The Opacity Of Price Transparency

Area of Science:

• Health Economics
• Healthcare Policy
• Health Services Research

Background:

• Price transparency initiatives are crucial for informed healthcare decision-making.
• Standardized payment methodologies are essential for successful price transparency.
• Variations in coding schemas and pricing approaches complicate healthcare cost comparisons.

Purpose of the Study:

• To explore the diversity of coding schemas and pricing approaches in five major US markets in 2024.
• To investigate the frequency of fixed-price contracts using Medicare Severity Diagnosis Related Group (MS-DRG) or Healthcare Common Procedure Coding System (HCPCS) codes.
• To identify barriers to price transparency stemming from heterogeneous payment methodologies.

Main Methods:

• Analysis of payment methodologies in inpatient and outpatient contracts across five major US markets in 2024.
• Examination of the use of MS-DRG or HCPCS codes with fixed prices versus alternative payment methods (e.g., per diem, percentage of charges).
• Estimation of the prevalence of fixed-price contract usage by service type and payer-provider relationships.

Main Results:

• Fixed-price MS-DRG or HCPCS methods were used in only 48% of inpatient and 53% of outpatient contracts in 2024.
• Few carriers utilized fixed-price contracts for all hospitals within a market.
• Most hospitals were not paid via fixed-price methods by all carriers.

Conclusions:

• Significant heterogeneity in healthcare payment methodologies presents substantial barriers to price transparency.
• Consumers, employers, and other stakeholders face difficulties in comparing healthcare prices due to varied pricing approaches.
• Future price transparency efforts must address and account for the diversity in payment methodologies across hospitals and markets.