When Price Transparency Still Leaves Us in the Dark

Health care in the United States is a fragmented system fraught with overutilization of specialty services, excessive health expenditures, and high prices. Although it is also a system full of rapid innovation and technology, it is one that primarily holds the patients and caregivers financially responsible and at the mercy of high cost-sharing, largely private insurance plans. For instance, up to 33% of adult patients and 50% of caregivers of pediatric patients report medical financial burdens.^1–6 

Price transparency has become a popular potential solution to this “priced-out” crisis. At the individual level, price transparency can increase competition by enabling patients to “shop” for lower-cost providers or facilities, which can decrease overall health expenditures. At the market level, public knowledge of prices can incentivize health systems and providers to lower prices to preserve patients and payers. Additionally, transparency of prices could help clinicians consider the financial impact of recommended medical services and facilitate identification of effective but less expensive treatment plans. Considering these potential benefits, the federal government passed stepwise legislation over the past decade mandating greater price transparency from hospitals and health systems. In 2019, an update to legislation initially passed as part of the Affordable Care Act required that hospitals publicly post their chargemasters online.

In an article published this month in Hospital Pediatrics, Parlar-Chun et al examined the impact of this mandate on the chargemaster prices of 3 commonly ordered tests (complete blood count, comprehensive metabolic panel, and a chest radiograph) between 2019 and 2021 in US children’s hospitals.⁷  The authors went through the extraordinary task of examining >1000 chargemasters but found little to no difference in the average chargemaster prices of the 3 tests or the variability of prices across hospitals between the 2 time periods. Even when analyzing discrete metropolitan areas, where the forces of market competition should be greater, an effect was lacking.

These results, although disappointing, are not surprising. Chargemasters are dossiers of thousands of billable medical services offered by a hospital and their associated price. However, the rates listed in chargemasters are formulated by hospitals and reflect the upper bounds of the “asking price” largely to facilitate reimbursement rate negotiations with insurance payers. On the basis of their primary function, it is clear that chargemasters are not the appropriate transparency solution for patients and families.

First, chargemaster rates have no relation to what the patient will pay out of pocket. Although chargemaster rates may be more equivalent to out-of-pocket costs for self-pay patients, in pediatrics, few children are uninsured (only ∼5% thanks to the recent expansion in public coverage),⁸  and for both children and adults who are self-pay, hospitals often provide significant discounts on listed prices. For the insured, the ultimate financial responsibility is based on a formula of negotiated rates, remaining deductibles, standard copays, and coinsurance rates, none of which equate to the rate listed in a chargemaster. For hospitals, there is little market incentive to lower the upper bound of their prices because this could decrease payer reimbursement rates and affect a hospital’s revenue. For clinicians, chargemasters could be useful as a reminder of the relative prices of certain tests or treatments, and to prompt them to reconsider the necessity of some orders. However, no clinician has the time to search through thousands of line-items in a “machine-readable file” to locate that price.

Chargemasters are not the appropriate tool for effective price transparency, but what is the right tool? An encouraging step forward is the more recent Transparency in Coverage Final Rule, which requires hospitals and health plans to provide patients with real-time access to personalized cost-sharing information for medical services.⁹  Parlar-Chun et al found that 88% of queried hospitals in 2021 posted their chargemasters, raising confidence that hospitals will continue to abide by more focused transparency measures. However, rote publishing of chargemasters was relatively straightforward, whereas developing and implementing effective cost transparency will be much more complex.

Transparency needs to be patient-centered and personalized. Because of the immense variability in insurance payers and plans, tools that provide average costs for services even regionally can still leave a patient with little idea of what their financial responsibility may be. Online tools are being developed by some health systems which allow users to input their insurance plan information to facilitate closer estimation of the cost of common services on the basis of their personal deductibles, copays, and coinsurance (www.healthcare.utah.edu/pricing). However, these tools only cover a small number of mainly elective medical services and are used outside of clinical encounters. This information needs to be brought as close to the point of care as possible. Embedding costs into publicly accessible clinical decision aids may help prompt cost discussions during clinic or hospital visits. One example of this is the Mayo Clinic Diabetes Medication Choice Decision Aid (www.diabetesdecisionaid.mayoclinic.org), which provides the relative prices of medications as 1 factor to help patients make informed decisions in consultation with their clinician.

Bringing cost transparency into the clinical encounter helps ensure consistent and equitable access to cost information. Importantly, this information cannot be provided in a vacuum, but instead should be provided in a shared decision-making environment, where patients and caregivers can understand why services have been recommended, their risks and benefits, potential alternatives, and financial options. There is no uniform approach to successfully implementing cost transparency in a clinical setting. The timing of these conversations will need to be adapted to the urgency of the clinical situation and flexibility of evaluation and management plans. Additionally, while some studies have shown patients are comfortable discussing costs with their clinicians,^10–12  other studies have demonstrated that patients prefer to have these conversations with nonmedical members of the care team.^13,14  Although clinicians will need to be skilled in discussing costs with patients, they cannot shoulder the entirety of these conversations. A financial care team working in parallel with the clinical care team could identify patients’ preferences for receiving cost information, screen for financial insecurities, and match patients with financial assistance and community resources when applicable. Ultimately, more patient-centered studies are needed to guide the design and implementation of transparency tools, as well as identify patients’ preferences for how to receive cost information, in what form, and by whom.

Greater transparency will not eliminate high medical bills, but early knowledge of expected costs and open conversations about financial options could help lessen their detrimental impact on patients and their families. We recognize that cost is only 1 factor in how patients navigate the health care system. Circumstances and values that influence a patient’s or caregiver’s choice of hospital, provider, or treatment are multifactorial. However, a universal approach to the integration of costs in clinical care will facilitate use of this information for those who want or need to prioritize cost in their decision-making.

In a health care system that increasingly leads to financial distress and toxicity for its patients and caregivers, cost transparency is a necessary first step. Investment in real-time, patient-centered cost-sharing platforms that can be integrated into the clinical encounter and supported by a multidisciplinary team needs to be prioritized. Only then may we understand the full potential of cost transparency to transform our health care system.