The Importance of Cost Transparency Between Physicians and Patients

December 24, 2013

Price transparency, once virtually taboo, is now a source of trust between physicians and patients. It's important to meet patient expectations for care and cost.

Until recently, physician-patient discussions about medical costs were not common in the exam room. Questions about charges for medical procedures primarily came from uninsured patients. However, cost-sharing features of health plans are evolving and insured patients are now being asked to pay out of pocket for more of their care. As a result, patients are increasingly interested in knowing what they will be charged for recommended healthcare services. This trend has led to greater recognition of the importance of consumer education and engagement around costs in healthcare delivery settings.

A recent study published in the Journal of the American Medical Association underscored the continued need for progress in price transparency. Researchers in the study called 20 Philadelphia area hospitals to inquire about two types of regular costs - parking costs and the cost of a common medical procedure (in this case, an electrocardiogram). While 19 hospitals readily gave the parking cost information over the phone, only three divulged the cost of an electrocardiogram.

This study highlights a critical disconnect in our healthcare system today: Although patients are being asked to shoulder a greater portion of their healthcare costs, they do not have ready access to the price information that enables them to plan for those expenses and exercise truly informed decision-making. Increasingly, many are turning to their physicians for guidance and information.

Using Cost Information to Promote Patient Engagement

Patient engagement is becoming recognized as an essential component of improved patient outcomes. And while developing and maintaining engaged patient relationships begins with offering high quality, evidence-based treatment, enduring patient relationships can also be bolstered by helping patients understand what their care will cost, including how their insurance coverage and reimbursement fit into treatment plan options.

To effectively engage patients on the financial aspects of their care, consider these tips:

1. Add the topic of costs to your routine patient conversations. At a minimum, by introducing this subject, you can relieve patients’ concern and hesitation about raising cost considerations with a physician.

2. Find out in advance if a patient has insurance coverage or is paying out of pocket, and then lead your discussion accordingly.

3. Transparency in cost information is not enough. Patients need clarity, or the context and educational information that will help them understand how to apply available cost information to healthcare decision making. Provide your patients with educational resources that help them to understand critical insurance concepts such as cost-sharing, various methods of reimbursement determination and out-of-network costs. FAIR Health offers medical practices free materials for download and distribution to patients.

4. Couple educational resources with robust, geographically-relevant cost information by directing your patients to free cost estimator tools, such as the FH Medical Cost Lookup, that allow them to benchmark the cost information you have given them and/or estimate costs for additional procedures that will be provided by another physician.

5. When recommending procedures that may not be fully covered by a standard insurance plan, note this fact in discussions with patients. This will support more informed decision making when a patient is considering the timing of a recommended treatment or weighing the benefits of alternative treatment options. It can also prevent the confusion and dissatisfaction that typically accompanies unexpected medical bills.

6. Increasingly, the cost of care is a critical factor when patients select a practitioner and/or treatment method, as well as when they decide whether to undergo optional or non-covered procedures. To assure patients that your charges are within the bounds of what is typical in a given geographic area, reference broad market data when discussing treatment options and charges. In addition to providing insights into market conditions, these cost data can support a wide array of practice management decisions, such as:

• Informing strategy for out-of-network services;

• Negotiating fair rates with discount plans;

• Developing strategies for bundled payments;

• Evaluating payer and network participation;

• Negotiating compensation for participation in exchanges and ACOs;

• Assessing expansion into new geographic areas;

• Estimating insurance reimbursement when purchasing new equipment; and

• Evaluating the impact of adding a new specialty or business line to your practice.

Price transparency, once virtually taboo, now has become a source of trust between physicians and their patients. As reforms to the healthcare sector continue and the economics of individual practices evolve, it is important to meet patient expectations for both care and cost. Fostering clarity through open communication and solid information can therefore offer important benefits to both patients and practitioners.

Robin Gelburd is president of FAIR Health, Inc., a national independent, not-for-profit corporation whose mission is to bring transparency to healthcare costs and health insurance information through comprehensive data products, consumer resources and research tools, all powered by the nation’s largest collection of medical and dental claims data. E-mail her here.