Understanding Price Transparency

in the Healthcare Market

Author’s Corner

David Haynes, Director of Client Operations, reveals how price transparency in the healthcare sector drives competition for consumers by enabling them to shop for the lowest individual and systemwide healthcare costs in this white paper.

Watch the video on the right to hear David speak on the importance of healthcare compliance, his motivation for writing this white paper, and why price transparency is such a hot topic.

To discuss this white paper with the author, please reach out using his contact information at the bottom of this page.

In the healthcare market, patients continue to ask the question: what is it going to cost for my service or procedure? There are many factors involved, making it very difficult to determine the actual cost to the patient. Ultimately, patients often become frustrated and shocked by the final bill.

There has been a major change in consumerism over the past few years, as single-specialty or pop up clinics open, providing fixed cost models and 100% cash pay. CMS and the government are trying to put new controls in place to help gauge and control some of the costs for patients and make it more transparent when going to a provider.

How Pricing is Set for a Health System

Healthcare systems set their own fees for different types of procedures or hospital stays, and prices vary between each individual system.

The chargemaster is sometimes based on a factor of CMS rates or may be determined by contract rates with insurance carriers.

Health System

Understanding your plan

As a patient in the marketplace, many assume the charged amount set by the healthcare provider is the amount paid for service. However, your specific insurance plan and network with the healthcare provider will determine what is actually owed and paid. In-network providers have negotiated rates with the providers, which may allow a discount from the charge amount set. If you are a patient seeing an out of network provider, you are technically responsible for the entire charge amount.

However, insurance companies will still set some benefit based on your plan if a patient has out of network benefits. The amount contributed and priced by insurance carriers on out of network plans are determined by different pricing models.

These models can be based on several factors, including Medicare, a negotiated percentage of the charge amount, usual and customary pricing, or tapping into a contract with a TPA and applying out of network rates.

Risks to market

All these models make it very difficult for healthcare systems to let a patient know exactly what they will owe or be charged. The new rule with CMS requires health systems to publish their charges, but that still does not let a patient know what they will owe.

The next phase to the CMS rule for Health Systems is to drill down to the insurance level and publish their allowable rates. The major concern is that rates with different health systems vary quite a bit based on population size, location and other factors. If rates were published, it would make it so that insurances have leverage to compare their rates to other insurances and could consolidate the market. This could make the pricing much more competitive, but may have some impact on smaller systems as they will find it tougher to negotiate all of the services.

The price transparency may also have an impact on the value-based model because it is designed on a fee for service type of model and only takes into consideration the actual service performed. The value-based care model is more driven by the outcomes of the service and management of patient care. This will directly go against that type of model since it will require systems to devote more support to unit price competition versus quality and value.

How to manage the solution as a healthcare system

The price transparency change will directly impact hospital operations and technology as they will need to become more efficient at informing patients about the cost. It will require technology and more sophistication from scheduling to determine a true patient cost. This may also lead to more issues with patient dissatisfaction because the pricing quotes provided prior to service may not be what actually has taken place during their care.

A physician may determine the treatment plan initially, but during the patient interaction, the physician may find out more information or need to add services to the treatment plan. Physicians aren’t trained to inform patients of the cost, and billing teams will determine those changes and inform the patient. This could lead to confused and disgruntled patients.


The goal of the new price transparency rule is to drive consumer-style competition through shopping lower individual and system-wide healthcare costs. In theory, it is a good strategy to make it more informative to patients; however, it will have impacts when setting prices at each health system.

This model could influence the quality of care at some health systems as patients are driven by cost to substandard healthcare providers.

David Haynes

Meet the Author

David Haynes - Director of Operations

David Haynes serves as the Director of Operations for Vee Healthtek. In this role, he utilizes his deep expertise in the hospital and healthcare industry to onboard and service all of Vee Healthtek’s clients in a seamless and efficient manner. With an eye on maximizing revenue, David specializes in identifying and improving all key performance metrics while implementing best practices in the areas of processes and technology. David is a graduate of Seton Hill University with a Bachelor’s degree in Accounting and a Six Sigma Black Belt post graduate certification at Villanova University.