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Patients Praise Price Transparency, Though Few Use It

July 27, 2017
By Stephanie Wisner

Price transparency tools abound but are not widely used.

Patients who say they like the idea of shopping around for providers offering care at the best price tend not to do so, a study published by the American Journal of Managed Care has found.

More than 60 online price transparency tools exist to help patients shop for the best value in health care, but relatively few patients use them or even know about them.

“We found a disconnect between respondents’ general enthusiasm for price shopping and their reported use of a price transparency tool,” write the authors of “Patients’ Views on Price Shopping and Price Transparency,” published in June. “Respondents cited many barriers to using price information when choosing care, including the salience of the idea of price shopping for care and other factors, such as provider loyalty, that were more important than price.”

Dr. Chad Savage, founder of YourChoice Direct Care, a direct-pay primary care practice in Brighton, Michigan, says few patients realize most providers are willing to come down from their sticker price.

“Although the demand for price transparency is increasing, many patients are unaware that prices can be negotiable,” Savage said.

Illusory Bargains

The more providers charge for services, the greater discount insurers can claim to obtain for patients, who don’t realize the higher prices they are paying are arbitrary, Savage says.

“Currently, insurance companies foster a sense of reliance in patients by sending bills indicating the false prices the system theoretically paid for or [that] were negotiated down by their insurance company,” Savage said. “Patients think to themselves, ‘Look at that bill. Thank goodness I have insurance.’”

Megan Freeman, executive director of the Free Market Medical Association (FMMA), says lack of transparency financially benefits many stakeholders in the health care system at patients’ expense.

“Many parties in the current health care system win when costs are high, which incentivizes them to hide the true cost,” Freeman said. “Keeping consumers ignorant helps them make more money.”

Tricks of the Trade

Even so-called transparency tools can obscure the true cost of care—sometimes deliberately, Freeman says.

“Even when third parties and large hospital systems are confronted by the demand for prices, they will create ‘transparency’ tools that do not tell the whole story,” Freeman said. “For example, a cost search tool by a carrier may only tell the patients what their out-of-pocket amount would be instead of showing the true cost of the care. Patients now believe the cost or price of care is whatever their copay, deductible, or coinsurance is. This setup has removed the actual buyer of the care from the cost equation.”

Murky Money

Price transparency is necessary if patients are to find the best values, Freeman says.

“When consumers are able to shop and compare services based on cost and quality, they are able to make better overall choices,” Freeman said. “Health care transparency provides patients and employers with the information and the incentive to choose health care providers based on value. Value is not just about price, it’s about price and quality.”

Lack of price transparency contributes to overspending and over-prescription of billable services, Freeman says.

“Facilities and hospitals that obfuscate their charges get to add more charges for every complication, every package of supplies they open, and every interaction,” Freeman said. “When a facility offers bundled, transparent pricing that is available to any patient, they are rewarded when the outcome is good.”

Sooner Solution

The Surgery Center of Oklahoma is a case study of the effect of price transparency on cost and quality. Dr. Keith Smith, cofounder of the center and of FMMA, lists prices for surgical procedures on the center’s website. The price of a hip replacement, for example, is listed at $25,000.

“The pricing outlined on this website is not a teaser, nor is it a bait-and-switch ploy,” the website states. “It is the actual price you will pay. We can offer these prices because we are completely physician-owned and managed. We control every aspect of the facility from real estate costs, to the most efficient use of staff, to the elimination of wasteful operating room practices that non-profit hospitals have no incentive to curb.”

Freeman says price transparency must be voluntary in order to be most effective.

“Repealing laws rather than creating new ones is necessary,” Freeman said. “Legislating transparency works less effectively than consumer demand.”

‘Falsely Priced System’

Savage says health care prices will drop as patients take control of their dollars back from commercial health insurers and taxpayer-funded payers such as Medicaid.

“I believe the health care system could be radically improved by giving the purchasing power currently reserved for the insurance company directly to the patient’s control,” Savage said. “For example, if a state Medicaid system is going to spend $7,000 on a patient, it could put a portion of that into a card for the patient to manage directly. Put as much control directly into the consumers’ hands and limit insurance to cover truly catastrophic financial loss.”

Transparent pricing improves the relationship between provider and patient, Savage says.

“We are making care affordable to those who could not afford it and assisting them with their resource allocation,” Savage said. “We get such immense appreciation from people who have been devastated by the current, falsely priced system.”

Stephanie Wisner (saw297@cornell.edu) writes from Ann Arbor, Michigan.

Internet Info:

Hannah L. Semigran, Rebecca Gourevitch, Anna D. Sinaiko, David Cowling, and Dr. Ateev Mehrotra, “Patients’ Views on Price Shopping and Price Transparency,” American Journal of Managed Care, June 2017: https://www.heartland.org/publications-resources/publications/patients-views-on-price-shopping-and-price-transparency

 Image via Thinkstock

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