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How to Recognize, Capitalize on the Benefits of Price Transparency in Healthcare


Hospital leaders who have historically viewed price transparency as potentially disastrous can tap into these three tips to leave that mindset behind and capitalize on the opportunities that price transparency provides.

Healthcare leaders everywhere are concerned that price transparency will lead to price wars. But these fears miss a significant point: Price transparency actually has the potential to bolster hospitals' financial performance. It can transform healthcare as we know it in a way that positively impacts everyone involved.

How? A number of ways. Knowing competitors' rates for specific services allows hospitals to do things like lower rates to gain market share, for example. It also enables them to strategically reduce prices in one area in order to increase volume for higher-margin services elsewhere.

As such, for hospital decision makers, price transparency is an opportunity, not a warning sign. With the right mindset and approach, it gives them the information needed to avoid a price war, improve hospital financial performance, and even increase hospital revenue.

Capitalizing on the Benefits of Price Transparency in Healthcare

For hospital leaders who have historically viewed price transparency as potentially disastrous, here are three tips for leaving that mindset behind and capitalizing on the opportunities price transparency provides:

1. Use price transparency information as a competitive advantage.

Price transparency doesn't mean your hospital has to resign to any negotiation terms that payers come to the table with. Instead, use pricing information as competitive intelligence to combat downward price negotiations.

If you know the pricing of healthcare services in hospitals with similar patient demographics, for example, you’re better equipped to negotiate competitive prices. Likewise, if you know another hospital is being paid more despite having fewer complex cases based on its patient demographics, then you’re coming from a much stronger position than you would be without that information.

You need to know what you offer in comparison to others, where you can afford cuts and where you can’t, and how price changes will influence patient behavior. Price transparency information allows you to come into negotiations with confidence, knowledge, and your own information. In essence, it becomes a tool rather than a disadvantage.

2. Pay attention to connections between negotiations.

Because healthcare involves a complex network of relationships, pricing discussions can't be made in isolation. Negotiations with one insurer impact conversations with another, which means it's important to consider how each aligns with your strategic goals.

If your goal is to increase market share, for example, you need to know what it takes for payers to encourage members to use your hospital system’s services. Or if you want to improve customer satisfaction in certain areas, talk to your payers about funding a special improvement project or increasing prices for relevant services.

You can even use pricing intelligence to strengthen your relationships with payers. One of the benefits of price transparency in healthcare is knowing what position you’re in compared to other hospitals. This allows you to make a more compelling bid for payers who might have previously been less inclined to work together.

3. Leverage machine learning.

The ideal negotiating outcome is one that lets both parties walk away with something they want. That said, in order to get what you want, you often have to sacrifice something you don't mind losing. Machine learning can help you figure out what that something is and optimize your overall pricing strategy to help you dynamically replan during contract negotiations.

This is not something most providers are doing yet, but that’s only because pricing data wasn’t readily available until recently. Now that it is, you can start answering the questions you may have been asking for years and using those answers to make more informed strategic decisions.

Optimizing hospital financials is complicated. There are many unknowns and factors influencing decision-making in healthcare. But when providers are equipped with pricing information, they can create better pricing structures, level the playing field when it comes to negotiations, and improve hospital financial performance, benefitting both themselves and the patients they serve.

Paul Boal is the vice president of innovation at Amitech Solutions. He has two decades of experience in information management, analytics, and operational solutions; he’s also an adjunct professor of healthcare data and analytics at St. Louis University and Washington University.

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