The Importance of Healthcare Price Transparency in Today’s Consumer-Driven Marketplace

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Photo credit: Depositphotos

By Evan Goad, Vice President and General Manager of Patient Experience, TransUnion

Healthcare consumerism continues to grow within the U.S. marketplace, and the financial and economic challenges of the COVID-19 pandemic have only exacerbated this trend.

A recent TransUnion Healthcare survey revealed 59 percent of recent patients deferred non-COVID-19 related care in the time since March 2020, and 49 percent said the state of the economy has at least some impact on the way they seek medical treatment. With more patients taking responsibility for their medical care and associated costs, there is a critical and rising need for increased price transparency from healthcare providers.

At the same time, the healthcare industry is finally placing a greater emphasis on ensuring patients have clear, accessible pricing information before service via the final Center for Medicare & Medicaid Services (CMS) price transparency rule. The new mandate, which went into effect on January 1, 2021, requires healthcare organizations to disclose standard charges for certain medical services, including payer-specific negotiated rates for those services.

Under the final rule, hospitals and healthcare systems must comply with two key provisions

  • Provide 300 shoppable services in either a file or patient-facing estimator. There are 70 CMS-specified services that must be included in this 300, in addition to another 230 the hospital can select. All ancillary services offered at the facility must also be accessible to the patient.
  • Make a machine-readable, hospital standard charge file available that includes gross charges, payer-specific negotiated rates, cash prices, and the highest and lowest negotiated rate.

Some hospitals have adopted a rate-averaging approach in response to the mandate, which uses averages of health plan rates for all services, equipment and drugs, instead of using payer-specific negotiated rates. However, CMS communicated that this strategy is noncompliant on a December 8, 2020 webcast. With the above in mind, it’s imperative that hospitals and healthcare systems consider solutions and resources that will allow them to be compliant with both of the above provisions. 

CMS also said it would begin auditing a sample of hospitals for compliance in January 2021, as well as investigating submitted complaints and reviewing analyses of non-compliance. Those hospitals that do not comply can face a maximum penalty of up to $300 per day per facility. 

Why is price transparency so critical? 

Patients expect to have visibility into their out-of-pocket costs before service, and the price transparency mandate is just one way that the industry has responded to the growing trend of healthcare consumerism. 

Many patients — and younger generations in particular — are facing continued economic and financial challenges due to the COVID-19 pandemic, which in turn has led to greater price shopping and cost sensitivities. In fact, 33 percent of Gen Zers and 29 percent of Millennials reported that their health insurance coverage was impacted due to COVID-19, compared to 22 percent of overall respondents according to TransUnion’s patient survey. 

Equally concerning is the fact that barely half of patients (52 percent) fully understand their financial responsibility for a medical bill, underscoring the nationwide challenge of health literacy and patient engagement. As consumers shoulder more of the burden of healthcare costs, and in light of the pandemic’s impact on employment and insurance status, providers will need to offer patients personalized billing and financial experiences along with innovative engagement strategies that meet each patient’s individual needs. 

Just as important as having a clear payment process, patients are also eager for clear and accessible information. And with patient out-of-pocket expenses remaining near their highest levels in 2020, TransUnion found more patients are researching healthcare costs online year-over-year. Further, many are actually selecting their healthcare providers based on cost. With this in mind, healthcare organizations will likely see a rise in patient satisfaction following compliance with the new transparency requirements.

Finally, care delivery and consumer preferences have adapted as a result of COVID-19. This is evident with hospital visits in the emergency department staying well below pre-COVID-19 volumes and nearly six in ten patients utilizing telehealth due to the pandemic. Of the patients that have used telehealth services, 62 percent said their billing experience was straightforward, suggesting that providers can learn from positive telehealth payment experiences to improve the patient financial experience across all settings. 

How can healthcare organizations meet the price transparency rule? 

Not only are patients calling for greater price transparency, hospitals and health systems that do not comply with the requirements risk a maximum penalty of $300 per day per facility, and up to $109,500 annually. 

In order to best meet these new rules, healthcare providers must develop strategies that include providing accurate, online price estimates; improving patient engagement efforts; and considering weaving quality data into negotiated price rate information. 

Transparency is here to stay, and healthcare organizations should implement approaches with the above elements in mind while also considering technology partners that are able to support both parts of the final rule. In doing so, healthcare providers can both comply with the new price transparency requirements and deliver a positive, frictionless payment experience that benefits all stakeholders. 

Evan Goad oversees front-end revenue cycle management and social determinants of health solutions. He’s been with TransUnion for nine years in various roles, including mergers and acquisitions, investor relations, business development and general management. Prior to TransUnion, he spent seven years at Sara Lee Corporation in progressive roles within investor relations, treasury, corporate development, strategy, and mergers and acquisitions.

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