For years, health care experts and economists have called for greater price transparency as a tool to bring costs down. The argument is attractive for many reasons, perhaps chiefly because it’s rooted in common sense. Many Americans won't buy a $75 pair of shoes, let alone a $500 airplane ticket or a $15,000 car, without first searching for a better deal. And though consumers may be less likely to shop around for a surgery than a pair of shoes, cost estimation tools can still minimize unpleasant surprises for the patient at the end — and minimize risk to a health care provider’s patient-satisfaction scores.
The uptick in high-deductible insurance plans has also moved health costs front and center for more consumers, as they shoulder a greater percentage of their own medical expenses. Now, as debate about the future of America’s health care escalates, the push for price transparency is expanding beyond health care and consumer circles into legislative action. Here’s an overall look at where things stand, plus the key states making national news, as the push for price transparency legislation gains ground.
The National View
To date, 28 states have passed laws that encourage or mandate greater clarity, according to the National Conference of State Legislatures. Two New England states, Maine and New Hampshire, are among the best in the nation at helping their patients access cost information, according to the Catalyst for Payment Reform and the Health Care Incentives Improvement Institute, which together put out an annual report card on price transparency laws.
Health insurers in New Hampshire must disclose cost information to their members, and the state also runs a free website providing pricing based on a resident’s insurance provider, deductible size and coinsurance. The site, which launched in 2007, uses a massive claims database to estimate the total cost of a visit or procedure, from doctor fees to facility add-ons. Maine, meanwhile, launched its own site in late 2015, created by an independent state agency and funded by a $3.7 million federal grant. The new site reveals that, for example, delivering a baby at one hospital versus another less than a mile away could save several thousand dollars.
Now, other states are trying to get up to speed. Last year, Florida passed a law that requires hospitals to share their prices with a state agency, which is spending more than $6 million to create a consumer-friendly website. The legislation clarifies that “price” means the amount a provider actually receives from an insurance company for a procedure or appointment, not an estimated out-of-pocket number or a hospital’s so-called chargemaster price, a generic figure that is often inflated because it’s considered the starting point for negotiations with insurance companies. In September, a statewide group that represents many Florida hospitals filed an administrative challenge to the law. If the court rules in the group’s favor, it would mean big news for Florida, but for now the law is still in effect.
Washington state legislators, meanwhile, are currently debating a bill that would force drug manufacturers to disclose any increases in the cost of medications. The state’s Health Care Authority, which purchases health care for more than two million public employees and Medicaid recipients, spent $1.2 billion on prescription drugs in 2015 — a 14 percent increase over the preceding year and a 45 percent increase over 2013. Under the proposed legislation, pharma companies would have to transparently explain price hikes on prescription drugs.
Despite widespread popularity, some of these efforts run into roadblocks in the form of industry opposition. Ohio lawmakers unanimously passed legislation in 2015 that would inform patients of a procedure’s cost, but it’s stuck in limbo today. The state’s hospital association has filed a court injunction to halt the law’s implementation; meanwhile, a host of other provider groups have joined in the pushback, arguing that the rule slows treatment by forcing doctors and other medical professionals to track down numbers from insurance companies before providing care.
The Tools to Follow Through
As state governments across the country work to implement these laws, some health systems are taking the initiative to increase their own transparency protocols. These providers say it’s a good business decision because patients who are aware of their financial responsibility are more likely to pay their portion of the bill up front — a significant boon in an era when providers struggle to collect out-of-pocket fees as deductibles rise.
The Mayo Clinic, for instance, offers an online price calculator that provides specific estimates for everything from routine office visits to, say, a twin cesarean birth — tailored by location and health insurance coverage. And the tool’s intuitive interface makes it easy to see exactly which services and follow-up care are included in the estimate.
From a provider’s viewpoint, offering a cost estimate prior to care can fundamentally change the way they acquire new patients, treat existing patients, and improve patient satisfaction for both groups, as I wrote in “How to Be the Amazon of Health Care.” No one likes to be surprised, and by helping patients understand their out-of- pocket costs it allows providers to build trust with their patients. That’s because these tools seed trust and patient empowerment, at a time when health and financial anxieties may be running especially high.
Integris Health, one of Oklahoma’s largest health systems, represents one of these success stories. It began offering out-of-pocket cost estimates, processed manually, in 2006. Since then, the program has shifted to an automated process and has expanded to provide about 20,000 cost calculations each month, generated during the appointment scheduling process. As a result, Integris has watched its payments collected at the time of service skyrocket to $18 million in 2015 from just $900,000 in 2007.
Last year, St. Clair Hospital in suburban Pittsburgh made a similar move, debuting an online tool that makes it easier for prospective patients to determine the cost of more than 100 common tests and procedures. People can click on “patient estimates,” provide the information on their insurance card, or choose “uninsured,” and then select the service they plan to receive. The results include the cost of the procedure itself, plus the drugs and other fees that are typically included, and explain how much the patient will owe.
Despite this momentum, there’s still a lot of room for improvement. Transparency at the state level remains abysmal, according to the Catalyst for Payment Reform and HCI3's report card. While this year’s results aren’t out yet, the 2016 report doled out just three A’s (for New Hampshire, Maine, and Colorado) and a whopping 43 F’s. The states that failed did so because they didn’t collect claims data from all payers or they failed to make the data accessible via a website. The failing grades reinforce a grim reality: Even if a state passes transparency legislation, gathering mountains of cost data from sometimes uncooperative insurers and publishing it in a manner that’s useful to consumers proves extremely difficult.
Still, the headaches are worth it in the end, say advocates, if only because cost transparency keeps customers happy. “Patients have been asking us for it,” St. Clair Hospital CFO Richard Chesnos told the Pittsburgh Post-Gazette about his employer’s price calculator. And in this day and age of consumer-driven health care, that should be enough.
Karl Ulfers is senior vice president of product at Rally Health. For more on cost estimation tools for hospitals and other health care providers please contact firstname.lastname@example.org.