The fog of more: Price transparency will increase health systems’ competition for patients

Jerome_Pagani_2023_squareHealthcare has had a notable shift in outpatient procedures. Care is increasingly being sought in lower acuity settings. Ambulatory surgery centers, specialized medical facilities, and retail clinics have all emerged as key players in the delivery of outpatient services. While hospital systems have invested heavily in outpatient settings to meet rising consumer demand and control costs, private equity and new entrants have made a strong showing as well, increasing the competition that health systems are facing. As price transparency legislation kicks in, cost pressure on providers will only increase. Health systems need to think holistically about what role they will play in the health ecosystem, how to attract and retain patients, and how to align cost and quality in a way that works for the increasingly empowered health consumer.

This trend has been driven by a few factors. Non-traditional healthcare businesses (increasingly owned by private equity firms) implement streamlined operational models and benefit from economies of scale, enabling them to offer outpatient procedures at a competitive price point. As healthcare costs continue to rise, these entities attract patients seeking accessible and affordable care options. In addition, the focus on specialization and niche expertise (and sometimes “micro-efficient” services) has allowed them to fine-tune their processes and optimize resource allocation with similar patient outcomes. The result has been high patient satisfaction and a steady stream of referrals, which has solidified their position in the healthcare ecosystem. The changing regulatory landscape has also played a role in the increasing prominence of non-traditional healthcare businesses in the outpatient sector.

Price transparency is coming. The No Surprises Act prohibits balance billing, requires providers to give patients good faith estimates of the cost of their care, and establishes an arbitration process for patients who receive surprise bills. While information for out-of-pocket costs is still rather limited, there are a number of other initiatives underway that will increase price transparency. These include the Hospital Price Transparency Tool, state price transparency laws, and the development of the infrastructure required to accurately share price-relevant information between providers, payers, and consumers. As these initiatives continue to develop, patients will have more information about the cost of their care, enabling them to make more informed decisions.

Quality and price are not tightly positively correlated; in fact, studies have suggested a negative association in some dimensions of quality. For health consumers, this means it’ll be hard to justify spending more. For health systems, it will speed up competition for consumers. Those who can afford to have popular services as a loss leader (I’m looking at you, Costco’s hotdog) for the longest may win this battle. As I’ve pointed out elsewhere, there is a real risk of a race to the bottom line. This can lead to a decline in the overall quality of healthcare, as providers are incentivized to cut corners to save money.

All of this will challenge health systems to adopt a more nuanced and strategic approach to delivering care. Emphasizing value-based care, leveraging data analytics, promoting patient engagement, and fostering collaboration are vital steps for health systems to optimize care quality while managing costs effectively in the ever-evolving healthcare landscape.

Health systems will need to continue to invest in data analytics and performance measurement tools to comply with the No Surprises Act, to provide the kind of transparency that can attract health consumers, and to continue to mine for insights into areas that need improvement. Data-driven decision-making can help identify opportunities for efficiency gains without compromising on quality, leading to better resource allocation and more informed strategic planning.

Emphasis on patient engagement and shared decision-making will become more important than ever. After all, we all want a health system that works for the people giving and receiving care (see Designing for Health: The Human-Centered Approach for more). Empowering patients with comprehensive information concerning their treatment options, including potential costs and associated quality measures, enables them to make informed and discerning choices. By actively involving patients in decision-making processes, health systems can foster higher levels of patient satisfaction and enhance adherence to treatment plans, consequently contributing to an overall improvement in care quality. This patient-centered approach not only cultivates a sense of autonomy and responsibility in patients but also ensures that their unique preferences and needs are considered throughout the healthcare journey. As a result, health systems can forge stronger partnerships with patients, culminating in more positive and successful healthcare outcomes.

Health systems can also follow the slogan, “Be like Nike.” People want to be healthy, and the empowered health consumer has more decision-supporting information and tools than ever. Health systems should be asking how their brand is telling the story of lifelong health. In crowded markets, it is vital that they define and fill their niche and be clear about they can easily be outcompeted. The effect on revenue may be even more dramatic for sparsely populated areas, where low-volume procedures may not be enough to keep the lights on.

Lastly, partnerships will be important for keeping a patient base and having access to the data needed. Learning from the best practices and experiences of others can help health systems identify innovative approaches to delivering high-quality care at optimal costs. New ventures or partnerships with specialized centers or alternative healthcare providers, like ambulatory surgery centers, can offer cost-effective solutions for specific services while maintaining quality standards.

Topics: featured, Healthcare

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