What should healthcare price transparency look like?

The transformation in the American healthcare system imposes new and evolving obligations on providers and the rest of the healthcare industry. Healthcare spending continues to outpace inflation leading to a consensus that the status quo is not sustainable. 

Read: Price transparency: A significant force in healthcare

The Affordable Care Act (ACA) has changed not only how the health insurance market operates; it also contains mechanisms to slow the growth in cost of care and to improve quality of care. 

Read: Demand for price transparency grows

KaufmanThe traditional system for pricing healthcare is seen as a barrier to reducing costs.  Princeton economist Uwe Reinhardt famously described the healthcare purchase as “shopping blindfolded,” referring to a lack of transparency into price and quality of healthcare services. 

Advocates for healthcare transparency believe opacity tolerates wide variations in prices and quality for similar services and is an impediment to achieving the triple aim of: (1) improving the patient experience; (2) improving healthcare quality; and (3) reducing healthcare costs. 

Current trends in coverage cause patients to bear an increasing share of their healthcare costs.  High-deductible health plans and certain ACA plans offer lower monthly premiums along with larger copayments and deductibles. As a result, patients are becoming more cost conscious. Health policy experts generally agree that properly tailored transparency tools can help to hold down prices. 

What is not settled at this point is what transparency should look like.

Next: How some stakeholders are embracing transparency

Stakeholders are pursuing a variety of approaches to gather and provide cost and quality information:

Dorman-Rodriguez1. The government, in its role as purchaser and regulator, has a powerful impact on developments in transparency. Several years ago, the Centers for Medicare & Medicaid Services (CMS) established a 5-Star rating system to give consumers information on quality they can use when selecting Medicare Advantage plans. On the cost side, CMS now releases data summarizing the utilization and payments for procedures, services and prescription drugs provided to Medicare beneficiaries by specific providers.

2. States are also addressing transparency. At press time, 17 states have established or are implementing All-Payer Claims Databases to collect claims data with varying levels of accessibility by healthcare entities or consumers.  Another 20 states have created or are developing public websites to make cost and quality information available. Each state has its own set of standards and requirements.   

3. Private insurers’ websites provide information on how much a customer will have to pay for a particular service from different providers. The information is often combined into service bundles to allow an “apples to apples” comparison. Bundling then impacts how providers bill insurers. 

4. Information technologies have created space for new types of companies to offer cost containment tools.  The success of these new entrants will impact what transparency will look like and how providers will be measured.    

5. Some employers and insurers are attempting to control costs by adopting a system of reference-based pricing. This system, while meeting regulatory standards for adequate access, lets patients know how much of the cost will be covered depending on what provider they utilize.

This transformational time in healthcare has created opportunities for new approaches.  As proposed solutions are tested, payers and providers will have to adapt to new requirements and obligations. The new methods will continue to evolve into more standardized forms of measurement and reporting toward the goal of controlling costs while improving the quality of care.

Deborah Dorman-Rodriguez is a partner at Freeborn & Peters LLP and is the leader of the Firm's Healthcare Practice Group.

David Kaufman is a partner at Freeborn & Peters LLP and serves as a key member of the Firm's Healthcare Practice Group.