Among its most prominent health policy initiatives, the Trump administration has made transparency, especially related to prices, a top priority. Efforts include pending interoperability regulations, the recently finalized 2020 OPPS rule, and the currently proposed transparency in coverage rule. While there remains uncertainty about how these rules will stand up to legal challenge, health care organizations should be considering the nature of competition in a market with total transparency.
A major competitive element in the health care marketplace today is the negotiated rates between payers and providers—especially the rates negotiated with market-dominant health care systems and provider groups. But, what if everyone knew those negotiated rates? Lower paid providers would demand equity, and insurers that see their competitors getting better deals would likely demand lower prices. Thus, one probable outcome of such transparency would be price conformity (although some providers will still likely give better deals for substantial patient volume and some payers will likely pay more to those providers with market or service monopolies). Similar phenomena have been seen in other industries where online competition has decreased local variability in prices.
Market participants could react by continued consolidation: even if prices are transparent, a monopolist will still be able to demand monopoly pricing. However, the benefit from this approach is likely to be short-lived as the cost of local monopolies will become knowable to government payers, who are unlikely to sit idly by.
Payers and providers then both will need to consider how to compete on other dimensions such as patient/member experience, population health, well-being and the ability to deliver care efficiently an effectively. The challenge in this transformation will be how these new values are quantified to the market—with all due respect to the the quality-industrial complex, employers and individual purchasers still, after 30 years, do not have meaningful measures they can equate to real differences in value.
Thus, while a move to total transparency is not a certainty, organizations that want to remain competitive should be considering the ramifications today.
Providers should be asking:
- If I have a market dominant price today, how will the economics of my business work on lower per patient revenue in the commercial market?
- If I want to charge higher prices to the market, how will I communicate that value to payers and patients? Through metrics? Through branding?
- How should I approach efforts to enter into APMs? How will those arrangements effect the prices shown to consumers? Could my competitors use APMs to manipulate “transparent” prices
Payers should be asking:
- If I am selling the best network rates today, what is my value proposition if I am unable to maintain a meaningful advantage in prices?
- How can I better quantify my company’s efforts to efficiently manage care?
- How can I better highlight how the better purchaser experience of my product?
Finally, both payers an providers should evaluate what additional benefits could be afforded by integrating into exclusive relationships (either though contracting or acquisition). Such arrangements could afford differentiation that could not be replicated and simultaneously avoid having unit price being the dominant marker of health care value.
*ZAHealth has the knowledge and experience to guide you through this changing landscape and ensure optimal positioning for your organization. Contact us today. “We start with the end in mind”