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Big Ideas: Healthcare Price Transparency: Patients and Payers Versus Providers?

By Philip Betbeze  
   January 04, 2016

Another, less-recognized factor propelling the transparency trend is that as physician organizations and ACOs of all stripes enter into risk arrangements with payers—where the provider of care is responsible for the total cost of that care, and where the provider takes risk on performance—the cost of the service becomes much more important to the primary care physician.

"If, as a physician, I have three hospitals to choose from and one is more expensive than others but of similar quality, that is one lever I can use to manage the health of that patient I'm at risk for," Mikuckis says. "Consumer tools may take a while to catch on, but the physician angle is important. Whoever is at risk will shift referral patterns, especially with the growth of products and networks that are more at risk for referral management."

The perils of price disintermediation
The point is, many services in the healthcare universe are shoppable. As patients become more like consumers and begin shopping around, prices for profitable services—many of which hospital executives have previously counted upon to subsidize money-losing specialty programs—will rapidly ratchet down.

The ability of certain high-margin procedures "to support your business going forward is very much in jeopardy," Mikuckis contends.

He says up to two-thirds of healthcare services will become price-sensitive in the next decade. Therefore, he says, providers need to work quickly to get a true handle on what it costs them to provide each of an array of services, so that prices are based on the foundation of cost. This requires providers to become much more sophisticated on the cost to deliver from a basic allocation game, he says.

For instance: What does an incremental MRI cost? The answer depends on a lot of factors, but some organizations have been able to better allocate the fixed cost of an MRI machine, for example, by charging less for people who agree to come in at off-peak times when the machine would otherwise not be used at all.

"If you have a true understanding of the cost to deliver a service, you can get more sophisticated on what you charge," Mikuckis says.

A possible bright side for providers may be that some services are underpriced, too. Again, that's where knowing what it costs to provide the service is invaluable information.

Philip Betbeze is the senior leadership editor at HealthLeaders.

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