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The Aptitude Blog

Enabling price transparency in healthcare

April 30, 2015
Posted by Sarah Werner

The importance of price transparency in healthcare has been picking up steam for the last few years. With more and more Americans paying an increasingly greater proportion of their healthcare costs out of pocket through high deductible health plans, consumers are demanding the right for accessible information about healthcare service costs.

Healthcare providers have work to do to make the vision a reality. A 2014 assessment by the Catalyst for Payment Reform and the Health Care Incentives Improvement Institute gave 45 states a failing grade for pricing transparency with no states receiving an “A” grade. With many states passing healthcare pricing transparency legislation and the Affordable Care Act requiring hospitals to make pricing around certain items and services public, healthcare providers need to start or improve efforts in this area.

In a recent HFMA article, Tawnya Bosko, Senior Manager at The Camden Group shared a few key factors to consider when beginning a price transparency initiative. From our position as specialists in finance and technology, a few points were especially interesting.

Gain a better understanding of costs

The first key factor mentioned by Bosko, is the importance of knowing cost data. She states, “If you don’t understand your costs at a granular level, now is the time to implement a plan to gain that understanding. Defensibility of pricing hinges on understanding costs.”

Understanding costs requires bringing together granular data from multiple sources to create a complete, detailed picture of the true cost of delivering care. Many hospitals struggle with applications that can only handle cost aggregates or require manual data extraction and manipulation due to a lack of information integration capabilities.

Having a platform that can integrate & standardize granular cost data, automate cost allocation rules and model assumptions can make it easier to both supply cost data and price services. With a better understanding of costs, hospital networks can uncover best practices, manage supplier costs and identify the most or least profitable services.

Understand your market position

As concerned as patients are with finding affordable healthcare, the majority of patients are willing to consider paying for a higher quality of care. However, many hospitals struggle to bring together cost and quality data to justify higher pricing based on a better standard of care provided.  As healthcare providers explore pricing transparency, they will need to find a way to combine quality and pricing data in a way that presents not just the cost to the patient but the value provided.

To facilitate this level of reporting, IT systems and applications will need to be able to combine cost data with things like reimbursement rates and physician reviews made available from governments, payers or other external organizations. Organizations that illustrate a greater value of care for healthcare dollars will be in a much better position to increase revenue by attracting more consumers.

Pricing logic / Consistent pricing for the same procedure

Bosko notes in her article that given this time of heightened consolidation in healthcare, many hospitals and health systems may have multiple prices for the same procedure across their healthcare network. When this pricing discrepancy is uncovered, it can be frustrating for consumers who pay hundreds or thousands of dollars more, often without any indication of increased value.

Having the ability to apply centralized pricing logic to an integrated data repository could help address pricing inconsistencies.  By applying business rules that can apply pricing logic based on codes for physicians, supplies, procedure types or any other business dimension, healthcare providers can maintain better control over pricing across their entire networks.

Unlocking the value of price transparency

In our experience of providing specialist finance applications to companies that have faced data transparency pressure before, integrating and standardizing detailed internal and external data is key. An organization typically creates a ‘single version of the truth’ so that business rules can empower centralized accounting, cost allocation, price determination and other requirements. This seamless integration enables statutory, financial and management reporting to be fed accurately and directly, reducing manual interventions and the need for an ‘excel army’.


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This blog post was written by:

Sarah Werner
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