Price transparency is not a new concept for healthcare providers, but as more consumers have insurance thanks to the Affordable Care Act—as well as high deductible plans with, in some cases, higher out-of-pocket costs—providers are working to improve access to accurate cost information.
According to a report from The Commonwealth Fund released in November 2014, 21 percent of adults with health insurance spent 5 percent or more of their income on out-of pocket healthcare costs over the past year (excluding premiums), and 13 percent spent 10 percent or more. Low-income adults were the most likely to have high out-of-pocket costs, with 41 percent of those making less than $11,490 a year spending 5 percent or more of their income on out-of-pocket healthcare costs and 31 percent spending 10 percent or more.
As a result of these higher out-of pocket costs, patients have more interest in determining what they will pay in advance, and that trend is also fueling efforts to improve price transparency. According to the Healthcare Financial
Management Association, which has a task force on price transparency, “The intended outcome of price transparency is to provide patients and other care purchasers with the information they need to make an informed choice of provider.
Price transparency is just one component of the information that care purchasers need to make this choice; the quality and safety of services a provider delivers, for example, are other important components of the information a care purchaser needs.” From a healthcare provider perspective, improving price transparency may mean evaluating who within a health system is best able to provide cost information for patients, according to Torrey Sundall, the enterprise executive director of patient financial services for Sanford Health, a health system based in South Dakota.
“I would describe it as a healthcare provider’s opportunity to improve the patient experience by providing that education and information upfront to a patient so that they can make an informed decision regarding their care from a cost standpoint,” Sundall said. “A lot of the healthcare providers across the nation [are assessing] their internal capabilities of providing [an] accurate and timely quote or estimate. And you’re seeing a lot of providers who are trying to figure out ways to improve that, whether it’s through internal efforts or engaging in a third-party vendor system.”
Providers and representatives of insurers, consumers and others in the healthcare industry involved with the
HFMA’s Price Transparency Task Force are also focusing more on the extent patient interest in their out-of-pocket costs is fueling the trend in access to information. That focus, along with how overall price transparency can be achieved and challenges with the process, is evaluated in the HFMA’s Patient Friendly Billing® 2006 report, Consumerism in Healthcare: Achieve a Consumer-Oriented Revenue Cycle.
“In that report, we go through what price transparency is from a patient perspective,” said Terry Rappuhn, leader of HFMA’s Patient Friendly Billing® and a former hospital system administrator. “It has examples and objectives on what hospitals can do to achieve price transparency.” Rappuhn stressed that efforts to improve price transparency are always evolving and will continue to get better.
“There has been an increase in interest from patients and consumers on prices as a result of the high-deductible health plans,” Rappuhn said. “That’s been happening for a number of years and…it’s going to continue to evolve. You can’t just flip a switch and say, ‘Tomorrow I am going to have price transparency.’ You have to build it. That’s why I think it’s evolving and it will continue to get better.”
According to the HFMA report, providers can achieve price transparency by providing consumers information that is meaningful to them. “Ultimately, the objective is to provide patients with easy and timely access to information that clearly explains their financial obligation to pay for health services—in most cases, in advance of receiving those services,” according to the report.
In regards to providing meaningful information, patients must understand how their individual plan benefits impact a price estimate, Sundall said. For example, if an insured patient is price shopping multiple providers and that patient only has gross charges from the providers, he may make a decision that actually results in more expensive care.
The most accurate information on out-of-pocket expenses is available by taking into consideration the allowed amount from individual insurance plan benefits. It takes a coordinated understanding. However, as a patient’s likely first point of contact, providers have to work to issue the best price information available as an out-of-pocket cost estimate.
It can be challenging because the cost for one procedure could vary based on the patient’s condition, the services they need, any complications that occur and even the type of supplies a provider may use to complete the procedure. “Those complexities can make it very difficult to come up with a price estimate that doesn’t have a wide range to it,” Sundall said. “I think patients are looking for that estimate that is as accurate as possible. But sometimes just due to the complexity or the potential complexity of the services, you have to provide that patient with a range of those potential costs.
The challenge there is having appropriate communication with the patient so that they understand that this is just an estimate, not a guarantee of what their charges will be. There may be an unknown variable that is not determined until after the provider has started the procedure. ”
Providers issuing estimates can recommend that patients contact their insurance company next to determine coverage for the service and out-of-pocket costs, and ultimately make the best informed decision on where to receive their medical care. “What’s important is for a patient to really understand their own insurance benefits.
[And] there is a level of coordination that’s needed between the provider and the payer to arrive at an accurate quote of what that person’s actual out-of-pocket responsibility is going to be,” Sundall said.
The Affordable Care Act and Price Transparency
Under the Affordable Care Act, hospitals are required to make available a list of their standard charges for items and services, according to an American Hospital Association report from July 2014, Price Transparency Efforts Accelerate: What Hospitals and Other Stakeholders are Doing to Support Consumers.
Under section 501(r) of the Affordable Care Act, which regulates nonprofit hospitals’ ability to maintain their tax-exempt status, hospitals are also required to establish and widely publicize written financial assistance (FAP) and emergency medical care policies. The 501(r) regulations were finalized in December 2014, and the final rules apply to a hospital facility’s taxable years beginning after Dec. 29, 2015.
Sundall stressed that price transparency is more than just providing a list of charges for services, but the requirements in the Affordable Care Act will prompt healthcare providers who have not focused on price transparency to this point to increase and improve their efforts.
“Appropriate scripting and communication will be important now that the 501(r) requirements have become final,” Sundall said. “Typically you want to provide a price estimate to a patient as soon as possible so they have the knowledge ahead of time to make an informed decision. But then you also have to maintain compliance with 501(r) and make sure you’re educating that patient about your financial assistance policy. You likely have to educate that patient about your financial assistance policy before engaging in discussions regarding your expectation of payment.”
The Affordable Care Act has also contributed to employers offering high-deductible health plans to their employees, leading to more inquiries about costs. According to The Commonwealth Fund report, as healthcare premiums rise, many employers and individuals are selecting insurance plans with higher deductibles and copayments in an attempt to keep premium costs in check. Overall, 13 percent of people with private health insurance whose plans include a deductible now have deductibles equivalent to 5 percent or more of their income; that figure includes 25 percent of adults with low incomes and about 20 percent of adults with moderate incomes($11,490 to $45,960 a year for a single person).
Over the next few years, assessing how health insurance is working for consumers will be a critical measure of the Affordable Care Act’s success, according to The Commonwealth Fund. But the healthcare law is increasing consumers’ awareness about their medical expenses. “The Affordable Care Act is impacting the demand for price transparency,” Rappuhn said. Additionally, the 501(r) requirements are doing more to influence providers’ price transparency efforts.
“The 501(r) requirements, I think, [are] causing the hospitals to really step back and be more systematic about both price transparency and what they communicate to patients,” Rappuhn said. “It does require more transparency in what your financial assistance policies are, and that’s a good thing.”
Challenges and the Future of Price Transparency
Overall, Sundall said all health systems want to find a way to improve the patient experience by providing them with accurate cost information in advance. “When you do that, I think you’re going to have greater patient retention; the patient in general is going to be happier with their care and want to come back to you for future healthcare needs,” he said.
According to the HFMA report, there are many important questions to answer about price transparency:
Will consumerism in healthcare bring about a decline in healthcare consumption, as patients become more discerning about purchasing healthcare services?
Will consumerism facilitate necessary preventative care?
Will providers and payers be able to provide meaningful price and quality information to allow consumers to make decisions about healthcare value?
Will consumers be willing and able to assume the administrative complexities and financial burdens of consumer-directed health plans?
Will providers find ways to compete with convenient care centers offering pricing advantages?
Will the widespread use of health savings accounts generate sustainable savings?
Rappuhn said the most important goal for price transparency is to work on it with consumers’ needs in mind. “I think for this year, the message is to keep working on price transparency as hard and fast as you can because it’s continuing to be more and more important,” Rappuhn said. “Whatever you’re doing, you just have to continue to get better and make it broader.”