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Underlying Complications

Price transparency may not control costs, so why does it matter?
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Increased transparency will not solve escalating healthcare costs on its own; rather, improved transparency must be only a first step toward increasing patient autonomy and more robust comparative effectiveness efforts.

August 06, 2019

There has already been much ado over the new CMS policy, which went into effect on January 1st, requiring all hospitals to post pricing information online. Superficially, this is a win for patients and their advocates. As with everything in healthcare, however, reality is not so simple. The vast majority of price lists are difficult to find and generally incomprehensible to the average layperson. Additionally, chargemaster prices for hospitals are often meaningless for patients with third-party insurance, as payors negotiate privately and aggressively with hospitals regarding what they will ultimately reimburse for a given service.

This illustrates one of the greatest challenges overshadowing all discussions of price transparency and the healthcare economy in America. To quote the great 20th century philosopher Drew Carey, “Welcome to the show where everything is made up and the points don’t matter.” Chargemaster prices are arbitrarily set to maximize the negotiating power of hospitals, payors privately negotiate alternative reimbursement rates, and patients themselves pay out-of-pocket deductibles — which vary dramatically based on coverage plans. This set of circumstances has confounded the healthcare market for decades and, precluding major unforeseen legislation, will not be changing anytime soon.

Numerous other questions arise when wading into the discussion of healthcare price transparency: what qualifies as transparency? Who is transparency for? Does transparency matter to patients when searching for healthcare options? A recent NEJM Catalyst article highlights four potential goals of transparency: do right by patients, lift the veil of healthcare costs, facilitate price shopping, and help providers ensure patients can afford their care. Given the varied challenges facing patients contingent on their insurance plans (or lack thereof), these goals are easier said than achieved.

Part of the challenge is that different patients will ultimately receive different bills for medical services rendered, even if undergoing identical procedures. These differences are further magnified depending on the setting of care, with inpatient services routinely priced at double what the same service may cost in an outpatient center. However, hospitals have found little incentive to stabilize prices, and that has manifested in continued increases over the last several years: Despite minimal increases in physician fees, hospital-based prices grew 25-42 percent from 2007-2014, according to a recent estimate.

Most patients still rely primarily on referrals from their primary physicians, and efforts to empower patients with pricing tools has had limited success. This underwhelming response has even been seen in states like California, which requires the posting of prices in understandable lay-terms. Clearly, simply listing chargemaster prices does little to facilitate decision-making or cost-savings. And increased price-sharing in the face of rising prices through high-deductible plans has not been shown to encourage price-shopping either.

Ultimately, increased transparency is unlikely to be the silver bullet to stymie out-of-control healthcare sticker-shock. Legislative intervention, such as Rhode Island’s Affordability Standards, may be one of the few realistic options left to address ever-ballooning prices. Current reimbursement and referral models essentially preclude real price shopping by patients. Consumerism will always be hindered in healthcare without a level “paying field” — i.e. the same cost for the same service and with quantifiable results.

So what’s left? Empowering patients and physicians with real pricing information is a worthy aim on its own merit: patients would become much less vulnerable to surprise billing, which can be devastating. Comparative effectiveness research would be dramatically simplified, facilitating direct cost-effectiveness studies of various interventions across clinical settings and specialties. Hospitals and physicians may actually avoid additional revenue losses, all the while increasing patient autonomy.

Posting chargemaster prices online is an admirable initiative, but it does little to clear the murky waters for patients or their physicians, the latter of whom are all too often just as unclear about billable costs of care. Increased transparency will not solve escalating healthcare costs on its own; rather, improved transparency must be only a first step toward increasing patient autonomy and more robust comparative effectiveness efforts. Reach out to your practice or hospital administrator to find out what they are doing to be more transparent.

For next steps on how you can help move the discussion of price transparency in radiology forward, please visit this Engage post and consider leaving a response of your own!

Author Nathan M. Coleman, MD,  radiology resident at the Indiana University School of Medicine and member of the Economics Committee of the ACR’s Commission on Patient- and Family-Centered Care