Healthcare price transparency: Where are we now?

In order for the United States to improve value in its healthcare system, more needs to be known about how much medical procedures, devices, and drugs cost. The Institute of Medicine estimates that $105 billion of annual waste in healthcare spending can be attributed to a lack of competition and excessive price variation.

“Insufficient public data on the price of healthcare services contributes to this waste by denying consumers the information they need to make smart choices,” says Kristof Stremikis, MPP, MPH, senior manager, Pacific Business Group on Health, San Francisco. “Greater price transparency will improve the functioning of healthcare markets and lead to better, more affordable care across the U.S. healthcare system, particularly when combined with meaningful information on quality.”

Bumps in the road

But providing price information about healthcare services to consumers before they seek care can be very challenging, says Suzanne Delbanco, PhD, executive director, Catalyst for Payment Reform, Berkeley, California. “It’s hard to predict exactly what healthcare services a patient will need, despite the fact that there are negotiated prices for each of the components of care that can be shared in advance.”

Factors such as enormous variation in care delivery, different approaches for measuring outcomes, and wide-ranging products and services compound the price transparency issue. “The diversity of payers in a market that contract with providers at different rates and serve different populations (e.g., Medicare, Medicaid, groups, individuals) adds to the complexity,” says Delbanco. “As purchasers, providers, and policy makers pursue change, the lack of provider competition, health plan and provider restrictions on data use, and policy makers’ concerns about the unintended consequences of price transparency will also pose challenges.”

Next: The transparency push

Transparency push

Many forces are at work in to improve price transparency. First, leadership at the federal level has been steady and strong. “And where Medicare goes, others will follow,” says Elizabeth Mitchell, president and CEO, Network for Regional Healthcare Improvement, Portland, Maine. “Providers understand that they will be held accountable-and paid-for greater value in the near future. So they want the necessary information, tools, and support in order to be successful in this transition.”

Secondly, Mitchell continues, more consumers are enrolling in high-deductible health plans and are facing some difficult truths about what this means in terms of their contribution to their healthcare costs. In addition, employers and employees are foregoing raises and cost of living adjustments because healthcare costs are consuming those dollars.

Finally, communities are becoming increasingly aware that more resources are going toward healthcare, and consequently crowding out funds that might otherwise go toward strengthening schools, roads, or other social goods, Mitchell says.

“All of this has made healthcare stakeholders more price sensitive, and will be furthered by the federal government’s push to pay-for-value programs,” Mitchell says.

Making progress, but more is needed

The good news is that some progress has been made in cost transparency. In particular, Americans with health insurance through larger insurers most likely have access to a consumer-oriented tool with price information about the majority of their healthcare services. “This is significant progress from five years ago,” Delbanco says. However, Americans insured through smaller, regional health plans may not have access, nor do most of the uninsured.

A growing number of purchasers and employers have turned to third-party vendors in search of tools and services that engage their employees and dependents, and encourage them to select healthcare providers and services more carefully. “Over the last several years, independent vendors... have made significant strides in developing price transparency products designed to help consumers shop for healthcare,” Delbanco says.

In addition, most major national health plans offer websites to patient members in which they can find provider-specific and healthcare service-specific cost and quality information, such as how much a visit or procedure will cost. These tools are often linked to the plan member’s benefit design information such as copay or coinsurance information, and can portray information about out-of-pocket cost sharing that correlates to where the member is in meeting his or her deductible and their account balance.

Several plans are also contributing price and performance data to multi-payer claims databases, such as the California Healthcare Performance Information System. In 2014, three of the nation’s largest insurers agreed to provide consumers with access to an online database (guroo.com), which provides information on the price and quality of healthcare services.

Next: Action at the state level

Action at the state level

States have the authority to pass laws to ensure that their citizens have access to healthcare prices. However, a recent review of state transparency laws conducted by Catalyst for Payment Reform and the Health Care Incentives Improvement Institute (HCI³), the 2015 "Report Card on State Price Transparency Laws," showed that 90% of states fail to provide adequate price information to consumers.

However, Delbanco is quick to point out that this bleak picture masks recent legislative and regulatory activity that has sprung up nationwide. “Some states, including Connecticut and New York, are just now assembling their all-payer claims databases and working on consumer-facing websites,” she says. “Maryland is in the process of embarking on a significant effort to publish prices on healthcare services, and the state of Washington recently enacted a new law that establishes a statewide all-payer claims database.”

New Hampshire returned to a high score this year after a brief hiatus because of an inactive website last year. “Its rebound shows that even small states can develop and maintain a useful and consumer-friendly website on healthcare prices,” Delbanco says.

The future

Efforts to increase price transparency will continue in the foreseeable future. “Public and private-sector stakeholders will demand data that creates consistent, understandable, and useable comparisons for common inpatient and outpatient procedures, devices, and prescription drugs,” Stremikis says. “Value-based purchasing initiatives will continue to proliferate, increasing pressure on providers to disclose cost and quality information. Multi-payer claims databases will continue to spread and gain functionality, and efforts to harmonize data collection standards across states will begin to emerge.”

Karen Appold is a writer in Lehigh Valley, Pennsylvania.