Price transparency and the future of healthcare
By: Michael Harper
It’s no secret that the patient experience has radically transformed in the last two decades as financial responsibility increasingly shifts onto the patient. A sample scenario illustrates just how much things have changed:
The year is 1999 and patient Jane Q has sprained her ankle. She goes to her primary care physician for help. Jane pays her $30 co-pay and is seen by her doctor, who takes an x-ray to confirm that her ankle’s not broken. Her doctor sends her home, telling her to rest and ice the ankle for a few days.
Flash forward to 2019. Jane Q goes to her primary care physician for help after spraining her ankle. Because she hasn’t met her deductible, the receptionist asks Jane for a payment of $130.00 to see the physician. Her doctor takes an x-ray to confirm that the ankle’s not broken and sends Jane home, telling her to rest and ice the ankle for a few days. Seven days later, Jane receives a medical bill from the physician for $250.00 for the x-ray.
In both scenarios, the injury, test and medical advice are the same, but the patient financial experience is profoundly different. In the past, patients didn’t worry about expenses. Today, money is a top concern for patients as they are now the majority payer. Compounding the issue is that cost transparency is now non-existent and patients are in the dark about what they owe.
This lack of healthcare pricing transparency is a major issue, as 61% of Americans do not have enough savings to cover an unexpected medical expense of $1,000 or more.1 Meanwhile, 75% of healthcare consumers say a medical bill of $500 or more is too expensive for them, according to a recent Elavon healthcare report.
Part of the problem is that even the medical personnel aren’t aware of the costs associated with the services they are providing. A recent study in the Journal of the American Osteopathic Association found that fewer than half of emergency room nurses and doctors knew how much services used to treat common conditions cost.2
The Next Evolution in Healthcare Pricing
But what does all this mean for those who work in the healthcare space?
It means we need to be working on solutions that create price transparency. We need better systems in place at the beginning of the patient journey to educate patients on potential financial liability. This is the next evolution in the American healthcare industry, and it will affect everything from how providers communicate with patients to how patients decide which doctors and hospitals will get their business – or if they get treatment at all.
Already, policy measures are being implemented to improve price transparency in healthcare. This past June, President Trump signed an executive order that aims to improve transparency and lower rising healthcare costs by showing prices to patients.
It’s too soon to tell what this will look like in practice, but the order asks providers and insurers to provide patients with information about out-of-pocket costs they will face before they receive services. Many states have begun this process – at least 27 are enacting legislation requiring healthcare organizations to provide pricing transparency tools to their patients.3
What Healthcare Providers Can Do
When it comes to price transparency, it’s clear the healthcare industry is lagging far behind every other industry in America – from retail to hospitality. Not only are patients not clear on what they have to pay, even the process of making a healthcare payment is most difficult in healthcare compared to other industries.
To make meaningful progress, healthcare providers can look to the practices, tools and technology of other industries. Solutions like better communication by staff, integrated payments, and leveraging digital payments processing solutions, such as online access to cost information and text and email reminders, are all steps in the right direction.4
Together, these and other advances in healthcare pricing transparency will improve the patient experience – and boost providers’ bottom line. Because patients aren’t the only ones paying the financial price of a lack of transparency. As patients become the main payers and deductibles increase, collection becomes more difficult and lengthier, resulting in more administrative costs.
In fact, research shows providers send 3.3 billing statements5 before receiving a medical payment, and providers may only receive 18 to 34 cents for every dollar billed to patients with high-deductible plans after the additional administrative costs.6 For patients, this means delayed care. For healthcare providers, delayed payments mean fewer appointments and longer receivables cycles, which negatively impacts their bottom line and ultimately their ability to provide treatment.
Digital pricing information and estimates can help, and should be part of any payment processing solution you consider. Digital access to this kind of information will also meet the expectations and preferences of the 55% of consumers who prefer to be notified about their healthcare bills through email, online portal, text or app notification. Elavon is at the forefront of developing such healthcare payments systems.
Ultimately, the healthcare industry needs to empower consumers to make informed decisions about their care and treatment. This means providing data and information upfront and continuously throughout the patient journey – and investing in the tools and technology that make this possible.
About the author: Michael Harper is vice president of healthcare product strategy at Elavon. He has over 10 years’ experience in the healthcare technology space and is an expert in digital data and project management for a wide variety of internet applications. Harper is particularly interested in data applications that extend current computing functionality to complex analytic solutions.
1Bankrate, “Most Americans don’t have enough savings to cover a $1K emergency,” January 18, 2018.
2Shelby Livingston, Modern Healthcare, “Is the price right? Solving healthcare’s transparency problem.”
3PatientEngagement HIT, “Refining Price Transparency Tools to Increase Patient Use, Cut Costs”, August 27, 2018.
4Naveen Sarabu, Medical Economics, “Why patient experience matters in healthcare collections,” July 19, 2019.
5Becker’s Hospital CFO Report, “A new patient engagement model for payment collection”, October 16, 2017.
6Naveen Sarabu, Medical Economics, “Why patient experience matters in healthcare collections,” July 19, 2019.