While it’s easy to shop around for the best price on a car or the cheapest gallon of milk, it can be nearly impossible to predict what your medical bill will be following a procedure or hospital visit, regardless of your health insurance coverage.
In light of this, President Trump signed an executive order in June aimed at making prices for “shoppable” healthcare services - defined as “common services offered by multiple providers” - more transparent for consumers.
According to the order, the Department of Health and Human Services (HHS) has 60 days to write specific price-publication requirements for hospitals for certain services. The new price transparency requirements should allow patients the opportunity to compare costs “before making informed choices based on price and quality.”
Though it is unclear how demanding these new rules will be for providers, here are a few things you should know:
Hospitals and insurance companies will have to publish their negotiated rates, and it won’t be easy. If this rule is strictly enforced by HHS, they will have to publish negotiated rates for a list of shoppable services as well as provide estimates of out-of-pocket costs to patients prior to non-emergency care.
This will be a complex task, as the list of shoppable services is incredibly long. The transition to a healthcare industry in which specific rates are available to the public will take time and effort.
The administration believes the price transparency requirements will give consumers more control over their healthcare costs, allowing them to make informed decisions about how and where to receive their care. However, it remains to be seen how HHS will interpret the order’s somewhat vague requirements.
A few price transparency efforts have already been made by providers, but with little effect. Some hospitals and insurers already provide price estimator tools, but they are infrequently used by consumers, as many medical services are needed last minute with little or no time to consider prices.
Additionally, the Affordable Care Act (ACA) requires hospitals to post “list prices” online, but these prices rarely reflect what insurers and patients will actually pay, and they are not user-friendly. In order to produce a price estimate for a medical visit from these hospital price lists, a patient must sift through a massive number of medical codes; pick out each individual component of their upcoming visit (specific blood tests, procedures, etc.), many of which are unknown prior to the visit; and tally those up to find their estimated total.
And, after all the sifting and tallying, that total will still not match the patient’s actual payment, as it does not account for any insurance coverage. In short, published price lists do little for the consumer.
Price information will only impact consumer behavior if the information is easy to use and understand. Providers won’t face the threat of lost business as a result of price publication requirements unless the rules require the information to be published in an easily accessible, understandable format.
It is possible that businesses, consumer groups, insurers, or even physician offices could direct patients to more cost-effective providers, but only if the information is detailed, location-specific and understandable.
We still have a lot to learn. Theoretically, President Trump’s order will require hospitals and insurers to publish prices that are more accurate and more detailed than those that are currently available.
However, all potential impacts of increased price transparency are subject to change based on final rules regarding price reporting (average rates accepted from insurers vs. hospital-specific rates); which prices are required (hospital service prices only or other laboratory and physician service prices as well); and how the administration plans to enforce the rules.
It also remains to be seen if the price-publication requirements for certain services will result in increased pricing for services not subject to price publication.
While economists are divided as to whether transparency will ultimately lead to higher or lower prices for consumers, there is one thing that’s certain: providers need to be prepared to share more information than they’ve had to share in the past, and this will not be an easy assignment.
Colin Luke is a partner at Waller Lansden Dortch and Davis.
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