John Talaga

Price transparency, affordability and patient liability: Forging the right connection

December 22, 2020
By John Talaga

Two federal rules, both intended to deliver greater price transparency to patients anticipating healthcare procedures, are set to go into effect January 1, 2021. While healthcare entities from the American Hospital Association (AHA) to the Association for Community Affiliated Plans have objected to these specific proposed rules—including a failed legal challenge by the AHA and other hospital groups—most healthcare stakeholders acknowledge that the industry at large owes patients more transparency. Indeed, massive surveys have demonstrated that when patients know in advance what to expect from their medical bills, they are more satisfied with their care as a whole.

Greater patient satisfaction is of course not the only story here. The widespread adoption of high deductible health plans has uncovered the glaring affordability gap in healthcare: research suggests that 38% of Americans say they are worried about being able to afford surprise medical bills and 50% of U.S. adults say they or a family member put off a healthcare visit in the past year because of cost. The affordability gap has only widened since COVID-19, with 13 million Americans having lost their employee-sponsored insurance following the pandemic.

In turn, patient liability has posed a major financial issue for hospitals. With 30% of the average healthcare bill owed by patients themselves—and nearly 70% of Americans with less than $1000 in savings before the pandemic—patients have found themselves unable to pay their medical bills in full. Hospitals have thus had to find ways to collect directly from patients who lack the capacity to pay.

What patients’ experience shows, however, may be promising in the current context. Patients who know upfront what they will owe for a medical procedure, and who have a reasonable payment plan beforehand, are more likely to pay their bills.

The call for greater transparency by patients is, at its core, a call for better affordability. In other words, while these new transparency rules will absolutely demand massive time and effort from both providers and payers, they may end up addressing some of healthcare’s other challenges like path to payment and affordability.

The rules
1. The final rule “Medicare and Medicaid Programs: CY 2020 Hospital Outpatient PPS Policy Changes and Payment Rates and Ambulatory Surgical Center Payment System Policy Changes and Payment Rates. Price Transparency Requirements for Hospitals to Make Standard Charges Public” requires hospitals and ASCs to make both their chargemaster prices and the prices they’ve negotiated with payers publicly available online. The rule applies to the prices of 300 “shoppable” healthcare services—everything from a basic metabolic panel to a hip replacement—which the provider organizations must display in a consumer-friendly manner.

According to the Centers for Medicare and Medicaid Services (CMS), educating the consumer about cost will help drive value in healthcare.

2. The second rule follows the same logic of consumer empowerment but looks to the payers rather than to the providers.
The “Transparency in Coverage Proposed Rule” would require payers to post online their negotiated rates for in-network providers as well as their allowed amounts for out-of-network care. In the language of the rule, insurers must make available to “participants, beneficiaries and enrollees (or their authorized representative) personalized out-of-pocket cost information for all covered health care items and services through an internet-based self-service tool.”

The context
Patients have long wanted to better understand the basic cost of healthcare procedures as well as what their specific financial obligations will be. The massive shift of liability from insurers to individuals in the wake of the Affordable Care Act has sharpened this wish, as has the significant prospect of personal bankruptcy due to unexpected or unexpectedly large medical bills.

Conducting regular surveys on the patient billing experiences of insured Americans, TransUnion Healthcare has shown that patients who receive upfront, accurate cost estimates for their care are more satisfied with their overall healthcare experience. The surveys also reveal that these estimates are now expected by about half of all patients—the younger generations in particular. According to TransUnion’s Jonathan G. Wiik, Principal of Healthcare Strategy, “Allowing patients to view this information in a self-service manner helps empower them to be more engaged in their healthcare and aware of potential out-of-pocket costs.”

Avoiding unintended consequences
All of this work toward price transparency and consumer engagement is necessary if healthcare is going to fix its ballooning costs and unaffordability issues. But there is one critical piece that neither the CMS rules nor the most engaged healthcare consumer can supply. That is the responsive payment support that makes necessary medical procedures affordable.

Think about it: one possible outcome of price transparency is that the patient recognizes they simply do not have the money to go through with the procedure. Because avoided and postponed care causes such well-demonstrated downstream harms, it is up to providers to face this possibility head on.

The right connection between transparency and patient liability
Hospitals can embrace the broader movement towards price transparency to enhance patient engagement and affordability. One way to do so is to leverage predictive analytics in order to customize affordable and flexible payment options that match an individual’s capacity to pay.

Price transparency alone cannot help patients meet their financial obligations. But providing flexibility in how they pay - whether it be through payment plans, patient financing, intelligent discounting , or more - alongside accurate, upfront estimates has been shown to improve collection rates for hospitals by forging the right connection between the provider and the patient.

About the author: John Talaga us the executive vice president and general manager for healthcare at Flywire.