Cost transparency in healthcare is one of those things that seems obvious. We all want to know where our money is going and why. We all want to be able to make informed decisions on how and where we allocate our money. But the byzantine nature of healthcare is opaque and anathema to the kind of transparency that is meaningful.
We spoke with Tina Mentz, Chief Operating Officer of Ambulatory Management Solutions, about the importance of price transparency, how it benefits all stakeholders in the healthcare ecosystem, and how this impacts the quality of care for patients.
What is cost transparency?
I think the most important thing when we’re talking about cost transparency is really it is what it is. It’s letting people know what their out-of-pocket expense is going to be based on what provider they choose and what setting they choose. So, they can make the best possible decision for themselves.
Cost transparency in healthcare seems like it should be straight-forward, but it isn’t. Why is that and how do we bridge the gap to make costs clear to the patient?
I think the way to look at it is being upfront with patients about how much they’re going to pay. It’s worrying about the patient’s financial health. Providers should say, “I am your surgeon and if you have your procedure performed in the hospital, I expect the out of pocket for my services to be X. If you have the procedure performed in my office, I expect your out-of-pocket expenses to be Y.”
And we know that patients’ expenses change depending on if they’re in a facility, whether that’s a hospital or a surgery center, or if they’re in the office. Giving patients that information about what their estimated out-of-pocket would be and what their financial health would look like before the procedure would let them make a more informed decision about where they want to have it.
Who stands to benefit from healthcare cost transparency?
In my opinion, everyone. If we’re looking at the payer side, informing patients about what their costs will be, what their options would be, and where they could have procedures done, could result in a savings to the healthcare system which is a savings for the payers. Again, if it costs three times as much – and this is a fact – to have a procedure performed in a hospital than in the office setting, why wouldn’t the payer want to direct the patient to the office setting assuming it’s safe and assuming they’re going to receive the same quality. Why wouldn’t we want to save the system?
I think on the provider side, the win is that by doing things in the office, they actually are incentivized at a higher reimbursement rate. They are providing more things. The surgeon is providing their services in the office which means they’re providing the equipment and the instrumentation they need, but they have benefits in terms of no delays going to a hospital or just driving in traffic. They don’t have to worry about having control over when they can put a patient on. They have control over how they put patients on.
It’s bringing the provider back into control and incentivizing them to keep that control within in his office. The whole healthcare system is saving, and the patient is getting the same exact quality care in a setting that has a lower cost to them.
Can you give us an example of the lack of cost transparency today?
Yeah. Unless you’re in healthcare and you deal with this every day, you don’t really understand what the whole picture looks like.
Let’s say you’re going to have surgery and you think that you’re going to get billed by the surgeon and you’re going to get billed by the facility where your procedure is performed. Those are only two of the many providers that you’re going to get a bill from. If you have something removed where it has to go to a lab or to pathology, you’ll have a bill from the physical lab AND you’ll have a bill from the pathologist who interpreted the report.
If you’ve had to have a test in the hospital maybe prior to the procedure, you’re getting two bills for that. Additionally, you’re getting a bill for the actual test performed. And then for someone to read the test. It’s the same with anesthesia: they put you to sleep and you are going to have a bill for that as well.
When you walk into a hospital, it’s not two bills run from your surgeon and the hospital; you could up have upwards of five, six, seven bills that you didn’t anticipate because you didn’t know any better.
I feel like from a patient’s perspective, they feel like they’ve been duped a little bit. They show up and they think they know but there’s a whole world they don’t know. Being up upfront with a patient and saying, “Hey, this is what you’re going to experience when you get here.”
It doesn’t matter what setting it is, whether it’s the office, the surgery center or a hospital, giving patients the full scope of everything that’s involved and what they can expect at the end is really important. Once they know that, then they can go make informed decisions. They can call their insurance company and say, “Hey, tell me what this is going to cost me for this procedure if I do this in the office or if I do this in the hospital.”
How can moving procedures out of the hospital and into the office setting help with some of those costs?
The payers have really defined that for us. For a given procedure, they pay a third of what they would normally pay in the hospital. If they are paying a third, that also means the patients out-of-pocket is a third less as well. So, they really are setting the benefits to encourage patients to go to the lowest cost setting depending on what their situation is. If their medical history allows for that and the procedure can be safely done in a lower site of service, in a lower cost setting, why not? It’s easy enough. The payers really built a system that encourages the best care and the lowest-cost setting and patients just need to follow that lead to see what their cost is going to be.
When it comes to the bottom line of cost transparency, what should the overall focus be?
As a healthcare community, we need to be concerned with both the patient’s physical health and the patient’s financial health. We need to educate the patient and let them know that the procedure that they are having belongs in any one of three settings and what the options are for that. If the procedure can be done in the safest setting that also is the lowest cost setting, we should educate the patient and let them make the choice.
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