Hospital Price Transparency Is Here to Stay

[Second of two articles.]Read our previous post on the topic of transparent prices among hospitals, How to be Named the Costliest Hospital i

[Second of two articles.]Read our previous post on the topic of transparent prices among hospitals, How to be Named the Costliest Hospital in the Nation.

When the federal government opened the books to the public on hospital prices, the unprecedented transparency came as a shock to many facilities and industry executives. And this visibility is likely to increase with the continued rollout of healthcare reform this year and next.

Consequently, more consumer information will intensify competition and increasingly guide medical treatment decisions.

Some hospitals are already considering changes to their business and marketing strategies. Among the first to publicly embrace transparent pricing as a marketing tool is at least one Miami area hospital.

“Steve Sonenreich, chief executive of Mount Sinai Medical Center in Miami Beach,” reports the Miami Herald, “made a public pledge to divulge the contractual rates the hospital charges private insurers for diagnoses and treatments. ‘We will post our prices relative to Blue Cross, and Aetna, our contractual prices, and we’ll challenge Baptist and the other systems in the community to do the same,’ said Sonenreich.”

Few hospitals publish prices for medical treatment. In the South Florida region, Jackson Health System does not publish prices, but is willing to explore the idea. Memorial Healthcare System (Broward) publishes prices for imaging services, but not for diagnosis and treatments. “Baptist Health’s urgent care centers post prices for services,” reports the Miami Herald, but the hospitals within the system do not.

“Brian Keeley, chief executive of Baptist Health South Florida, which manages seven hospitals in the region declined to accept Sonenreich’s challenge for price transparency, but acknowledged ‘That’s where the whole industry is going, undoubtedly.’ ”

And, if transparency is the future, how will it sway selection, healthcare delivery, hospital operations, business models, marketing and advertising? The influence will likely be widespread.

• Informed consumers will be shopping. Public awareness will be growing and informed consumers will—along with published satisfaction and service quality data—give greater consideration to cost in their purchase decision. Policies with a higher deductable amounts or defined contribution will influence consumer calculations.

• Consumer may be confused when comparisons are not simply apples-to-apples. Hospital costs are often complex, and typically based on variables that differ among facilities. What’s more, hospital formulas for private insurers have a different structure than the way the government reimburses hospitals.

• Competing solely on the basis of being the “low price leader” or “lowest price in town” has limited consumer appeal and remains ill advised, especially for serious medical matters such as open-heart surgery.

• Overall value is a stronger consideration. Physician referrals, insurance networks, Emergency Department admissions, doctor and hospital reputation (branding message), satisfaction ratings, measures of safety, quality and outcomes, recommendations of family and friends, as well as an overall perception of value will remain part of the mix.

• Insurance plans, participation and reimbursement systems are changing. For example, individual and group insurance plans are moving toward a co-insurance structure with a percentage payment replacing a fixed co-pay amount.

The introduction of hospital price comparisons is expected to provide the public with yet another reference point, and prospectively lead to lowering costs in the system. It seems likely that the price points for same services and procedures will eventually find a common level.

From a hospital marketing and advertising perspective, facilities will–more than ever–need to need to standout from the competition. Although “price” is now a consideration, effective differentiation and marketing success will remain rooted in delivering benefits and solutions to the patient and the community.