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Market development around transparency in the cost of billable outpatient medical services is heating up in 2014, with the Health Care Cost Institute recently announcing a voluntary agreement with the three largest insurers in the US to publish standard charge rates across most CPT assigned services. Price transparency provides the benchmark by which healthcare service enters the retail price-competitive world and continues to evolve into a robust platform with improved quality and analytics measures. However, it has been dogged in recent years by a few factors that limit availability and relevance of published information. The following article discusses major issues in this area, as well as a market analysis.

Market development around transparency in the cost of billable outpatient medical services is heating up in 2014, with the Health Care Cost Institute recently announcing a
voluntary agreement with the three largest insurers in the US– Aetna, Humana and United Healthcare–to publish standard charge rates across most CPT assigned services.
Price transparency, as a broad initiative set, provides the benchmark by which healthcare service enters the retail price-competitive world and continues to evolve into a robust platform with improved quality and analytics measures. However, it has been dogged in recent years by a few factors that limit availability and relevance of published information.

Short-Term Market Discussion and Issues
Frost & Sullivan believes that the following are the key current impediments to effective implementation over the short term:
- Chief among these impediments is the scale of consolidation across provider entities that negotiate annual contract rates for outpatient services. According to Frost & Sullivan analysis, approximately 18% of all US employer-covered lives are served through “master contract” integrated delivery networks that set annual rates for all affiliated/owned service entities.
- Vendor “guesstimates” based on relative local claims data reveal wide discrepancies between regional “average” rates against specific negotiated rates for single services. This becomes especially prominent in regions with a few large integrated medical centers that artificially skew actual costs of services to many times that of average regional bill rates.
- There is very little agreement across medical entities on appropriate rates for a defined service. For example, combined administrative, product and analysis cost for simple services like 48-hour holter monitoring fall under three nearly identical CPT codes. Such discrepancy discourages voluntary cooperation for price transparency initiatives, particularly for entities that offer higher-touch services at higher comparable billing.
- Discrepancy between single-service coding against outcomes measures. Transparency assumes that consumers can self-limit cost based on a basket of services when their end outcome procedure set may involve multiple additional services to meet minimum outcomes measures for the supplying provider. Negotiated rates for bundled services, which are frequent for larger integrated provider entities, additionally obscure real rates when broken out.
- Price transparency initiatives rely on individual or group rates for services that provide covered individuals with net cost of services (i.e., total negotiated rate –total OOP based on deductible and any co-pay). This requires a three-way contractual supply of cost data supplied by the insurer for negotiated rates between providers that service covered in-network and those providers that service out-of-network services.
- Public sector transparency legislation relies most frequently on reported cost of procedure, but in most cases fails to account for payor-negotiated rates that can still leave consumers with the same or higher out-of-pocket payment. This phenomenon accelerates as the employer market shifts from defined benefit to defined contribution, which forces insurers to squeeze larger concessions on services to protect annual per-member margins (defined contribution also naturally assumes lower overall utilization of services).

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The Emerging Market for Price Transparency in Medical Services: Can Price Transparency be the New Core of Consumer Health Engagement

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