The following definitions represent the Price Transparency Task Force's consensus on distinctions among charge, cost, and price, and among different stakeholders and stakeholder interests.

Care Purchaser. Individuals and entities that contribute to the purchase of healthcare services. In general, the patient is the principal care purchaser. Other important care purchasers include private employers and public-sector healthcare purchasers such as state employee and retiree agencies that contribute to employees' purchase of health insurance and the cost of actual healthcare claims, including through self-funded health plans.

Charge. The dollar amount a provider sets for services rendered before negotiating any discounts. The charge can be different from the amount paid. Medicare or Medicaid beneficiaries, privately insured patients, and uninsured patients who qualify for financial assistance rarely pay full charges. Uninsured patients who do not qualify for financial assistance may be asked to pay full charges, but often ultimately pay a lower price.

Cost. The definition of cost varies by the party incurring the expense:

  • To the patient, cost is the amount payable out of pocket for healthcare services, which may include deductibles, copayments, coinsurance, amounts payable by the patient for services that are not included in the patient’s benefit design, and amounts balance billed by out-of-network providers. Health insurance premiums constitute a separate category of healthcare costs for patients, independent of healthcare service utilization.
  • To the provider, cost is the expense (direct and indirect) incurred to deliver healthcare services to patients.
  • To the insurer, cost is the amount payable to the provider (or reimbursable to the patient) for services rendered.
  • To the employer, cost is the expense related to providing health benefits (premiums or claims paid).

Out-of-pocket payment. The portion of total payment for medical services and treatment for which the patient is responsible, including copayments, coinsurance, and deductibles. Out-of-pocket payment also includes amounts for services that are not included in the patient’s benefit design and amounts for services balance billed by out-of-network providers.

  • For insured patients, out-of-pocket payment can be affected by a number of variables beyond copayments, coinsurance, and deductibles. For example, the use of an out-of-network provider can significantly increase the amount of an out-of-pocket payment. Out-of-pocket payment for insured patients thus depends on the specifics of each patient’s benefit design and on the contracting status of the relevant providers.
  • For uninsured patients, out-of-pocket payment can rise to the full charge for a service, although patients rarely pay full charges today.

Payer. An organization that negotiates or sets rates for provider services, collects revenue through premium payments or tax dollars, processes provider claims for service, and pays provider claims using collected premium or tax revenues. Examples include commercial health plans (also known as insurers), third-party health plan administrators, and government programs such as Medicare and Medicaid.

Price. The total amount a provider expects to be paid by payers and patients for healthcare services.

The price of healthcare services often differs depending on whether the patient has insurance coverage or is eligible for financial assistance.

  • For an insured patient, the price for healthcare services is the rate negotiated for services between the payer and the provider, including any copayments, coinsurance, or deductible due from the insured patient.
  • For an uninsured patient, price is first determined by eligibility for financial assistance. If the patient qualifies for financial assistance, the price is reduced according to the terms of the provider’s financial assistance policy, provided that the patient works with the provider to supply the documentation necessary to establish financial need.1
  • If an uninsured patient has the financial means to pay for the services rendered, the price could be as much as the provider’s full charge for the services, although the patient and the provider may negotiate a discount from the charge.

Price transparency. In health care, readily available information on the price of healthcare services that, together with other information, helps define the value of those services and enables patients and other care purchasers to identify, compare, and choose providers that offer the desired level of value.

Provider. An entity, organization, or individual that furnishes a healthcare service.
Examples of providers include (but are not limited to) hospitals, health systems, physicians and other clinicians, pharmacies, ambulance services, ambulatory surgical centers, rehabilitation centers, and skilled nursing facilities.

Value. The quality of a healthcare service in relation to the total price paid for the service by care purchasers.

Value Is in the Eye of the Beholder

Value is ultimately the determination of the individual stakeholder. Quality, for example, can comprise elements of access and convenience, patient safety, patient satisfaction, patient experience, adherence to clinical guidelines and evidence-based medicine, and clinical outcomes. Patients will likely weigh these elements differently—one patient may put the highest priority on convenient access, for example, while another may put the highest priority on the provider’s safety record. The price a patient is willing to pay will vary in relationship to the patient’s preferences. A goal of transparency should be to provide the right information on key elements of price, quality, and other relevant information to enable patients and other care purchasers to choose a provider that best fits their definition of value.

1 Note that section 501(r) of the Internal Revenue Code, which was added by the Affordable Care Act, limits the price that not-for-profit hospital organizations can request for emergency or other medically necessary care provided to an uninsured patient who qualifies for financial assistance to no more than amounts generally billed to insured patients for these services.

Publication Date: Tuesday, March 10, 2015