Practice Notes

Massachusetts becomes first state to publish prices of health care services

by William Hudec

How many of you are flying home for the holidays? Would you buy your ticket without first scanning Kayak, Expedia, or Priceline for the best deal? Unless someone else is footing the bill, probably not.

The difference between health care and other industries like air travel is stark. Without access to clear and accurate pricing information, patients can easily spend thousands of dollars more for common procedures like MRIs, mammograms, even blood tests.

Traditionally, this has not been of concern for most patients because someone else—their insurance company—was covering the cost. But recent trends indicate that this model is under threat. With consumers increasingly on-the-hook for more of their health care expenditures, they’re demanding tools that enable them to shop around for low-cost, high-quality providers in their area.

Archived webconference: Meeting New Consumer Demands

You’ve likely heard of much-heralded startups like Healthcare Bluebook, Clear Health Costs, and HealthSparq that have begun to publish health care prices, but a new law in Massachusetts is the first legislative effort to require insurers to make this information public.

How the Massachusetts price transparency law works

In October, Massachusetts became the first state to require health insurers to post the price of health care procedures ranging from simple office visits to complex surgical procedures. If you have private health insurance in Massachusetts, you can request a cost estimate for an operation like an MRI, and the insurance company must provide a quote that accounts for treatment site, provider, deductibles, and co-payments.

Beginning in January 2015, physicians and hospitals must be able to furnish similar cost estimates for their patients. Massachusetts hopes the new law will drive patients to make cost-sensitive care decisions by putting information directly in their hands, thereby also putting competitive pressure on providers to be the lowest site of care.

Across the country, state legislators are closely watching Massachusetts to see if the initiative is replicable in their state.

How does your state grade on price transparency?

What are its limitations?

Massachusetts’ ambitious initiative is not without complications. By exposing consumers to pricing information, the state is also exposing them to its complexity. As Kaiser Health News notes, there is no standard procedure list, and “price” can be loosely defined to include some, but not all charges. A further limitation is that data on outcomes and complications is largely missing, making it difficult for patients to assess providers on metrics beyond patient experience scores.

Should medical groups embrace price transparency?

Medical group leaders should ask themselves some fundamental questions to assess their organization’s preparedness for full price transparency:

  • Do our physicians know what the cost of care is for different procedures?
  • Which services are patients most likely to compare prices and shop around for based on price?
  • How does the strategy for attracting price-sensitive patients differ based on the revenue opportunity available in each service line?

Learn more

For more information on how to prepare your medical group to compete on price, review Thriving in a Price-Sensitive Market from our colleagues with the Financial Leadership Council.

Eight ways to protect your margins

Make sure your to-do list contains these eight margin preservation must-dos—and use our interactive resource to explore each mandate's details, impact, and difficulty.