Health Care Prices - Price Transparency Issues

Price Transparency Issues

In a market with transparent pricing, the price of a particular service is openly advertised. For example, companies that provide automotive oil changes often advertise their prices, and consumers have access to these prices when choosing a service provider. In contrast, in the US medical industry, patients generally do not have access to pricing information until after medical services have been rendered. A study conducted by the California Healthcare Foundation found that only 25% of visitors asking for pricing information were able to obtain it in a single visit to a hospital.

Since the majority (85%) of Americans have health insurance, they do not directly pay for medical services. Insurance companies, as payors, negotiate health care pricing with providers on behalf of the insured. Hospitals, doctors, and other medical providers have traditionally disclosed their fee schedules only to insurance companies and other institutional payors, and not to individual patients. Uninsured individuals are expected to pay directly for services, but since they lack access to pricing information, price-based competition may be reduced. The introduction of high-deductible insurance has increased demand for pricing information among consumers.

Organizations such as the American Medical Association (AMA) and AARP support a "fair and accurate valuation for all physician services". The AMA sponsors the Specialty Society Relative Value Scale Update Committee, a private group of physicians which largely determine how to value physician labor in Medicare prices. Among politicians, former House Speaker Newt Gingrich has called for transparency in the prices of medical devices, noting it is one of the few aspects or U.S. health care where consumers and federal health officials are "barred from comparing the quality, medical outcomes or price".

Recently, some insurance companies have announced their intention to begin disclosing provider pricing as a way to encourage cost reduction. Other services exist to assist physicians and their patients, such as Accuro Healthcare Solutions, with its CarePricer software.