Beyond the numbers: Why price transparency isn’t the whole story

Rapper-turned-health care advocate Fat Joe recently summed up the issue of health care price transparency for anyone who has ever walked into a deli (or purchased anything else, for that matter). “It’s the only thing on earth they don’t give you a price for. If you go buy a sandwich in the store, you know the price.” But for health care, “Somebody’s paying $300 for an MRI, somebody’s right behind them paying $4,000.”

If you had no idea what the customer behind you was paying for your exact same sandwich (or surgery), you might not even realize there’s a problem (other than the fact that sandwiches – and health care – keep getting more expensive). But after one of health care’s best-kept secrets got out, the U.S. government stepped in to compel industry players and payers to publish their prices. 

A clear goal with a murky execution

The 2019 executive order was probably the clearest thing about the health care price transparency initiative: To enhance the ability of patients to choose the health care that is best for them, and to make fully informed decisions about their health care, patients must know the price and quality of a good or service in advance. 

In practice, compliance – and enforcement – of these price transparency rules has taken time. The price transparency rule has been in place for hospitals since January 1, 2021. Yet data from March 2023 found only 24.5% of the 2,000 hospitals surveyed were posting complete pricing information. In July 2022, payers were required to post price transparency data, as well.

Generally speaking, shining a light on one of the biggest mysteries in health care is a noble goal. But for a couple of reasons, it’s a Band-Aid (which, by the way, can cost $629 in an emergency room) rather than a solution to affordable quality health care: 

1. An expensive sandwich doesn’t necessarily taste better.

So, let’s say you know that one sandwich costs $5 while the exact same sandwich costs $30 next door. Do you know whether the pricey lunch will taste better (or be any healthier)? You sure don’t. And the same goes for big price variations for identical medical procedures: They do not indicate major differences in the quality of health care delivery. 

2. The numbers are only part of the story – and could be misleading.

Prices for most health care services will vary depending on the patient’s insurance coverage, the type of service provided, and the hospital’s negotiated rates with insurers. Plus, different data formats, coding nuances and duplicated procedure costs challenge some consumer-facing tools. What’s more, published prices don’t take into account plan deductibles or copays.

3. Knowing the sticker price can deter care altogether.

As I discussed in our recent webinar “Beyond the rules: Delivering transparency across all aspects of your client’s health plan,” research has shown that “consumerism” has not led to smarter health care shopping, but rather to care avoidance – skipping care due to sticker shock or the fear of what a medical finding will cost down the road. 

4. People ultimately listen to their doctor.

Despite the increase in posted prices, people still aren’t shopping for the best rates. Either the tools to decipher the numbers aren’t accessible or patients simply don’t have the time or acumen, when diagnosed with an illness, to go out and shop for care providers. Instead, they tend to go where their doctor tells them to go. 

Building a better sandwich

Awareness that medical costs are unhinged and uneven is a solid start to inspire action. So now that the symptoms are exposed, what can employers and benefits advisors focus on to build on the transparency momentum and transform the system?

• Employers need to be part of the solution. They can demand transparency from insurance carriers and work with payers focused on value rather than volume. And they can explore published rates to compare carriers based on their own employees’ utilization data.
• Promote primary care. Access to a list of posted prices doesn’t make most Americans medical mavens. Health care consumers want someone to help them navigate this complex system, and having a dedicated primary care doctor who knows your history and the nuances of your care needs can eliminate costly repetition, duplication, and unnecessary visits.
• Put pricing in perspective. Insurance companies are not always efficient at negotiating prices – and in some cases, can benefit by making more money with higher-priced care. Additionally, providers often lack incentives to compete on price because volume is not tied to performance or value. Benefits leaders and brokers have a responsibility to really dig into what is driving the costs, align contracts to value, and understand how incentives play into the pricing.
• Keep patient experience in the equation. The published data doesn’t quantify patient satisfaction, continuity of care, provider-patient engagement, or outcomes. 
• Find the providers who are doing it right. It’s not all doom and gloom. There are a number of providers out there focused on the right things, including financial management and data analytics, to inform treatment options and drive toward better performance. 

Price transparency is a necessary step in the uphill challenge to change the status quo, but it’s just the start. We can make it part of our conversations and negotiations to forge partnerships aligned for a healthier future.

Drew Burns is Mid-Market Sales Lead for Centivo.