Healthcare prices in the U.S. have historically been anything but transparent. Varied health plan contracts and coverage made it nearly impossible for patients to know ahead of time what they’d be charged for a given service. 

Price transparency regulations aimed to change that by requiring hospitals and health plans to post their prices online for everyone to see — thus empowering patients to choose the right care for them and their wallets. But the effect of public prices will ripple beyond patient choice and into physician referral patterns as well, with both actors incorporating price into their decision-making process much easier than before.

Complying with the regulations won’t be enough for healthcare delivery organizations that want to thrive in this new, more transparent environment. They must take strategy a step further to consider and address how price transparency will change physician referral patterns and patient choice. 

The origins and opportunities of healthcare price transparency in healthcare  

The Centers for Medicare and Medicaid Services (CMS) has made several efforts to make the price of healthcare clearer for patients, including the Hospital Price Transparency Rule. This rule requires hospitals to post their prices publicly in two formats: a consumer-friendly display of standard charges for what CMS deems “shoppable services” and a comprehensive machine-readable file of the prices of all items and services offered at the hospital. 

Though the rule went into effect on Jan. 1, 2021, compliance remains low — a recent report found just 36% of hospitals were fully compliant as of July 2023 (a CMS report published in Health Affairs says 70% of hospitals are fully compliant, however). 

Complying with hospital price transparency regulations is no easy feat, and making sure patients have enough information to understand that data is not easy, either ensuring patients have enough information to understand that data is not easy, either.  

One challenge is in the file format itself. CMS didn’t require a standard format for the machine-readable files, leading to a wide variation in the format and quality of hospital price data. That can lead to confusion for the consumers trying to use this data to compare providers in the market and make informed care choices. 

Beyond the file format, static price information may not reflect the actual out-of-pocket cost for the consumer. This data doesn’t factor in a patient’s health plan coverage or other additional services that may come along in the course of accessing care. 

While price transparency does present new, interesting challenges to healthcare delivery organizations, it also opens the door for new growth opportunities. Hospitals that embrace price transparency and put it to work can keep their patients in network — but those that don’t meet this moment may see their patients go elsewhere for care. 

Navigating price transparency-related changes in referral patterns

The healthcare price transparency movement may have started to empower patients to shop for care, but it will inevitably affect how referring physicians choose specialists as well. In the future, primary care physicians may compare the cost of care at area hospitals and incorporate that information into their referral decisions. 

Keeping patients in network is important for hospitals in both fee-for-service and value-based care arrangements. One 2022 report found that preventing patients from leaving a care system could increase revenue by 17%. And in a value-based care world, having patients see in-network providers gives more clarity into and control over the cost and quality of the care they receive. In fact, CMS has stated it hopes hospital price transparency supports a shift to value-based care because of the “clinicians who use the data at the point of care when making referrals.”

Every patient referred out of network is costly, which is why it’s vital that hospital leaders analyze hospital leaders must analyze data on which physicians recently changed referral patterns and act on those insights. Business intelligence tools can provide insight into current referral patterns and highlight opportunities for improvement. 

Then, it’s time to provide physician liaisons with the data they need when going to speak with providers. Equipping them with quality data adjusted for case mix and acuity, in addition to price data compared to area organizations, can help build a convincing case to keep patients in the network. 

Price transparency as a tool to attract patients

Even if physicians refer a patient to an in-network specialist, consumers don’t have to follow that recommendation. Now that patients are armed with price data and empowered to shop for care, this may become more common. This may become more common since patients are armed with price data and empowered to shop for care. See this as an opportunity to further engage patients in their care choices — instead of looking at it as a chore. 

Savvy healthcare delivery organizations will leverage price transparency into an asset to attract and retain new patients. Complying fully with the regulations and making the posted prices easy to access and understand will give a competitive advantage in most markets, especially since few hospitals are complying with regulations to begin with. 

Of course, price isn’t the only thing consumers will look at when choosing where to go for care. Provider organizations need to provide a top-notch experience and have good outcomes to earn consumer loyalty. Linking prices to quality and outcomes data upfront can help make the case to patients that the hospital charges fair prices for the quality of care provided. 

The future of provider networks in the age of price transparency 

Referral patterns and patient choice will inevitably change as everyone gains an understanding of publicly posted healthcare prices. Investing in the right health IT tools can help hospital leaders forecast those changes and influence those choices.

“There’s going to be a lot of organizations who are going to work really hard to turn these mountains and mountains of data into actionable insights and guide (patients) to the lowest-cost, highest-quality providers, and as a result, make our healthcare system a better place for people to seek care in an affordable manner,” said Niall Brennan, Clarify Health’s chief analytics and privacy officer. 

In other words, price transparency has the capability to transform healthcare. Harness that power and be part of the driving force behind the transformation.