Many industries, from energy to retail to travel and hospitality, have adopted transparent pricing and expect — and even assist — their customers to shop for the best value. In healthcare, the truism has been that not many consumers comparison shop, even when price information is easily accessible. In fact, in one recent study, nearly 64% of providers said the industry’s new price transparency rule would have little impact on how consumers choose health services.
The Centers for Medicare & Medicaid Services (CMS) begs to differ. By January 2021, the CMS rule requires providers to publish their payer-specific negotiated prices, including minimum and maximum negotiated charges for 300 shoppable services. The agency expects that data to enable healthcare consumers to make direct, apples-to-apples comparisons of “common shoppable hospital services” across different providers. It’s been difficult for consumers to make such comparisons in the past due to unavailability of easy-to-understand pricing information and limited reference pricing. While 21 states have previously required publication of health prices, only seven have published consumer-oriented data — and not in a uniform way.
But when consumers have clear comparison data about health service costs and quality, the evidence reveals that they do shop. In California, research showed that after enrollees were given shoppable prices for hip and knee replacements, consumers chose low-cost facilities 21% more frequently and high-cost facilities 34% less often. Prices at high-cost facilities subsequently declined by 18%. And a study of plan members in Massachusetts showed that they price-shopped for inpatient services, which would translate into a 53% volume increase for providers in the lowest cost tier.
While transitioning to a price transparency paradigm in healthcare will be challenging for providers, they can go beyond mere compliance with the CMS rule set to engage healthcare consumers and patients in new ways relating to how health services are priced and paid. Accomplishing this requires providers to more deeply understand the market areas and the communities they are obligated to serve, and to help healthcare consumers shop for services. Adopting these strategies will equip providers to compete effectively in the industry’s emerging care-on-demand, consumer-driven and price-sensitive platform business models.
Understanding the healthcare consumer
Making the most of a price transparency paradigm requires providers to do more than simply publish prices. They must understand the consumer personas in the communities they serve, just as banks, financial services firms, retailers and other businesses do with their target markets. Persona-building requires understanding and customizing the care delivery to the precise needs of their communities. It also means comprehending generational attitudes and emotions concerning money, healthcare and overall service expectations.
For instance, baby boomers are generally somewhat less price-conscious, with 65% researching health costs before accessing services compared to 84% of millennials. Further, just 34% of boomers say out-of-pocket estimates affect their choice of provider, while 60% of millennials say these costs factor heavily into their decision making. Each group generally has different health concerns, though these may vary by geographic location.
