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March 8, 2016

'Price transparency' is misunderstood. Here's how to get it right.

Daily Briefing

Sam Bernstein, Daily Briefing

A new survey suggests hospitals aren't consistently sharing pricing information with cost-conscious patients—but The Advisory Board Company experts explain that raw pricing data is only one piece of the price-transparency puzzle.

A market imperative

As high-deductible health plans grow increasingly common, more and more patients are comparison shopping for health care. For instance, a recent study from Public Agenda found 56% of Americans now actively look for pricing information before getting care.

The trend affects providers' bottom lines: According to Ed Hock, who leads the Advisory Board's price transparency strategy team, a four-hospital system can see swings in revenue of $16 million to $40 million dollars due to their price transparency strategy—or lack thereof. "Providers who can share information quickly and clearly can steer patients away from their competitors," he explains.

But a new secret-shopper style survey released by the Pioneer Institute finds that sharing price information remains a major challenge for providers. Pioneer researchers posed as patients and requested pricing information on an MRI for the left knee without contrast at 54 hospitals in six states.

According to the survey, most hospitals took more than 15 minutes to provide pricing information that included the cost of a radiologist reading the MRI, and about 25 percent did not provide price information despite as many as 11 calls. Many organizations required patients to provide diagnostic codes or other difficult-to-find information in order to receive pricing data.

Barbara Anthony, a senior fellow at Pioneer Institute who called some hospitals herself, concluded that patients currently "can't shop for price, even if they wanted to."

The full story on pricing

But making charge prices available may fall short of what patients are looking for. Charge prices "typically have a wide degree of variability across a market and historically have not had a significant bearing on the patient's real financial burden," explains Chris Samples, a partner in the Advisory Board's consulting and management division.

What patients actually want to know, he says, is "what they owe, and [to] have it communicated to them in plain language—not medical finance and coding lingo."

Price transparency as a service

Patients' costs depend on a range of factors, from the status of their deductible to the details of their insurance coverage, says Cassie Wolfe, director of the Advisory Board's Performance Technologies division. Even self-pay patients frequently pay less than a charge list price because of discounts and assistance policies, she adds.

To provide price transparency that stands out in a competitive health care landscape, Hock says providers need "a tool to wade through the variables"—and they need to focus their efforts where they will make a difference. "Only about a third of procedures are shoppable," he notes.

Beyond simply offering price information, Hock adds that organizations need a comprehensive strategy to realize returns on their transparency efforts, including:

  • Deciding whether to play in the market;
  • Understanding consumer and referral behavior; and
  • Benchmarking key prices.

Providers also need to "be able to communicate [pricing] to customers clearly in a way that reaffirms the value they are getting and then successfully schedule care," Hock says. "We call it price transparency as a service."

The most progressive providers will make sure to plan ahead and "leverage key market facts to drive their strategy before blindly stepping into the price transparency spotlight," Samples says.

For instance, the Advisory Board partnered with a 13-hospital system in the Midwest to help it assess current consumer priorities, pricing, and the service environment around "shoppable" procedures in their market. The system's leadership now has a blueprint for evaluating and developing pricing strategy that it can replicate across its other divisions.

More price transparency tales from the road

On March 21, the Advisory Board's price transparency expert, Jon Maack, will describe how progressive hospitals and health systems are segmenting consumer behavior to create an optimal pricing strategy and to grow market share. Jon will tell stories from markets big and small and share lessons learned from the cutting edge of price transparency strategy.

Register now

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