’s mandated by the government – in order to transform a muddy mess into something clear.

Photo: sdecoret, Getty Images