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Keys to Price Transparency Success at Health Systems and Hospitals

News  |  By Christopher Cheney  
   December 05, 2016

Healthcare providers should consider multiple factors when launching price transparency initiatives.

Health system and hospital executives must several questions before starting a price transparency initiative, says Amy Floria, CFO at Goshen, Indiana-based Goshen Health.

"It is the value proposition. Why does it cost more? What am I getting? What's included? What do your patients want? What is the price elasticity in your market? How price-sensitive are procedures? What are your competitors providing?" she says.

"It's also about defensibility," says Neville Zar, senior vice president of revenue operations at Boston-based Steward Health Care.

"There is a lot of regulatory pressure around price transparency, and it is probably every other couple weeks that either a regulator or attorney general or someone calls up and says, 'We have a patient complaint,' or a patient advocacy group calls up and says, 'We have a patient complaint.' So we have invested over the last 18 months in the technology, in the processes, to create transparency from a defensibility perspective as well as a market equilibrium perspective," he says.

Goshen Health is pursuing a dual strategy as the organization develops price transparency capabilities, Floria says. "We are looking at it as a couple different strategies. One strategy relates to growing competitors in the retail space and commodity services. We want to make sure we are able to compete. Our patients are also requesting more information on the cost of care," she says.

Accurate Price Estimates Elusive
One of the primary challenges in establishing price transparency capabilities at health systems and hospitals is generating accurate price estimates for patients before they receive medical services.

"What we hear is the ability to be transparent is only as good as the tools utilized to provide price estimates. Many providers that we talk to are investing in upgrades to their estimator tools," says Melinda Ramsdell, senior vice president and treasury solutions manager, specialized industries-southeast region, at Charlotte, North Carolina-based Bank of America Merrill Lynch.

A crucial part of the price estimation challenge at health systems and hospitals is educating patients about their health insurance coverage, Ramsdell says.

"A lot of our provider clients set up and assume most of the liability for education. How realistic is that long term when all stakeholders—providers, payers, and employers—share in the education responsibility? It is reality that many consumers don't have clarity about their personal insurance plans."

Steward has invested significant resources to help patients understand their health insurance coverage, Zar says. "The estimate is only as good as the insurance you have. So before we even provided the estimate, the one thing we started doing is getting what we call the right liable payer—the right insurance plan," he says.

Steward has established a call center to help the health system rise to the cost estimation challenge, Zar says.

"We set up a call center in Quincy, Massachusetts, where we've got 50 people on the phone and they're calling patients prior to service and they're trying to educate the patients. They're trying to get the insurance right, they're trying to get the estimate right, and they try to get all the information right before patients come in. … But I think there is joint responsibility—there's responsibility of the employer as well as of the provider to be more forthright."

Health insurance carriers also have a role to play in the price estimation process, says Lynn Guillette, vice president of finance-payment innovation at Lebanon, New Hampshire-based Dartmouth-Hitchcock.

"The insurance company has an obligation, too. For the HR department at an aerospace company, they're really just trying to make sure that they're providing a benefit to their employees, because that's what the market demands. … So the insurance companies have an educational role to play."

View the complete HealthLeaders Media Roundtable report, "Engaging Patients as Financial Partners."

Christopher Cheney is the CMO editor at HealthLeaders.

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