Friday, Oct 28, 2022

Pulling Back the Curtain: Health Care Price Transparency Expected to Boost Market Competition, Support Patient Decision-making

Chris MurraySenior Manager, Deloitte Consulting LLP

Christi SkalkaManaging Director, National Health Care Transparency Leader, Deloitte

HLTH Foundation

Amid the growing importance, involvement, and influence of patients in health, price transparency is becoming a front-burner issue for health care systems, health plans, employers, and other industry stakeholders (see New and future transparency rules could push health plans and health systems to collaborate). Unlike virtually every other consumer market, the prices for health care products and services are typically shrouded in mystery and often presented months after care was provided. As a result, prices can vary widely among hospitals—even those that are in the same geography. Moreover, negotiated contracts can mean every health plan pays different prices for identical services at the same facility performed by the same clinicians. Negotiated rates are not necessarily tied to outcomes or value; they tend to reflect which entity (the health system or health plan) was most successful at the negotiating table and had greater leverage in the market.

Deloitte’s work with hospital and health plan clients reveals largely positive intentions in caring for a patient’s financial health, in addition to their physical health, and helping them navigate the often-challenging requirements of a fragmented health care delivery and financing system. Further, our experience with these clients gives us unique insight into the challenges of health care price transparency and what it’s going to take to achieve a fair and equitably transparent market.  

Despite the challenges to achieving transparency in health care markets today, we believe that transparent health care markets are a critical accelerator to what Deloitte sees as Future of Health in which the consumer is at the center of the health care ecosystem and empowered to own their health care journey. 

We call this future “360 Degrees of Transparency”: an ecosystem in which pricing and cost data are accessible and easy to understand for the consumer; standardized quality metrics are utilized in conjunction with pricing data to gauge overall provider value; all stakeholders are actively participating and interacting with the available data; and provider prices are highly affected by consumer sentiment and payer/public data interpretation. This future has implications across all health care stakeholders. For example: 

  • Decisions factoring in the service-level cost of care could impact hospital volume and employee benefit plan selection.
  • Innovative benefit design could influence hospital volume and drive patients toward higher-value (low-cost, high-quality, accessible) care. Employers could look to make changes to network or switch health plan carriers. 
  • A mutual understanding of what is in the hospital- and health plan-disclosed pricing data is becoming the starting point for negotiations.

Federal government as catalyst for change 

The US government has taken a number of actions to advance 360 Degrees of Transparency. On January 1, 2021, the Centers for Medicare & Medicaid Services (CMS) began requiring hospitals and health systems to display negotiated prices for “shoppable services” in a user-friendly format. A similar rule, which went into effect July 1, 2022, requires health plans to post the rates they have negotiated with clinicians, hospitals, health systems, laboratories, imaging companies, and other entities. Health plans will also be subject to additional requirements—such as providing members with online tools to enable price shopping—in 2023 and 2024 (see our 2021 report on The Transparency in Coverage rule). The price transparency regulations have twin intentions: (1) to boost market competition among hospitals and health systems and, ultimately, drive down prices; and (2) to provide consumers with the information needed to make informed decisions. Fundamentally, the regulations pull back the curtain on prices that providers and payers have long considered to be proprietary.

More recently, regulators have enacted a law that builds upon the hospital transparency requirements and Transparency in Coverage final rule. The No Surprises Act (NSA) is a federal law that became effective January 1, 2022, and requires providers and payers to provide information about the cost of health care services scheduled in advance. The law is intended to prevent surprise billing of patients and increase decision making in health care by mandating proactive measures that providers and payers must take to communicate anticipated costs to patients before they receive care. NSA provisions require immediate changes for most providers and payers in order to comply in a way that provides financial transparency to patients.

While imperfect, hospital pricing data is currently available nationwide. Almost all hospitals have provided some level of price transparency, but there is significant variation in the level of functionality and information disclosed. Of the hospitals we analyzed:

  • 71% either did not update their previously posted CDM file or posted a new file without any form of negotiated rates
  • 1 out of 3 posted files required some form of additional scripting or data manipulation (e.g., python, SQL) to view
  • 29% posted a file with some version of payer-specific negotiated rates. Of these files, 95% included information on national commercial plans; the other 5% only included information on managed government plans or smaller regional plans.
  • 26% of providers we analyzed posted some version of cash/self-pay rates in their disclosure. Self-pay rate discounts ranged from 10% - 70%.
  • Among the files with payer-specific rates, 76% displayed inpatient rates at the DRG level, 28% displayed some version of outpatient or inpatient case rate information, 
  • 88% displayed outpatient rates at the CPT/HCPCS level, while the remaining 12% summarized rates at the APC level
  • 51% included some version of drug rates, while only 26% included rates at the NDC level.

The major national health plans posted their machine-readable files the first week of July 2022, and the file sizes and usability are proving to be the biggest challenge in analyzing the underlying data. The average health plan file size is 100-1000X larger than average hospital file sizes, and the largest group of plan files’ size (so far) is 20 terabytes, across ~4,500 employer files. Our analysis of the machine-readable files also reveals that the data provided by health plans is inconsistent, and often inaccurate or incomplete. In working with one health system, we determined that prices submitted by one of its health plans—for one service line—were up to 10 times the actual negotiated rate. Additionally, only a portion of the services they had negotiated were included in the file. These are issues that should be identified and resolved in the monthly reporting required of health plans under the Transparency in Coverage rule.

Finally, patient-facing tools do not yet meet customer expectations. Our consumer survey found that a majority of people would use a tool that aggregated their likely out-of-pocket costs for health services. However, such a tool would need to be contextualized with quality, conveniency, coverage, and user reviews. For example, when asked about accuracy of liability tool estimates, 42% of consumers responded that they expect estimates within a 10% or less accuracy range and 5% responded that they did not expect a liability estimate tool to be very accurate. In practice, it could be several years before consumers are able to comparison shop. We expect the transparency rules, along with new interoperability rules, could eventually lead to less price variation among health care providers, improvements in market differentiation, and shift to value-based care, outcomes that line up with Deloitte’s vision for the Future of Health.

Preparing for 360 degrees of transparency

Given the state of pricing transparency—and the clear market forces driving increased competition and appetite for informed decision-making by employers and patients—many health systems and health plans are making a series of no-regret moves to prepare for a possible future of 360 degrees of transparency in which pricing and cost data is accessible and easy to understand for the consumer; standardized quality metrics are utilized with pricing data to gauge overall provider value; all stakeholders are actively participating and interacting with available data; and provider prices are highly affected by consumer sentiment and payer/public interpretation of data. These moves include:

  • Understanding price position. Analyzing the price transparency disclosures to understand price relative to provider or health plan peers.
  • Evaluating pricing strategy. Developing a pricing strategy that sets price relative to value and is consistent with business requirements and mission.
  • Engaging with stakeholders. Building value communication and engagement strategies to help stakeholders understand and engage with the newly transparent data.
  • Pursuing technology investments. Digitizing the patient financial experience to surface liability estimates ahead of service and support patients in financing their care. 

To make these moves, Deloitte’s MyRateFinder™ data framework has been designed to use extensive domain knowledge and proprietary analytics to extract meaningful insights from hospital and health plan pricing data and surface estimates for transparency-related use cases. 

In one client example, a nationally recognized academic medical center encountered non-standard completion of machine-readable files among hospital peers and health plans due to ambiguous CMS guidance. The implications of the data in the market were unclear and competitive business use cases were undefined. We developed a five-year sustainable, enterprise-wide strategy to help our client prepare for the accelerating evolution of price transparency, achieve federal compliance, and maintain its desired position in the market. 

We expect the transparency rules will dramatically alter the competitive landscape over the next couple of years. While there are clear challenges with implementing the new reporting standards, we are energized by the breadth and depth of this data. With unit prices now available for institutional and professional services across all sites of service (and paired with utilization data), we can begin to compare total cost of care and, ultimately value, within and across markets to improve decision-making for all stakeholders in the health care ecosystem. 

While price transparency remains in its early stages, we are already seeing organizations taking steps toward the envisioned 360 degrees of transparency. Tech start-ups are aggregating pricing data and reporting in a consumer-friendly interface to enable price shopping. Employers are hiring health benefit firms or accessing online tools, and analyzing the cost of their network and the value they’re receiving from their health plan partner’s price negotiations with providers. Health care payers and providers are integrating transparency data into their pricing strategy for negotiations but, in a new era of consumerism and patient-centricity, they will need to do even more to embrace 360 degrees of transparency and unlock value in market share and profitability. 

As used in this document, “Deloitte” means Deloitte Consulting LLP, a subsidiary of Deloitte LLP. Please see for a detailed description of our legal structure. Certain services may not be available to attest clients under the rules and regulations of public accounting.

This communication contains general information only, and none of Deloitte Touche Tohmatsu Limited, its member firms or their related entities (collectively, the “Deloitte Network”) is, by means of this communication, rendering professional advice or services. Before making any decisions or taking any action that may affect your finances, or your business, you should consult a qualified professional adviser. No entity in the Deloitte Network shall be responsible for any loss whatsoever sustained by any person who relies on this communication.

Copyright © 2022 Deloitte Development LLC. All rights reserved

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