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Debunking Myths on the Path to Pricing Transparency

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Debunking Myths on the Path to Pricing Transparency

Without resources such as Consumer Reports and other online comparison tools to assess car quality ratings, we might be led to believe that the more expensive a car is, the better its quality.

But healthcare doesn’t yet provide easy ways to compare price to quality outcomes or patient satisfaction—the building blocks required for patients to act like consumers. According to a 2014 task force report on price transparency from the Healthcare Financial Management Association (HFMA), a guiding principle for price transparency is that price alone is not enough. Information about quality, safety and other values of service to the consumer should be a component as well.

In healthcare, cost is not a reliable indicator of quality, and quality outcomes may not come from the highest cost provider. In an examination of 61 studies about the relationship between healthcare quality and costs between 1990 and 2012, published in the Annals of Internal Medicine, 21 studies (34 percent) reported a positive association (higher cost associated with higher quality); 18 studies (30 percent) reported a negative association (higher cost was not associated with higher quality); and 22 studies (36 percent) reported no difference, an imprecise or indeterminate association, or a mixed association.

What we do know is how important the role of referring physician is in consumer choices. Patients want to believe their primary physician is referring them appropriately to other providers, but cost is rarely part of the referral discussion. More than half of patients (58 percent) surveyed in a Deloitte study on Health Care Consumer Engagement say physicians should share cost information with them, and 38 percent say they would be comfortable having a discussion with a doctor about costs. Only 19 percent of consumers asked about pricing before a procedure, though consumers with major chronic conditions are far more likely to ask questions.

With the rise in high deductible health plans (39 percent of Americans had a high deductible health plan in 2016 versus 26 percent in 2011), the expectation is that more patients will demand pricing information and the ability to compare value across procedures. Since this seems to be the trend, behavior will have to change. Patients still trust their physicians to recommend the treatment that is in their best interest regardless of price.

Patients who are ready to act like consumers are rare. Some price comparison tools are growing in usage among younger consumers, but a majority aren’t using them. Only 14 percent of consumers searched for healthcare cost information online, according to the Deloitte survey, though a growing number of millennials report using the tools. However, numbers are inching up: 17 percent reported using the tools in 2013, and 27 percent of those same consumers used the tools in 2015.

Obviously shopping for healthcare is more complex than shopping for a car, and the market is not rational. There is great variation of cost in the delivery of care in the U.S., particularly in smaller areas. Also, some argue that very little healthcare spending is on services that are shoppable—estimated as only 7 percent to no more than 34 percent, according to this study.

Hospitals can ride this wave of pricing transparency and consumerism with patients by getting valuable quality data into consumers’ hands. It doesn’t have to be on every procedure the provider performs; telling the story of the top 10 outpatient procedures performed by a provider is a great start. Publish those quality indicators right alongside average charge information. By doing so, you’ll be ahead of the pricing transparency curve and show your community you care enough to provide them meaningful information. Treat them like a consumer, while also treating them as your patient.