Will Trump's price transparency order trump market clout?
Trump’s plan to bring pricing into the open is dependent upon so many variables that its true impact will not be felt for years.
President Trump’s June executive order mandating healthcare providers to increase price transparency tapped into a popular thread in American politics. But whether Trump’s two-part plan to bring pricing into the open will actually result in lower overall spending on health services is dependent upon so many variables that its true impact will not be felt for years.
Or so says Anna D. Sinaiko, MPP, PhD, Department of Health Policy and Management, Harvard T.H. Chan School of Public Health, author of a recent analysis of the executive order published in the Journal of the American Medical Association.
Related: Transparency puts the consumer back into health care consumerism
Sinaiko notes that the order has two components and two objectives. The components: Hospitals must post “actual paid amounts, per medical service, based on negotiated rates,” and clinicians, health insurers, and self-insured group health plans must offer patients out-of-pocket estimates ahead of treatment. The objectives: minimize “surprise billing” while creating “price transparency much more broadly.”
It is the latter objective that she focuses on. A basic problem with the order is that it is too vague, giving providers considerable leeway in how and what to report. For instance, she says, will hospitals be required to post average amounts paid over multiple health plans, or costs per plan? The outcomes could vary widely depending upon which one prevails.
Then there’s the large-market/small-market situation. In a small market where few competitors exist, will transparency have any effect on what a provider decides to charge? Or how about the impact of market consolidation on pricing? Here, she basically forecasts price collusion among major players. She says: “What is unknown and critical to monitor is whether in markets with a few large health systems with substantial market power, market-wide price transparency could facilitate coordination or other anti-competitive behavior such that prices increase.”
Quality of care could also be lost in the transparency shuffle, especially in regions where competition is weak or very large providers can establish high base prices. All too frequently, she says, the cost of services has little to do with the quality of the services provided.
“Another reason that transparency might not lead to a change in prices is that current price variation across hospitals does not reflect differences in health care quality (as economic theory would predict), but rather the balance of market power between the parties during negotiations.”
There’s yet another factor that could undermine transparency efforts: consumer behavior. As she notes, many studies have found that, when consumers have price transparency tools at their disposal, 1) they don’t use them very often and 2) even when they do, they often don’t make the less expensive (or even higher quality of care) choice.
“It seems unlikely that patients would use price information made available under the new executive order any differently than they have used the same information already available through health plans and employers. Thus, expectations that price transparency through this executive order will lead patients to begin to shop for their health care based on price are not supported by current evidence,” she says.
She sums up her analysis on a note at once hopeful and skeptical.
“The administration’s executive order should help to broaden price transparency well beyond information that has previously been available. Experience suggests that providing personalized price information to patients to reward higher-value clinicians rarely changes behavior. It remains to be seen how far greater price transparency will affect the hospital and physician markets. Additionally, purchasers, policymakers, journalists, or others could act as superusers of the data to foster greater competition and put downward pressure on prices through naming and shaming. It will be critical to watch all these groups to understand the full influence of market-wide price transparency on the US health care system.”
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