Price disparities challenge ability of transparency executive order

Just because a price is disclosed doesn’t mean that the cost to the patient—not just in money, but in quality of service—will be transparent.

That’s the conclusion of a study from public accounting, consulting and technology firm Crowe, Transparent Doesn’t Equal Rational: Problems With Transparency Order, which analyzed Crowe’s national hospital database for individual pricing levels of 100 common outpatient procedures priced at more than $500 in gross charges, the list price that hospitals post in their systems. Crowe also reviewed the average allowable revenue (what patients pay out of pocket after insurance) for each of those procedures.

What did they find? The average difference between listed gross prices for each procedure was a whopping 297 percent, with the average “expected payment” ranging 236 percent.

Related: Growing gap between what insurers and Medicare spend on hospital stays

But the problem goes beyond price. While the aim of the Trump administration’s executive order directing transparency on the cost of health care is to allow patients to have a better idea of what they’ll end up paying for care, in execution the order is flawed, says Crowe.

Among other problems, not only is there massive price disparity among health care providers for the same procedure, simply choosing by price doesn’t provide consumers with other information they need to make an informed decision: the hospital’s brand value, quality of care, consumer ratings, convenience, accessibility, customer experience and urgency of need.

In short, Trump’s executive order fails to take into account the shopping process used by consumers to find a provider—or what happens to the consumer who needs urgent care and can’t shop around at all.

“Consumers want to understand the confusing disparity among prices for similar services,” says Brian Sanderson, managing principal of health care services at Crowe. “An increase in transparency will allow consumers to apply normative, rational purchasing criteria when making non-urgent choices on where to get care. Hospitals that can clearly state the total price to be paid for a procedure before those services are delivered—and then charge only that price once they are delivered—will give patients the basic tools they need to make well-informed decisions.”

Read more: 

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• Hospitals, but not consumers, profiting from Medicaid expansion
• Uncompensated care costs at hospitals on the rise