Healthcare Price Transparency: What’s the Impact of Shining the Light?

Transparency initiatives in healthcare are gaining steam, with the focus primarily going toward the price of healthcare services.  The concern lies not only with what hospitals charge, but also what physician practices will charge.  Insurers or payers have always been concerned about charges because the payor traditionally has been on the frontline of paying.  However, individual patients want more information now too because of a greater cost sharing burden and overall attention to the cost of care.

The transparency movement is best seen in Massachusetts.  Provisions in Chapter 224 require both payor and providers to disclose price information to individuals upon request.  The burden has mostly fallen on payor to date to respond to requests, but providers cannot expect to remain off the hook.

When considering price transparency from the provider perspective, it is first necessary to understand that price can have varied meaning.  The first level may be the “chargemaster,” which is the full amount set for a service before any discounts are applied.  The price may be the amount that the provider actually expects to receive from a payor or patient, which may or may not be the amount set forth in the chargemaster.  Then, the actual cost typically depends upon who is paying, whether it be a payor, full out-of-pocket by the patient or some other option.

Further, the price, cost or whatever term is used will be impacted by other forces that are not readily apparent.  What is the market power of a particular provider and can it get away with charging higher rates than another provider.  The market power issue does not have to connect to the quality of care though.  The cost of supplies will also play a role and this is an often hidden aspect.  Providers can have their hands tied because certain products can have only one supplier or be under exclusive rights, which can drive up prices.  If the cost of a supply is high, it can be expected that the provider will make up for that cost in the price it charges.

With all of the background in mind, does that mean price transparency efforts are doing enough, or can have an impact?  Arguably, the price transparency efforts are putting more information into the hands of patients, which can result in change.  Additionally, price transparency is consistent with the goals of value-based care, which is the route that healthcare is now following.  In a value-based world, it is necessary to couple price information with quality information.  To that extent, the focus on price transparency is moving ahead of efforts to ensure that quality data is also available.  Without both pieces to the puzzle, it may not be possible to meaningful use the information obtained.

What does all of this mean for providers?  It means that providers will need to more carefully consider what goes into setting prices or charges.  The days of such information being kept hidden are over and providers must be prepared for the sunshine.  Additionally, it can be expected that negotiations with payor will change.  Both sides will be able to access information about what others receive or pay, which could result in a more level playing field.  It would also be expected that such open knowledge will result in high quality providers being able to seek a premium.

Ultimately, providers need to be aware of new statutory and regulatory requirements that are being imposed.  For example, as mentioned above, Massachusetts requires that price information be provided upon request.  This obligation cannot be avoided and providers must understand what compliance will take.  Robust and active plans should be put into place to enable appropriate responses.  Providers should also determine how best to use available information to their own benefit.  There can be lessons learned and advantages achieved by considering the landscape and assessing each provider’s place.  It is necessary to recognize that the healthcare world is changing and the provider that will succeed is the provider that most quickly figures out how to operate in the new world.

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About Matt Fisher

Matt is the chair of Mirick O'Connell's Health Law Group and a partner in the firm's Business Group. Matt focuses his practice on health law and all areas of corporate transactions. Matt's health law practice includes advising clients with regulatory, fraud, abuse, and compliance issues. With regard to regulatory matters, Matt advises clients to ensure that contracts, agreements and other business arrangements meet both federal and state statutory and regulatory requirements. Matt's regulatory advice focuses on complying with requirements of the Stark Law, Anti-Kickback Statute, fraud and abuse regulations, licensing requirements and HIPAA. Matt also advises clients on compliance policies to develop appropriate monitoring and oversight of operations.
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