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Why price transparency matters for health care

by Loren Bonner, DOTmed News Online Editor | May 20, 2014
Will Hinde
The costs of many health plans are now published for the world to see on health exchanges, but cost by procedure remains elusive, according to Will Hinde, the director of the health care practice of West Monroe Partners. But this is all changing as consumers take a more prominent role in health care decision making. DOTmed News spoke with Hinde about some of the potential benefits of price transparency — especially for imaging — and what challenges still need to be overcome.

DMN: The government seems to be supportive of more transparency in health care. How do providers and health care organizations feel?

WH: Government programs are largely administered by private organizations; the government is in favor of transparency due to the high costs of Medicare and Medicaid, which transparency would help combat.
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Provider and health care organizations understand the demand and need for transparency, but the legacy organizations will most likely not be the ones to champion this movement. These organizations are somewhat slow to change, and providing transparency is a costly and complex endeavor. Providers will have a difficult time as they are contracted with many carriers, all with unique fee schedules, so providing a price will be somewhat meaningless absent the patient's insurance policy information. Payors will need to upgrade systems, educate consumers, and create easy-to-use tools to help drive adoption. They are doing so to some degree, since they have the most to gain by their members making more cost-friendly care choices with which they typically share or absorb the cost.

DMN: Why have health care organizations historically been resistant to price transparency?

WH: The costs of many health plans are now published for the world to see on health exchanges; however, cost by procedure remains elusive.

There are several reasons health care organizations (payors) have not embraced the idea of true cost transparency. First, it is complex and expensive to implement. Given the policy-centric nature of the payor back office, it is difficult to determine the true cost of a patient encounter. Also, the majority of payors run their administrative platforms on legacy technology, which is not easily configured to produce this type of inquiry. Second, if forced to disclose procedure pricing, health care organizations feel they are giving away some of their 'secret sauce' as to how they assess risk pools and negotiate with providers. In this highly competitive market every advantage counts, and they do not want to help their competition or potentially lower all prices by getting into pricing wars with one another. Finally, historically, these types of tools have not been adopted by their members; the mentality has been, "Why spend the money and effort to upgrade systems and create tools if nobody will use them?"

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