Price Transparency: Will It Lead To Better Value In Healthcare

Mar 16, 2021

Price transparency means that prospective patients can determine the cost of a procedure in advance or its occurrence. As of January 1, 2021, the federal government has mandated that hospitals publicly reveal the price they have negotiated with each insurer for each type of procedure. This data has revealed that there is significant variation both within and between individual hospitals. A total knee replacement at one hospital may be thousands of dollars more or less than the same surgery performed at a hospital within a 20 mile radius. The same hospital may have a negotiated rate with one insurance provider that is thousands of dollars more or less than another provider despite no difference in the care. This variability and the difficulty in determining the direct cost of care has been a cornerstone of the rising cost of healthcare that is crippling employers who provide health coverage for their employees. 

While hospitals originally argued fervently against price transparency legislation because it stood to expose the inflated costs of care, now they are finding other loopholes to complicate a consumers’ ability to shop for value. These are buried in the form of hidden fees, balance billing, out of network benefits and other complicated insurance schemes that shift rising costs directly to consumers rather than to payers. The current fee-for-service system is intentionally designed to financially benefit hospitals and payers at the expense of healthcare consumers. This is particularly true for the growing number of companies who self-insure to avoid unsustainable costs of purchasing an individual policy for each employee. For these companies, the rising costs of care and the inability to shop for healthcare like a true consumer based on price and quality is the principal reason the current healthcare system is broken.

At present, there is little incentive for either the hospitals or insurance companies to change the current system because they are profiting far too handsomely on the windfall it provides. Payment reform resulting in true value will therefore require innovative strategies put forth by those on the front lines of care delivery along. Direct care and bundled payments are two such strategies that align healthcare providers with employers and patients without the need for a complex intermediary system. A bundled payment is a single, fixed price for a bundle of services like a joint replacement. The bundle includes the surgery, implant, anesthesia, operating room, recovery room, home nursing and therapy, and outpatient therapy. This can be packaged into a single price that can be known in advance of the surgery by those paying the healthcare bills. 

The Knee Hip and Shoulder Center is currently the only practice in New Hampshire offering bundled payments for orthopedic procedures. This currently includes total hip and knee replacement but this model can apply to any procedure that can be performed in the outpatient setting. The transition of joint replacement to the ambulatory surgery center has enabled us to offer these bundled payments which result in a savings of over 50% when compared to fee-for-service, hospital-based care with no difference in quality. 

As consolidation in the market increases with more hospital mergers and more physician practices becoming employed by these systems, there will be fewer private healthcare providers who can offer innovative solutions like direct-employer contracting and bundled payments. Our goal is to compete on quality and price by delivering excellent care at an affordable cost.