Price Transparency… the train has left the station

Five Guidelines for Smart Transparency

As we proceed toward Pay for Performance and value enhancement, we have seen a huge rise in transparency in medicine.  The effect has been unprecedented in terms of improving results.

Regarding clinical performance improvement,  I have stated in a previous blog that transparency is the best thing to happen to quality since antibiotics.  I can give multiple examples of performance improvement catalyzed by this transparency— surgical infection rates, core measures, HCAHPS,  just to name a few.   For all transparency has played a significant role in their rapid improvement.

This scramble for performance improvement has generated excellent results.  Our delivery system is safer than ever before…. and  next year it will likely be safer yet.  This is great news for the patient.  Transparency has accomplished two very important things–  It has raised the bar for all and it has decreased the variance amongst all participants.  Transparency here is good !!

So, what about price transparency…

Out of control health care costs and resultant higher co-pays and deductibles  are becoming the norm.  In the past, the consumer simply had to deal with minor co-pays or no direct payments at all.  High deductible plans continue to rise at an unprecedented rate.  Last year the average single premium deductible was $1,100… a 400% increase from five years ago, and the trend continues sharply upward both in terms of the amount of the individual deductible and the percentage of Americans that have elected high deductible plans.  The insurance exchanges from the ACA have resulted in most participants electing high deductible plans, thus accelerating this trend.  The demand for transparent upfront costs is higher than ever before and will continue to become even more important in the future.

In every other industry the consumers know how much they have to pay upfront and then make an informed decision… Why should health care be immune to this process?

Why is the delivery system is concerned?   There is a very legitimate possibility that this transparency could sharply drive down prices.

Simply put, widespread transparency in price should be expected to have a similar effect on the market as did quality and satisfaction…. but in the opposite direction:  It will likely decrease the wide variation of prices, but unlike quality and satisfaction, it will have a tendency to decrease prices…perhaps through an uncontrollable consumer spiral.  Can the industry afford this potential shock?   Furthermore, there is concern that this transparency would expose private contractual relationships and divulge unnecessary financial information to the consumer.

As a result,  health care deliverers have had a tendency to either ignore this issue, or lobby to kick the can down the road hoping it will go away.  Consumers are frustrated and  believe that if you are NOT in favor of showing the price, WHAT ARE YOU HIDING?  This has lead to decreased trust for all parties involved.  As legislators respond to the demands of their constituents, many states are now looking at legislation that will force this issue.

I propose that the delivery system take on this issue of price transparency proactively.  I would like to propose some guiding principles for the development of SMART transparency:


1.  Price transparency is not a fad;  It will NOT go away…. doing nothing is NOT an option

2.  The solution needs to be developed as a delivery system… NOT individual components such as hospitals, physicians, insurance companies, etc.,.  It is confusing to the public that different advocacy groups within the health care sector are advocating different approaches.  The entire delivery system must come together to develop an actionable solution.

3.  Price transparency does NOT mean divulging all possible financial data.  We need to determine exactly what information the consumer actually needs and simply provide only that data…. NOT divulge any and all financial arrangements.  Contractual arrangements are rightfully confidential to the individual parties concerned.  The consumer simply needs to know, as much as is reasonably possible given the uncertainties of diagnosis and treatment plans, how much that consumer needs to pay out of their pocket for those services rendered.  Previous price transparency strategies have focused on many things that are irrelevant to the consumer including the cost of providing such services, how much the delivery system pays its employees, charge-masters (not that anyone would understand that anyway!), percent of charges, etc.  All that matters to the consumer is at the end of the day, how much do they have to pay? And the consumer deserves to know.  The consumer understands that this information may only be an initial estimate.  It could certainly change based upon the actual diagnosis and management.

4.  For those with insurance, public or private, until that deducible is covered, the individual insurance company is in the best position to provide that data to their members.  Once again, this information could simply be provided to that consumer without divulging other financial arrangements. Individual plans should be the owner of this process for their members and provide timely and accurate information that the consumer could use in real time to make health care decisions.

5.  For those without insurance, the individual healthcare providers would have to provide upfront how much that consumer would have to pay, and place it in a forum that is reasonably accessible to the consumer probably in a form of social media.


I believe we can work together as a delivery/ insurance system to help the public better understand how much they will have to pay for healthcare.  The public will demand this from us, as they have appropriately demanded in any other consumer industry.

Price transparency is not necessarily a bad thing for the delivery system.  Transparency is becoming a way of life… we need to get on board.

…..That train has left the station.


Let’s be proactive and come together as a delivery system.  Let’s  develop some programs that make medical sense before they are mandated onto us.  Let’s regain some of the trust and credibility we have lost.

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