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June 23, 2015 12:00 AM

Consumers demand price transparency, but at what cost?

Beth Kutscher
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    ORLANDO, Fla.—Consumers are demanding more transparency around healthcare costs, but there are limits to how much that information can help them make decisions and it could end up costing them more in the end.

    Price transparency has been a key initiative for the Healthcare Financial Management Association, which is holding its Annual National Institute this week in Orlando, Fla. The group established a task force on the issue in 2013.

    But one of its opening speakers offered a sobering take on the subject.

    “I have not drunk the Kool-Aid on price transparency,” said David Newman, executive director of the Health Care Cost Institute, which compiles data on cost and utilization trends and is supported by major payers including Humana, Aetna, Kaiser Permanente and UnitedHealthcare. “There can be adverse effects of price transparency.”

    In markets where pricing is very transparent, pricing tends to narrow and the average cost rises, he said.

    In healthcare specifically, hospitals may become price-competitive only on selective services or those they are required to publicize, he noted.

    That's assuming, of course, that there's real competition in a market, and that patients have the ability to take cost into account when making decisions. “In some markets, the price is the price is the price,” Newman said.

    In a medical emergency situation, for instance, patients aren't going to begin price shopping while waiting for an ambulance. And sometimes what seems like minor ailment can turn out to be something more serious—and more expensive—making it difficult for patients to compare prices ahead of time.

    Still, the growth of high-deductible health plans has put the onus on consumers to control their own healthcare costs. Out-of-pocket costs for premiums and deductibles have doubled to nearly 9.6% of household income between 2003 and 2013, according to data from the Commonwealth Fund.

    In conjunction with the HFMA meeting, credit-reporting agency Transunion released the results of a survey that found that 80% of respondents listed price transparency as a factor in choosing a healthcare provider—on par with bedside manner. And 79% said they'd be more likely to pay their bills in a timely manner if they had price estimates before getting care.

    St. Luke's Health System in Kansas City, Mo., began offering price estimates about a decade ago, but only to patients who requested them. In 2011, however, it started giving out estimates to all patients, and the number of estimates it provided grew from about 2,500 in 2010 to more than 26,000 the following year.

    “When patients know what they might owe, they're more likely to make a payment,” said Diane Watkins, St. Luke's vice president of revenue cycle, during a presentation on how to improve billing and collections while focusing on the patient.

    As hospitals think about patient engagement, online scheduling and price comparison tools are two areas getting attention, said Jim Lazarus, managing director of strategy and innovation with the Advisory Board Co.'s revenue-cycle-solutions division.

    Some of the larger players in a market see it as a patient service, while smaller providers might see it as a way to gain a competitive advantage, he added.

    MetroHealth System in Cleveland publishes prices for a number of common services, such as daily inpatient rates, psychiatric and maternity care, laboratory tests and radiology scans. It also links to its payers' cost estimate tools.

    The move was part of an overall effort to improve patient financial communications. Another step included holding patient focus groups to redesign bills to make them easier to understand.

    While its patient-friendly financial guidelines have won the system recognition from the HFMA, CFO Craig Richmond acknowledged the limitations of price transparency.

    “We also need to marry the cost comparison with the quality,” he said. “The information exists out there, it's just not married together.”

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