2023-02-17

Why is Price Transparency Critical to Reducing Waste in Healthcare

The growth of health care cost-sharing in recent years has led to increased demand for price transparency. Federal government, State legislatures and corporate boardrooms have responded with various programs to make the costs of health care services more accessible. These initiatives typically focus on non-urgent, routine procedures; procedures where patients have the time to explore alternatives; and prescription drugs with wide variations in pricing. It is hoped that price transparency will enable patients to identify low-cost, high-quality providers, stimulate competition among providers based on the value of their services, and reduce wasteful spending. So, let's take a closer look at how price transparency can help reduce waste in the healthcare system*. 

  • Controlling for price variations - Reduce spending by $61.9B 
  • Increasing hospital price transparency reduces hospital spending by $8.7B  
  • An increase in hospital market competition, could reduce spending by $6.2B  

Increases Accountability

Price transparency is critical to reducing waste in healthcare, as it increases accountability for all parties involved, including payers, providers, patients and employers. Having access to pricing information, empowers all parties to make knowledgeable and well-informed decisions about the costs of treatment. Healthcare providers, in turn, become more aware of costs and are better able to help their patients make informed decisions by offering advice around quality and cost of care. Payers can use this information to partner with providers to structure contracts that minimize price variations, leading to lower costs and waste.  

Improves Patient Education 

Price transparency improves patient education by allowing patients to see the cost of services and treatments before they decide. This allows them to make an informed decision about their care and gives them the ability to shop around for the best quality and price. It also allows them to compare the costs of different providers and treatments, so they can make an informed decision about their care. With greater transparency, patients can have a better understanding of their options and make choices that are right for them. 

 

Increases Competition 

Price transparency drives a competitive market, where providers are incentivized to offer lower prices to attract consumers, which results in better pricing for healthcare services and lower overall costs. Additionally, greater competition means improved quality of care, as providers strive to stand out from the competition. The resulting competition could lead to better access to health care services, as better quality and cost-effective services are more likely to be offered. 

One of the main benefits of price transparency is wider industry knowledge of costs associated with procedures, services, and medications. The benefits of these transparencies spread across the whole supply chain, from providers to payers and patients. With a projected $90B in waste due to inflated prices, price transparency is critical to reducing waste in healthcare, and empower patients to make better-informed decisions. Payers with access to accurate pricing information, can make more informed decisions about which services to cover and negotiate better contracts with providers. For the healthcare organizations that are looking to streamline their operations and reduce costs, this information is immensely valuable. 

*https://www.rand.org/pubs/research_reports/RRA805-1.html 

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