What is Price Transparency, and how does it relate to Value-Based Care?
Value-Based Care has gained significant momentum in healthcare. The goal is to reduce cost and improve quality. Accompanied with this trend towards shifting financial risk towards providers and health systems is the concept of price transparency (AETNA).
A key assumption within standard economic practice and decision-making is equal access to information. The healthcare industry has long been plagued by unequal access to information creating an ever-evolving imperfect market. Recent efforts to level the playing field with the goal of reducing costs have revolved around the Price Transparency Rule. The thought process behind making prices more transparent in the healthcare industry is that by bolstering the knowledge possessed by patients, they will make more informed and cost-effective decisions when it comes to their care.
Effectiveness of the Price Transparency Rule
The Centers for Medicare and Medicaid Services put the Price Transparency Rule in effect on January 1st, 2021. It required health systems to make their pricing information more transparent and easily accessible online. Hospitals were asked to have this publicly available information be “machine-readable” and published in a “consumer-friendly” format (CMS). This would, in turn, improve the value of care being provided by fostering greater competition through pricing transparency.
However, the effectiveness of the Price Transparency Rule remains unknown and has come to the forefront of industry research. Common questions that arise include if competition fixated on the cost of care will impact quality, how will anti-trust legislation will influence the utilization of publicly available information by competing health systems, is a better business strategy to become compliant or remain noncompliant, and will releasing chargemaster data even be all that influential in reducing costs?
Complying with the Price Transparency Rule
Research continues to grow on this topic, which will become more prominent in the coming new year. Failure to comply with the Price Transparency Rule since its inception has been accompanied by a $300 daily penalty. Effective January 1st, 2022, this penalty will jump to a daily fee of $5500, which will provide much more incentive for health systems to become compliant (HFMA). Much remains to be seen and researched. Only time will tell, but one certainty is that failure to comply with the Price Transparency Rule will only become more expensive, and the push for Value-Based Care is here to stay.
To learn more, please click the hyperlinks provided and stay tuned as Bright Ideas Medical Consulting will continue to monitor the implications of this trend.
By Michael Philippone