Payor Contracting

Price Transparency: Why It Matters

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The healthcare industry is one of America’s only major services where you can walk in for an appointment or procedure and have no clue what the price will be until the bill arrives.

That’s a problem.

The lack of price transparency often frustrates healthcare consumers. And this issue is only exacerbated by complicated medical jargon and fractured insurance coverage and rules. But for savvy, independent healthcare providers, this industry-wide dilemma presents a significant opportunity to differentiate your practice and create a competitive advantage in the market. For more tips on how to grow your practice, see our blog.

How? By offering exactly what consumers want: price transparency.

What is Price Transparency?  

Price transparency in healthcare is all about informing patient-consumers about the costs of service before they’ve received them.

Outside of the healthcare space, the most common way businesses engage in price transparency is through the price tag. Whether it’s on clothes, websites, or menus, a price tag serves as an indicator that tells the consumer exactly how much they’ll need to pay in exchange for a good or service (not including taxes). It’s a signaling mechanism that allows the potential purchaser to decide whether the price is worth their hard-earned money.

That seems like a fair thing to ask for, right?

Yet, while practically every business you shop at will voluntarily provide this common courtesy, the healthcare space is one of the few notable exceptions.

There’s a Notable Lack of Price Transparency in the Healthcare Space

Saying that there’s a lack of transparency in the healthcare space is a dramatic understatement. As Martha Hostetter notes:1

“Prices for health care services vary significantly among providers, even for common procedures, and it’s often difficult for patients to determine their out-of-pocket costs before receiving care. Some consumer advocates, employers, and health plans are pushing for greater reporting of the prices of health care services as a way to encourage consumers to choose low-cost, high-quality providers and to promote competition based on the value of care.”

For healthcare consumers across the country, it’s hit a boiling point. A 2019 survey found that a lack of price transparency was the most significant factor creating a negative patient experience.2 Other issues that contributed to these negative feelings include:

  • Few billing options
  • An overly complex billing process
  • No option for a payment plan
  • No dialogue with staff about the final bill    

This is an escalating issue, especially for younger Americans who tend to struggle with healthcare literacy. They are a generation that demands clear information and tailored personalized communication, or else they’ll just eschew the services all together. In fact, 39% of respondents between the ages of 18-39 said they’d foregone a life-improving procedure because of the potential costs.

Patients need access to useful price, quality, and incentive information. Armed with this knowledge, they have a better chance of finding low-cost, high-quality care.  

What Has Been Done to Increase Transparency?

When it was first enacted, the Affordable Care Act (ACA) required hospitals to make their prices visible by publishing list prices, also known as chargemasters, for the services they provided.

The Trump administration further added to this by requiring hospitals to publish this information on their website in a readable, computer-friendly format. Despite these efforts, the problem persisted. Lovisa Gustafsson, VP of Controlling Healthcare Costs, writes:3

“However, what’s resulted—confusing, unwieldy lists of thousands of goods and services posted on thousands of individual hospital websites—is of dubious relevance to patients in its current form. Crude versions of price transparency like the release of hospital chargemaster lists are unlikely to help patients get more value for their health care dollars.”

There were several reasons why governmental interventions have come short, including:

  • Most healthcare isn’t “shoppable” – Consumers typically lack the information necessary to make informed decisions about the types of healthcare products and services available to them. This is especially true for emergency treatments where time is of the essence.
  • List-price data is usually inaccurate – The vast majority of patients don’t purchase individual services directly from the hospital. Rather, there is a package of services that could include anything from supplies, to medications, to the doctor’s rendered services.
  • They can’t compare prices – In practically any other industry, consumers have the ability to shop around for the best prices. On top of that, there are services that help them gauge where the best options are. Healthcare patients don’t have access to that kind of data, so they often just default to the closest provider to them.

How Can Independent Providers Remedy This Issue?

Do you want to create competitive advantages while providing better value-based care? Then you should do everything in your power to improve pricing transparency. Fortunately, there are several ways you can do this as recommended by the American Medical Association.4 These include:

  • Provide pricing information upfront – Healthcare providers need to make information about prices for common procedures or services readily available from the beginning. Physicians and staff should communicate this information early on while factoring in the patient’s health insurance plan or status.
  • Boil it down for patients – Many patients lack adequate healthcare literacy. Simply handing them a healthcare “menu” will likely cause more harm than help. Instead, have conversations where you break down the costs to encourage cost transparency. When patients are more aware of how much money they need to pay, that increases the likelihood they’ll accept care.5 Details you should cover includes:
  • Plan benefits
  • Cost-sharing info (both in-network and out-of-network) for provider services
  • Plan elements that impact out-of-pocket costs
  • Embrace an industry-wide ethos of transparency – While some of this may be out of your hands, it takes everyone working together to create this change. Healthcare plans and entities need to work together to foster an environment where price and quality transparency is the status quo.
  • Install systems to ensure pricing accuracy – Simply listing your prices isn’t good enough, especially if those prices are misleading or incomplete. If you’re using price transparency tools, there should be internal processes in place to make sure that the provided information on services and costs is accurate and up-to-date. There are digital tools that can track key metrics like debt and price-related decreases.  See our blog to learn more about payment variance in healthcare and how it affects providers.
  • Get everyone involved – Creating this change won’t happen overnight, and it can’t be accomplished by a single person within the organization. It takes a village. So, be sure to include various members throughout your organization, including:
  • Patient access
  • IT
  • Patient financial services
  • Legal
  • Compliance
  • Managed care
  • Develop your payor claim databases – To improve in this area, you’ll likely need to continuously invest the resources to ensure that your various databases have the support and capabilities required to fulfill this mission of denial management.
  • Create resources to improve health literacy – If you want to improve Hospital Consumer Assessment of Healthcare Providers and Systems (HCAHPS) scores, it starts with communication. By developing resources to facilitate communication and help potential patients grasp healthcare pricing complexities, you signal to them that you have their best interest at heart.
  • Train your staff to provide better patient support – Even if you give patients pricing tools and information, there’s still a high likelihood that they won’t fully understand everything. A well-trained staff can clearly explain how to utilize these resources and answer any questions patients might have.

It’s Time To Change The Way You Do Business  

Customers have spoken. They demand more from their healthcare providers—more honesty, more transparency, more information.

If you want to differentiate yourself from your competitors, embracing a price transparency ethos could pay significant dividends in both the short- and long-term.

And while you focus on price transparency and providing the best care for your patients, we can focus on ensuring you’re paid well in a timely manner. At PayrHealth, we’re transparent about what we offer: the best in healthcare contract negotiating.

If you want a partner by your side when it comes time to dealing with payor contracts—contact us today.


  1. Commonwealth Fund. Health Care Price Transparency: Can It Promote High-Value Care?
  2. Healthcare Leaders. Lack of Price Transparency Biggest Factor to Negative Patient Experience.
  3. The Commonwealth Fund. Hospital Price Transparency: Making It Useful for Patients.
  4. AMA. Strategies to increase health care price transparency.
  5. Beckers Hosptial Review. 5 price transparency strategies for healthcare providers to boost revenue and patient loyalty.
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