In February, President Trump ordered the secretaries of the Departments of Treasury, Labor, and Health and Human Services to “take all necessary and appropriate action to rapidly implement and enforce the healthcare price transparency regulations.”
This presidential action has rekindled interest in understanding what the next generation of healthcare price transparency will look like and the impact it will have on the healthcare ecosystem. And assessing the future of price transparency requires taking a couple of steps back to review its recent history.
In the beginning
Pricing for healthcare services has historically been contained in private and confidential contracts between payers and providers. However, the idea of providing greater price (and quality) transparency to healthcare consumers has been around for decades. Previously, payers’ adjudicated claims data had been considered the gold standard for pricing information. When aggregated across payers in databases like MarketScan from Merative (formerly known as Truven), these databases became reference points for researchers and market participants. Individual payers also had their own analytics and tools leveraging their claims.
While these early efforts represented progress, there were challenges that limited impact. Individual payers had access to their own claims but not to the claims of other payers, which could have provided a more complete picture of provider pricing. Claims database aggregators tried to address these gaps but were hobbled by data exclusions (i.e., certain payers and self-insured employers withheld their data) and usage limitations (i.e., confidentiality and anonymity requirements in data use agreements). Moreover, there was also a wariness among payers of potentially triggering a “provider backlash” to aggressive usage of price and quality transparency data to channel real-world patient traffic. The industry needed aircover from a higher power.
Enter Trump I
The first Trump administration took the unprecedented step of requiring both providers and payers to publish actual negotiated prices initiated in a 2019 executive order. For the first time and due to regulations released after the 2019 executive order, publication of pricing agreed upon in confidential payer-provider negotiations was required.
Lots of problems…
There were (and still are) lots of problems with the publication of price transparency files. It started with basic mechanics like being able to use the files. The files were supposed to be “machine readable”—which many organizations may have interpreted as “human unreadable.”
The payer files were so large that only the most technically proficient researchers and analysts were able to use it in the early years. Many of these problems are documented by a recent publication from the Peterson-KFF Health System Tracker.
…But impact nonetheless
Despite these problems, price transparency started having an impact in the market, as entrepreneurial and intellectually curious market participants found a new, rich data source to inform their strategies in the market. Payers and providers are closely analyzing these data in preparation for contract negotiations. Others are leveraging the information for network design. Some organizations are taking it further by putting key information into consumer-friendly mobile applications to enable network steerage informed by payers but activated by consumers/patients.
Finally, the enhanced fiduciary obligations of employers noted in the Consolidated Appropriations Act of 2021 (CAA, 2021) made self-insured employers more liable for the pricing offered by their health plans if they are not deemed as being in their members’ best interests, and transparency data became a way to validate if the employer was being vigilant about the pricing offered in their employees’ health plans. The CAA, 2021 also prohibits group health plans and other payers offering group coverage from entering into agreements with providers, networks of providers and others that restrict access to cost and quality data and de-identified claims data, and addresses sharing such information.
Some of the most interesting analyses of the impact of price transparency came in the recent Turquoise Health report that showed “significant price convergence, with high rates declining by 6.3% annually and low rates increasing by 3.4% annually.”
This makes intuitive sense as price transparency creates a greater spotlight on industry outliers. Providers with comparatively low prices relative to other providers in their market are likely negotiating with payers with a greater understanding of their market’s dynamics. On the other hand, providers with relatively high prices will likely have to explain and justify their model within the context of their overall value proposition.
More intense negotiations ahead
The Biden administration continued and strengthened federal transparency rules, including increased penalties for noncompliance and other changes to the compliance process. In addition, the No Surprises Act, which took effect in 2022, includes protections for patients covered under group and individual health plans from receiving surprise bills for most emergency services, and established an independent dispute resolution process for payment disputes between plans and providers.
The recent Trump administration executive order, if implemented, will result in greater enforcement of the original intent of price transparency.
Payers and providers should expect more intensely analytical negotiations in future as both sets of parties leverage the data for information advantage. Expect greater productization of this information into consumer apps. This might mean the implementation of more push notifications and proactive healthcare suggestions, like an end-to-end knee replacement care bundle offer when a user searches pricing information for the procedure.
Providers will need to recraft their competitive strategies for this new world. Just as merchants across all industries had to figure out how to position themselves in Google searches, providers will need to figure out how to win on the frontlines of the most popular consumer mobile applications. Similarly, payers will need to think hard about how to derive network advantage in this new world and earn preferential treatment from the top providers to avoid getting commoditized.
Finally, while the current focus is understandably on price transparency, healthcare quality transparency is also an established area of focus worth additional attention. Like price transparency, efforts have been underway in this area for decades—from payer-designated centers of excellence to quality rankings and data sources, including Vizient’s Quality and Accountability Rankings. Today, newer companies are pushing harder into a more nuanced and data-driven understanding of healthcare quality.
The combination of mature price and quality transparency data will be a game changer in how healthcare is utilized in the United Sates, both in interactions between payers and providers as well as in interactions between healthcare organizations and informed and activated consumers seeking care.
In conclusion
Nearly 90% of Americans support strengthening price transparency in healthcare. In addition, February’s executive order calls for additional federal action within 90 days, including requirements for the disclosure of actual prices for items and services, the standardization of pricing information, and updated enforcement policies.
Given this reality, organizations will need to prepare for additional regulation, leverage emerging sources of pricing information and craft thoughtful strategies for payer-provider negotiations. Leaders must also make space for reflection on strategic questions like:
- What is our (honest to goodness) value proposition and differentiation in the market, and how will that inform our pricing model?
- How can our organization pursue its chosen value proposition and pricing model over time?
- How will we utilize healthcare quality data as a differentiator?
So, what’s your organization’s strategy for price (and quality) transparency?
