What's Next: Price Transparency Takes Center Stage

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Price transparency takes center stage in 2016 as plans invest in user-friendly price tools and consumers incorporate cost information into healthcare decisions.

Todd Van Tol

Our "What's Next" healthcare predictions series continues with this view from Todd Van Tol, Oliver Wyman's head of Health & Life Sciences for North America. He shares his perspective of what the future holds for health services in 2016:

According to Oliver Wyman estimates, about one-third of today’s healthcare spending has characteristics that make it shop-able, meaning it's not emergency care, or a complex or unique procedure. That’s about $900 billion in healthcare spending that could be price shopped if consumers had the knowledge and tools to do so. But up to now, they have had neither.

Price-comparison tools have been in the market for some time, but use of the tools has historically been low—primarily because the price information available via such tools has been unwieldy, complicated, and often not specific to a consumer’s unique situation and benefit plan. In addition, benefit structures did not provide incentives for consumers to comparison shop, and so few patients felt compelled to do so. What’s more, many providers still do not have a good understanding of patients’ share of costs—given the complex contracting arrangements with payers—and so could not discuss cost with their patients even when the consumer was motivated to do so.

Today, however, cost is foremost on consumers’ minds. Nearly 40 percent of people in employer-based plans are in a high-deductible plan and many of the ACA plans have shifted to high deductibles. With so many facing more out-of-pocket exposure, cost of services has taken on greater importance; and consumers are beginning to show interest in incorporating pricing into their healthcare decision making. At the same time, plans are mobilizing to make price more relevant with user-friendly pricing tools.

After years of price-transparency discussion, 2016 is the year that cost of services will not only enter into the conversation, but move meaningful volume.

The key, though, to making price transparency actionable will be tools that are meaningful to consumers. Cost is incredibly complex, and it is not always rationale or intuitive in terms of how different services are priced and reimbursed. The new generation of price tools will need to be easier to use, move beyond the general cost range of a procedure, and be specific to an individual’s insurance product.

While some providers are threatened by cost conversations, those who take a proactive position and introduce price into patient relationships will benefit in the coming year. That’s because as consumers take on a greater share of costs via high deductibles, providers will be billing patients directly more than in the past; and collecting payment from consumers is often more onerous for them than extracting claim payment from insurers. Consequently, providers who introduce price into care-planning discussions and reinforce consumer behaviors to shop for care will likely face fewer hurdles when it comes time to collect payment.

At the same time, providers will need to pay greater attention to their price points for shop-able services and make sure they are competitive and relevant.

Of course, not all healthcare is shop-able. If you require a complex cardiac procedure, there may be only one qualified provider in your area. However, $900 billion is a lot of shop-able care. Armed with accurate cost information, consumers will now increasingly incorporate cost into those decisions, causing volume to move in more than token ways.

Author
  • Todd Van Tol