Greater transparency of healthcare price and quality information is a rising tide, but it will not lift all boats. 


Value in health care is defined by the relationship between the quality of care and its total cost to the purchaser. Value is created through improvements in quality, reductions in the total cost of care, or both. Value creation is also contingent upon the ability of patients—the individuals who drive the purchase of health care—to identify and select healthcare providers that offer better value. In a well-functioning marketplace, purchasers can access information that enables them to identify the best-quality service or product for the best price. That information has typically been difficult to find in health care, which has in turn diminished market incentives to improve the value of care. 

Lack of transparency with respect to meaningful price information was highlighted last year in a report from the U.S. Government Accountability Office (GAO).  As part of its research, the GAO contacted 19 hospitals in a Colorado market to obtain complete price estimates for a full knee replacement. Of the 17 hospitals that responded, 10 did not provide any type of price information, and none could provide a complete price estimate. Of the seven hospitals that did offer some price information, most provided billed charges in a wide range (between $33,000 and $101,000) or an average charge that reflected what an uninsured consumer would pay (Health Care Price Transparency: Meaningful Price Information Is Difficult for Consumers to Obtain Prior to Receiving Care, Sept. 2011).  

The GAO report cited numerous factors that can make it difficult for a hospital to provide price estimates. Although there are many “standard” procedures in health care, no patient is the same: Multiple factors—including preexisting conditions, type of anesthetic used, or unforeseen complications—can affect the final cost of a procedure. In the case of an episode of care, patients may need to get estimates from multiple providers—and need to know who these providers will be. Providers may also lack access to claims data or negotiated rate information that would enable them to give more accurate estimates of out-of-pocket costs to a particular patient. Contractual and legal considerations, including antitrust concerns, may make both providers and insurers reluctant to make negotiated rate information public. 

Consumers’ ability to accurately interpret healthcare quality and price data is also a concern. Consumers may equate a higher price with higher-quality care, or believe that a longer hospital stay is preferable to a shorter one. A study published earlier this year in Health Affairs confirmed that these concerns are real, but also found they could be countered by careful framing of the data presented. For example, the use of dollar signs to differentiate lower- and higher-cost providers proved ineffective: Consumers tended to equate fewer dollar signs (i.e., lower-cost care) with lower-quality care. But when a star system was used to rank the degree to which providers were “careful with your healthcare dollars,” the lower-cost option proved significantly more popular. 

Despite these concerns, efforts to improve the transparency of quality and price information are intensifying, driven in large part by employers eager to contain the healthcare costs of their employees. Employers have greatly expanded their use of high-deductible health plans (HDHPs) in recent years: Research by the Kaiser Family Foundation and Health Research & Educational Trust indicates that the percentage of covered works with a deductible of $1,000 or more for single coverage has increased from 12 percent to 34 percent over the past five years (Kaiser/HRET 2012 Annual Survey of Employer-Sponsored Health Benefits). But exposing employees to a greater degree of cost sharing is just one piece of the puzzle; employees also need quality and price information to make value-conscious healthcare decisions.  

Accordingly, employers are pushing insurers to provide their employees with tools that direct them to higher-value providers. Organizations such as Catalyst for Payment Reform, the National Business Group on Health, and the Leapfrog Group are providing employers with resources that help them gauge the adequacy of transparency tools, determine fair market prices for various procedures or episodes of care, and identify providers with high patient safety scores. New vendors are also developing transparency tools for employers, or are going directly to patients and inviting them to upload their medical bills and explanation of benefits into online databases and then share in any sales of their data to price-shopping healthcare consumers. A number of states have adopted mandatory or voluntary all-payer claims databases, and some are converting their data into publicly accessible transparency tools for consumers. 

Throughout HFMA’s Value Project, HFMA has heard payers, purchasers, and provider organizations themselves speak of the need for healthcare providers to better define the value proposition they offer to patients, employers, and other purchasers of care. As the push for transparency heightens this need, provider organizations should be working to understand how value is being defined by payers and purchasers in their market and how their quality and price positions line up against these definitions and the positions of other competitors in their market. They should also be working to identify and act upon opportunities to improve their value proposition. Organizations that occupy a higher price position in their market should be making specific efforts to understand whether they offer higher quality outcomes, a superior patient experience, or other aspects of care that justify a higher price—and whether a sufficient segment of their market is willing to pay the price for what they offer. 

Transparency is a rising tide, but it will not lift all boats. Provider organizations that understand their value proposition and are confident in their ability to consistently offer this value proposition to their patients will be best positioned to meet the demands of their market for high-value care—and avoid being swamped.  

James H. Landman, JD, PhD, is director, thought leadership initiatives, HFMA, Westchester, Ill. (


Publication Date: Tuesday, January 01, 2013

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