The Trouble with Hospital Price Transparency

Many hospital and health system leaders acknowledge that if prices were more transparent, they would compare favorably with their peers and be able to attract more patient volume. So why isn't it happening?

When I talk to healthcare CEOs about how the negotiation dynamic is changing between the provider side and the payer side, they can provide lots of examples of how it's changing. In many regions, they're collaborating on risk-based contracts, forming accountable care organizations, and in general, getting better about sharing with each other what had previously been proprietary information: claims data and outcomes.

That information is critical to trying to improve the cost and quality of healthcare—a goal acknowledged by just about everyone involved.

But among many who are not yet benefitting from these innovations have not yet arrived, I hear a note of resignation. Often, they're leaders whose hospitals or systems are still negotiating fee-for-service contracts with commercial insurers. In these cases, innovations such as narrow networks, risk-reward contracting, and accountable care organizations are just something they hear about that other people are doing.

In my latest article in HealthLeaders magazine, I look into the reasons why that happens, and a few possible solutions to drive greater healthcare price transparency.

Frozen Out of HIX, NH Hospitals Feel Burned

But why are these leaders resigned, and in some cases, even a little depressed about their ability to compete on a level playing field? Largely, it's because these people are running hospitals and health systems that are already among the lowest-cost, highest quality organizations in their geographical regions, yet they can't effectively leverage those attributes because of a variety of factors that seem beyond their influence.

Maybe they feel like they are well ahead of their competitors in being able to offer lower prices because they've been forced to operate in a lean environment for years. These organizations are lean precisely because they don't dominate their market.

They don't have traditional leverage. In fee-for-service negotiations, the size and market dominance of a health system can be much more important than the lower cost a less dominant system might be able to offer.

My story in the March issue of HealthLeaders magazine investigates that issue in more detail, but the crux of the situation for most of these leaders is that they are prevented contractually from revealing what commercial insurers pay them for their services.

Lahey Health Reexamines the Appropriate Care Model

So, for instance, a community hospital that has been squeezed for years on fee-for-service contracting, that has comparable quality scores and a much cheaper price for a course of care, gets no benefit for being more economical because critically, either what the payer pays for care doesn't make a difference to the patient, or that the patient doesn't know it makes a difference.

Let's hope that as taking risk on outcomes evolves, that price and quality truly become more of a differentiator than they are today.