The Potential Costs of Healthcare Price Transparency

May 15, 2019
Kayt Sukel
Kayt Sukel

A proposed policy calling for hospitals to publicly disclose negotiated prices charged for services is drawing ire from some hospitals and insurance companies.

Earlier this year, HHS published a sweeping patient-data policy proposal calling for hospitals and other healthcare organizations to publicly disclose the insurer-negotiated prices charged for various services. Currently, hospitals and other provider practices negotiate prices for different services with insurance companies, and the price for a single procedure can vary widely depending on the size and location of the healthcare organization.

Many of those contracts include hidden costs or pricing agreements that provider organizations are legally obligated to keep quiet, leaving consumers in the dark about what they may be responsible for paying after care.

“Patients seeking care often don’t know how much a service will cost until after they actually receive it,” says Sunita Desai, a health economist with the NYU Langone School of Medicine. “Healthcare is a unique market in that way-probably the only one in which consumers can’t get cost information upfront.”

While the HHS policy proposal is only a draft, with the agency seeking public comment on its viability to help curb surging healthcare costs, some hospitals and payer organizations are already grumbling. As reported in the Wall Street Journal, Thomas P. Nickels, executive vice president of the American Hospital Association (AHA), calls the idea “impractical,” citing the complexities involved with negotiated contracts. In addition, he argues, hospitals may have dozens of contracts with different payment terms, varying by company and by plan, which may only confuse healthcare consumers further about their true out-of-pocket costs.

At the beginning of the year, in a nod to greater price transparency, CMS started requiring healthcare organizations to post their chargemaster lists online so patients could see them. Yet, Desai argues, those prices don’t reflect actual costs or reimbursements. This new rule could help make pricing information more accessible to consumers-allowing them to make better choices about where to receive healthcare services.

“It’s not a silver bullet, by any means,” she says. “But this new rule could help patients be more informed consumers. Getting to a point where information about negotiated prices is accessible is necessary, even if not completely sufficient, to help patients better navigate the healthcare system.”

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But other organizations also fear what such public exposure may mean for the provider and payer organizations themselves. If these contracts become open to the public, hospitals with lower reimbursements may demand parity with competitors who were able to negotiate a better deal. Some organizations, like the AHA, have stated they plan to fight the proposed rule. Others, like America’s Health Insurance Plans (AHIP), stated they are still “evaluating” the proposal.

HHS will take public comments regarding the proposed rule through May 3, 2019 before coming up with a final policy decision. And, in the meantime, Desai believes healthcare organizations can provide information to help consumers, if not know their exact out-of-pocket costs, at least get an idea of the what the ballpark figure will be for healthcare services.

“We would expect that these negotiated prices and out-of-pocket costs to be correlated,” she says. “So if Hospital A’s negotiated price is higher than Hospital B’s, it’s likely a patient’s out-of-pocket costs would be higher at Hospital A-or at least equal to those at Hospital B. Just because these prices don’t give an actual cost, doesn’t mean there isn’t useful information there.”

Furthermore, she says, such transparency could also result in second-order effects where, once providers see consumers responding to price information or pushing back on prices that don’t appear to reflect fair value for a particular service, they can better adjust their costs to be more competitive in the marketplace.

“That’s the broader vision of the type of competitive force that price transparency can hopefully unleash,” she says. “And that’s the reduction of what we already know are often unnecessarily high care costs.”

Kayt Sukel is a science and health writer based outside Houston.