Consumers will most definitely drive the future of healthcare. And the idea of meeting consumer expectations in a way that rivals today’s online shopping experience isn’t just aspirational. It’s becoming a reality under the pointed prodding of several federal initiatives.

Recent transparency rules aim to empower healthcare consumers with upfront service-cost information, ideally allowing them to choose providers with lower prices. As consumers bear higher out-of-pocket costs, it only makes sense to give them the chance to shop around.

Let’s take a look at how the federal price-transparency rules are rolling out thus far and what the implications might be for the market overall.

Are providers following the hospital price transparency rule?

Starting January 1, hospitals were required to post their prices online, following specific CMS guidelines. For one, hospitals must offer the public machine-readable files (something consumers can download and dig through on their own computers), and the files must include several different types of pricing information for at least 300 services.

Hospitals can’t simply post chargemaster sticker prices. The rules require detailed transparency around discounted cash prices as well as payer-specific negotiated rates. If a local Blues plan PPO pays a health system $79 for a routine screening mammogram, for example, that specific payer, plan product, and service by CPT code must be displayed alongside the price.

A Health Affairs analysis of the 100 largest U.S. hospitals found:

  • Only 22 percent appeared to be in full compliance
  • 65 percent had posted some price information but “clearly” were not compliant
  • 12 percent had not posted any information at all, weeks after the compliance deadline

Separately, a PwC analysis of 102 U.S. hospitals found:

  • 19 appeared to be in full compliance
  • 76 had some degree of compliance but not full compliance
  • 7 had not posted any information as of March, about three months past deadline

Although the penalty for noncompliance was set at $300 a day, CMS seems to be allowing for some discretion because the COVID-19 pandemic has created so much upheaval for hospitals. The transparency regulations passed under the Trump administration, however, the extent of this grace period for noncompliance remains a decision for the Biden administration to make.

The Wall Street Journal also reported that some hospitals posted their prices but did so in a way that excluded the website location from Google searches. In effect, the consumer could only find the information with a direct link. Just this week, new federal guidance has made it clear that hospitals cannot use website coding to hide their prices from search engines.

Is the hospital price transparency rule doing any good?

A minority of hospitals are demonstrating compliance, proving that it is possible to post super-specific price information. But is it really the sort of transparency that accomplishes the true goal of making healthcare consumers smart shoppers?

The machine-readable files are huge. All of them. Search for your local hospital’s “standard charges,” and try to download a file to see for yourself. They’re also pretty tough to navigate without a great deal of insight on CPT codes or medical terminology.

Even more so, the matching of the health insurer, the specific plan product, and the range of high and low prices is potentially misleading. A consumer would need to know the correct insurance plan and the exact health service she needs, then search the enormous files from multiple hospitals and try to match them up apples-to-apples. Considering the fact that only four percent of consumers even know the most basic health insurance terms, like “copay” and “coinsurance,” it’s unlikely a savvy new healthcare consumer has been born.

What’s the opportunity for the healthcare market?

Compliance is just the beginning. With such big swaths of hospital price data on display, industry organizations are smart to peek behind a few curtains and see what they can gain.

1. Research the hospital pricing landscape

Market research can provide a macro or micro perspective on pricing, especially for companies in a growth phase. Looking for the pricing spread on a certain service in one geographic area so you can compare it to another area? You can do that now that the information is out there. The data files can serve to be a quite the treasure chest for anyone with the insight and initiative to sift out the most relevant material.

Additionally, providers are relying on their technology partners more than ever, and this data crunching opportunity might become a nice value-added service for one of the existing health IT leaders, or possibly even a new innovator with fresh capital. However, understanding the deeper market dynamics will be more important than just running the numbers.

2. Craft a brand story that differentiates your organization beyond price alone

Make no mistake: Payers, competing providers, and other stakeholders will be interested in the price information, especially if they can leverage it in contract negotiations. Comparatively high-cost providers might need to justify their rates by highlighting superior outcomes or pointing to specialties in which they excel. Low-cost providers might have a story that centers around serving vulnerable populations or addressing social determinants of health.

Either way, organizations with a strong reputation and brand recognition can become the trusted provider of choice in the community, making them that much more valuable to a health plan network. As payers whittle down their networks and shepherd members toward high-quality, low-cost providers, differentiation by brand will make all the difference.

3. Connect consumers to the bigger picture

About 56 percent of the U.S. population is covered by an employer-sponsored plan, and those employers are becoming more aggressive and more sophisticated in their cost-control strategies. Any company — incumbent or otherwise — that can make hay out of the provider price data and put it in context for both the employer and the employee will find ripe partnership opportunities.

The bottom line is that someone needs to translate the huge spreadsheets into easy-to-digest, best-value information for healthcare consumers.

PwC says the individuals most likely to shop around for health services are those age 25 to 34, and they tend to use online tools provided through their health insurers. But to advance smart shopping, more tools must be made available to more consumers, while also being aligned with precise, personal variables, such as deductible remaining, copay for the service in question, and suggestions for a less expensive provider when available.

One could argue that the hospital price transparency rule is pretty cumbersome for hospitals to follow — the American Hospital Association fought against it, and the rule was delayed by a year. Yes, it might eventually fizzle out if it’s not useful for consumers, but it’s hard to imagine a future without some responsibility for upfront pricing placed on providers.

Insurers are up next. In January 2022, health plans will be on the hook to post machine-readable price information that includes negotiated rates and historic payments for services as well as net prices for prescription drugs. Time will tell if consumers find these gigantic spreadsheets useful or not.

Discover how healthcare market research and insights can inform your growth strategy, allowing you to take advantage of unique opportunities. Contact the Canton & Company team to start a conversation today!