Better Health Outcomes Through Transparency

The basic lack of transparency around health care costs has long contributed to wasteful spending and inefficient care delivery. Wide price variations in medical services – with no rationale or true measure for value – are often the status quo in U.S. health care. This makes health care pricing opaque and inhibits consumers and purchasers from selecting care based on quality or value.

In no other industry would consumers operate so blindly before making a purchase. For example, a diagnostic sample collected in one facility can cost significantly more in another setting in the same city block. Similarly, consumers generally do not have information on costs of drugs before getting to the pharmacy counter – let alone the tools needed to switch to effective alternatives that might be less expensive than the one that a physician has prescribed. Efforts like the recent Executive Order from President Trump requiring hospitals and insurers to offer clear, accurate pricing information, rather than estimates, will help address the problem, but we need a more focused effort across the entire health care ecosystem.

Public programs, like Medicare and Medicaid, pay prices set by regulation. This brings some measure of predictability to their rates. But the employer-sponsored insurance sector, which covers half of the U.S. population, lacks this structure. Additionally, employers don’t have the leverage and scale to drive reimbursement changes or scale quality measures in the same manner that public programs can.

For employers, managing health benefits is an already complex task, requiring significant time and resources to offer a high-value experience for their employees. If employers had price visibility, they could design their benefit to drive utilization of more affordable options. Without it, employers cannot guide their employees toward higher-quality, more affordable care.

Transparency efforts aimed at making health care more “shoppable” have the potential to generate significant savings, estimated in the billions of dollars. Within employer-sponsored health care specifically, there are several benefits:

• First, transparency can influence market dynamics by encouraging competition among insurers and providers. This supports lower negotiated prices, particularly in markets with one or two dominant players.
• Second, transparency can encourage providers to offer competitive pricing and higher quality services to attract patients. This is key in helping patients stay engaged with their care
• Lastly, transparency has the potential to empower consumers to make more cost-effective and well-informed choices about their care. But we need a stronger, more interoperable data infrastructure – along with a consumer-friendly interface to deliver actionable insights directly to patients.

While sectors like financial services and public utilities have rapidly evolved to offer price comparisons that help consumers make informed decisions, there’s been minimal progress in health care. Transparency efforts to date have focused largely on hospital prices, which is arguably the care that is least discretionary to American consumers.

Fortunately, the federal government has begun to recognize the extent of this issue, and there is bipartisan support for ensuring that the prices of health services and treatments are more readily available and consistent. As noted, transparency is a focus for the Trump Administration and lawmakers have signaled a renewed commitment to it.

Legislatively, recent efforts have focused on building on the Transparency in Coverage rule to expand price transparency requirements beyond hospitals to include diagnostic labs, imaging centers, and ambulatory surgical centers. Other efforts would equip employers with drug price information and require Medicare Advantage organizations to report provider acquisitions.

Site-neutral payments, which ensure that costs are the same for the same service regardless of the location, have garnered strong support across political parties.

The private sector also has a part to play. We need a more targeted effort to scale solutions that prioritize more efficient health care utilization, which is key to driving better outcomes and keeping patients of out costly care settings like the hospital. This was foundational to several of Morgan Health’s investments, including Embold (provider quality analytics), apree (advanced primary care) and Centivo (alternative, provider-led insurance design).

Transparency in health care pricing and agreement on what constitutes quality is not just a policy imperative – it’s a business one. By supporting these changes, we can create a more efficient and higher quality health care system that keeps Americans healthier.