Financial Benefits of Clarifying the Pricing Transparency Maze

Does a knee replacement in South Carolina cost the same as the same procedure done in New Jersey? Not likely. And that price differential likely exists just by driving across town in the same city.

Does a knee replacement in South Carolina cost the same as the same procedure done in New Jersey? Not likely. And that price differential likely exists just by driving across town in the same city.

The takeaway from that scenario, on the part of many healthcare consumers, is that the price of the procedure is linked to the quality of care. You pay more and you get a better knee replacement. But that, too, is unlikely.

Rebecca Palm, healthcare finance expert and founder of Copatient, which reviews medical and hospital bills for error correction, resolution, and negotiation for healthcare providers and consumers, acknowledges there’s a pricing transparency problem in healthcare. But there’s no simple solution.

“There’s a multitude of components that contribute to the complexity and the industry’s struggle to make progress on this progress on this problem,” Palm says. “When you put it all together you end up with a perfect storm for confusion, and a lack of a rational approach as to how consumers think about what they’ll pay for services.”

Weathering the storm

Palm explains that part of the challenge in improving pricing transparency is the complex way healthcare services are priced.

“The fact that every single health plan network out there is negotiating different contractual rates with every single billing provider out there in and of itself results in a massive amount of complexity,” Palm explains. “And physicians oftentimes have multiple relationships with different practices.”

The problem is compounded, Palm says, by claims adjudication platforms that are supposed to be sorting everything out but end up just trying to keep up with all of the contractual changes. That’s combined with the fact that there really isn’t any sort of rational floor or ceiling to any price in healthcare.

“Where do you begin when you’re negotiating a price for a service, or a medical device?” Palm asks, rhetorically. “There’s no rational starting basis for a lot of these pricing negotiations.”

Physician responsibility

Palm says that the healthcare industry has grown around the concept that patients were somewhat removed from the financial discussion. Most of that financial discussion happened between the physician and the health plan. But with patients now potentially on the hook for thousands of dollars every year in healthcare expenses, that can’t continue to be the case.

“When physicians think about revenue cycle, they’re typically focused on the claims they’re submitting to the health plan,” Palm says. “But I think they need to equally weigh some of the measures that they can take to have just as constructive an interaction with patients as well.”

Palm explains that, in some cases, consumers’ financial responsibility toward services and procedures can comprise 25% or more of the practice’s accounts receivable. And with healthcare linking reimbursement more to value-based care, there’s added incentive for physicians to think differently about that conversation with patients.

But, she adds, the approach to consumers has lagged behind what payers and providers are trying to mutually achieve.

“As they’re coming up with these value-based contracts and risk-based contracts, what has not changed as they look at those different approaches to payment is the massive consumer responsibility financially for all of these different services,” Palm says. “It’s important to make sure that we don’t leave the consumer conversation behind as we’re moving more into a value-based payment environment.”

Financial benefits

Palm has seen firsthand the stress front and back office staff are under trying to keep up with their workload; a workload that’s compounded when they have to spend time working with consumers on their bills. But engaging patients proactively can help.

“Practices often struggle to collect even 10 or 20% of their accounts receivable directly from patients,” Palm says. “So when providers work with us, they actually receive a much higher payment rate, because they’re solving the root cause of non-payment with a lot of these consumers. And that root cause is confusion and skepticism.”

Giving patients clarity on what patients owe, Palm says, gives them peace of mind knowing that what they’re paying is appropriate for the services they receive. As a result, they’re more likely to pay a much higher percentage of what they owe than providers would normally collect.

“That’s not even taking into consideration the labor intensive endeavor for most healthcare providers trying to collect on their claims from carriers and on bills from patients,” Palm says. “And how much it does to preserve the physician-patient relationship.”

As for posting pricing, Palm says that wherever pre-planning and pre-pricing is possible, more innovative models—such as CVS with its Minute Clinic initiatives—that have published pricing for a lot of different procedures are cropping up to help consumers navigate those waters.

“I don’t think that’s unrealistic at all,” she says. “There are a lot of innovative practices that are starting to deliver on just that.”