Our Take: Employer-Led Healthcare Transparency Initiative
The high prices paid for hospital services—and the lack of transparency surrounding them—are gaining a lot of attention lately, highlighted by the recent executive order signed by President Donald Trump. It’s the latest development in the growing focus on the issue from stakeholders across the healthcare industry, from policymakers to patients and everyone in between.
While there are myriad opinions on the topic—including differing views on its root cause and conflicting ideas for how to solve the challenges patients and payers face—the harsh reality is that prices for healthcare services are high and on the rise. Further complicating the problem, prices aren’t transparent and they’re highly variable between geographies and facilities, leading to an opaque view on the true cost of care. All this contributes to frustration among consumers who are ill-equipped to make informed decisions on where to go for care and are stuck with out-of-pocket costs that are higher than ever.
As the effects of this issue compound, more research is being conducted to examine the underlying dynamics and offer potential solutions. Studies like the recently published report from the RAND Corporation show that on average, hospital prices for those insured by private health plans were 241 percent higher than Medicare rates in 2017. This figure is driven in large part by the price growth for outpatient hospital services like emergency room (ER) visits and imaging, which is outpacing price increases for inpatient services.
With more than half of the U.S. population receiving insurance coverage through an employer-sponsored health plan, pricing variability and lack of transparency are troubling issues for employers, particularly those that are self-insured. So, what can be done? While price transparency for healthcare services is critical, it should be viewed as a first step from service providers. For employers to influence near-term progress, there are a few actionable steps forward that fall within their span of control.
First, design benefits focused on reducing expensive ER and urgent care visits. It’s been shown that up to a third of healthcare spending in the U.S. is wasteful, with unnecessary services having the largest impact on this figure. Employers can combat this trend by improving access to comprehensive primary care that offers wide-ranging services, including common diagnostics and in-office procedures. In the near-term, this offers a direct cost replacement for more expensive ER and urgent care visits. Longer term, implementing a thoughtfully designed wellness program aimed at making employees healthier through behavior change and preventive care will ultimately reduce the need for costly emergency care.
Second, employers should focus on an independent referral strategy for specialty care. While it’s tempting to go the route of a narrow network design with an aggressively negotiated contract, limiting patient choice is not necessarily the best solution. A single hospital or health system may be able to offer value on certain services but will inevitably fall short on others that are higher priced than competitors. Going beyond basic price transparency tools, employers should take it a step further and provide referral navigation services that offer more support in steering people to the highest-quality, lowest-cost care.
Finally, employers should think big picture about their healthcare spend and its return on investment. Expensive hospital care can often be transactional in nature; only addressing acute health issues for patients, with no long-term benefit towards better health. With a two-pronged approach that focuses first on replacing costly, low-value visits with higher-quality, lower-cost care, and second on getting people healthier so they consume less healthcare services overall, employers can imbed more value in their current plan spend.