Column | Pricing

Price Variation 101

Column | Pricing

Price Variation 101

Price variation has been a hot topic in healthcare industry circles but most consumers are unaware that healthcare prices vary. 

It doesn’t take expertise in healthcare finance to know that different hospitals and physicians charge different prices.

Or maybe it does. It seems that much of the American public doesn’t realize there are price differences. Only 20 to 38 percent of patients who participated in a recent study knew that some physicians and hospitals charge more for the same service than others do. One-third to one-half of participants said they didn’t know or weren’t sure. Many patients surveyed had recently undergone joint replacement surgery or been hospitalized for childbirth, which are considered among the most shoppable of healthcare services.

On the surface, this flies in the face of common sense. After all, prices vary for virtually any item an American consumer can buy. You might ask, “Why would they think health care would be different?” Well, for one thing, we, as an industry, have treated health care like it’s different. We have made it harder to get prices for healthcare services than for anything else a consumer buys. And most traditional healthcare stakeholders haven’t chosen to compete on price—no one wants to be the lowest-priced hospital. But hospitals and physicians, who have borne the brunt of the blame for the lack of transparency, are not the only ones at fault. Health plans haven’t adequately articulated differences in plan designs and coverage; employers haven’t done enough to educate covered people; and consumers have not educated themselves on the issue, despite abundant media coverage.

In any event, consumers’ beliefs about pricing are a sign that we, as healthcare stakeholders, need to question our assumptions. In promoting price transparency and developing transparency tools, we have assumed that people realize that prices vary by hospital or provider. People who think all physicians and hospitals charge about the same price, or who don’t know if they do, are not going to use transparency tools or shop around.

As a consequence, when patients are surprised by the amount of a bill, or by their portion of it, they are likely to paint all providers with a broad brush as “overpriced.” This means that each physician, hospital, or health plan that does not use best practices in communicating with patients about financial matters—or that seeks to preserve opaque pricing—is affecting consumer perceptions of the entire industry. Here is the stark reality: We are all in this together.

We can be certain that consumers will become more knowledgeable about purchasing healthcare services. They’re paying more out of their own pockets now, so they have an incentive to learn. A vocal minority have figured out that healthcare pricing isn’t like pricing in other sectors, and they’re demanding transparency, not excuses. Other consumers are bound to catch up.

Providing accurate, timely, individualized pricing isn’t easy. But forward-looking hospitals, physicians, and health plans already are doing so. Others that commit to transparency and best practices sooner rather than later can approach this as relationship-building, not defensive posturing or regulatory compliance. Instead of resisting consumerism, let’s meet consumers where they are and work through this together.

Follow Joe Fifer on Twitter: @HFMAFifer

From the President's Desk

Joe Fifer expands on his ideas in his February column.

Follow Joe Fifer on Twitter: @HFMAFifer

About the Author

Joseph J. Fifer, FHFMA, CPA,

is President and CEO of HFMA.

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