Commercial risk will be a critical catalyst of progress – it’s complicated, but is it possible? We think so.


June 25, 2018

2 years after my 'surprise medical bill,' are we any closer to fixing the problem?

Daily Briefing

    By Ashley Fuoco Antonelli, contributing editor

    As consumers, we're used to shopping around—but the experience of tracking down the lowest-priced fruit or lawnmower is very different from trying to find a low-cost MRI, or even the lowest price for a needed prescription drug. Patients might encounter any number of bumps in the road while seeking out reasonably priced care, but no matter what obstacle they hit, the end result often looks the same: unexpected out-of-pocket costs.

    Patients are shopping for prices—are you making it easy for them?

    For years, health care wonks have called for increased price transparency. I joined the cavalcade a few years back when I received my own surprise medical bill: I went to an in-network urgent care center for flu treatment, but somehow I still wound up receiving an out-of-network bill for a chest X-ray. As I wrote at the time, "It's a simple matter of fairness: Shouldn't consumers have the right to know which providers are in their networks, and which aren't, before they seek care—especially at a time when insurers are increasingly narrowing their networks to reduce costs?"

    The tangled web of in-network and out-of-network billing is just one of many challenges that has made it so hard for patients to identify prices in advance—but there are signs the industry may finally be making some progress on the price transparency problem. Let's take a closer look.

    Why health care pricing is so opaque

    Research published last month in JAMA Internal Medicine suggested that price transparency surrounding medical procedures actually has gotten worse over the last several years. Among 120 U.S. hospitals, the percentage of hospitals unable to provide price information for a full hip-replacement surgery rose from 14% in 2011 to 44% in 2016. A separate commentary published in JAMA argued that hospitals often can't provide reliable price estimates because they don't know either the physicians' fees for services or the patient's cost responsibilities under his or her health insurance.

    In some cases, insurance can shield patients from opaque, high prices—but in other instances, insurance makes it even harder for patients to understand exactly what they owe. Vox's Sarah Kliff spotlighted one patient who visited an in-network hospital and still received a surprise $7,924 bill from an out-of-network doctor. The issue, Kliff explained, is that hospitals and doctors typically enter into their own separate contracts with insurers, so doctors might be out-of-network even while providing services at an in-network facility.

    These pricing surprises aren't unique to the hospital setting. The media and policymakers over the past few months have brought attention to so-called pharmacy gag clauses," which prevent pharmacies from proactively telling customers if they would save on a prescription drug by paying for it out of pocket instead of using insurance.

    How policymakers and others are looking to boost transparency

    Even though most states have price transparency laws on record, few provide sufficiently robust transparency to earn passing grades by the standards of Altarum and Catalyst for Payment Reform. In fact, 43 states flunked the groups' latest scorecard, and so far there is no federal law addressing the issue, according to Kilff.

    Now, CMS is taking matters into its own hands, recently proposing a rule that beginning in 2019 would explicitly require hospitals to publicly post on the internet a list of charges for standard services.

    While some have questioned whether CMS' proposal is feasible, Arizona-based Maricopa Integrated Health System's (MIHS) early success suggests such a policy could benefit both hospitals and patients. MIHS in 2013 became the first health system in Arizona to implement a self-pay price transparency program. Suzanne Delbanco, executive director of Catalyst for Payment Reform, in Health Affairs in 2014 wrote that the MIHS program represents "one of the core building blocks of payment reform and a higher-value health care system," noting that the program helps MIHS inform consumers of their financial responsibilities, contain costs, and reduce price variation. MIHS' operating revenue increased by 28.5% from fiscal year (FY) 2011 to FY 2016, reaching a total of more than $722 million, and MIHS' net patient revenue increased by 14.7% from FY 2011 to FY 2016, while its bad debt expenses decreased by 24.9%.

    The federal government also might take steps to increase transparency in the prescription drug market. CMS Administration Seema Verma last month warned Medicare Part D insurers that they could face compliance action if they are parties to pharmacy gag clauses. In addition, the Trump administration in a recent policy "blueprint" said FDA would look into requiring pharmaceutical companies to include drug prices in their advertisements (though it remains unclear if this is within FDA's authority), and CMS last month unveiled updated drug pricing dashboards that significantly expanded the data available on Medicare and Medicaid drug spending and list prices.

    Some industry stakeholders also are working to improve drug price transparency. For instance, CVS Health earlier this year unveiled a new tool designed to help pharmacists and customers compare drug prices and purchase lower-cost options at the point of sale.

    What the future holds

    Many of those policies have yet to come to fruition, and policymakers and advocates say there is still more work that needs to be done to boost price transparency. One thing is certain: U.S. residents will be watching. Polls continued to show that health care will be among voters' top priorities in the November midterm elections, and as news about rising health insurance premiums and prescription drug price hikes continues to abound, you can be sure they'll be looking to see what policymakers have done, and what candidates say they'll do, to bring down health care prices.

    Patients are shopping for prices—are you making it easy for them?

    Demand for price information is increasing, but many providers struggle to generate meaningful estimates.

    Every provider's price transparency strategy will depend on internal capabilities, brand strategy, and their price point relative to the market. Based on Advisory Board research, we compiled best practices we've seen when it comes to implementing price transparency.

    Download Now

    Have a Question?


    Ask our experts a question on any topic in health care by visiting our member portal, AskAdvisory.