A Case for Healthcare Practices to be More Price Transparent
"The greatest danger in times of turbulence is not the turbulence itself, but rather to act with yesterday's logic." - Warren Buffett
Imagine running a professional business without knowing how much revenue you’ll generate for the services you provide, while your customers have no idea how much those services will cost them.
How can such a business operate efficiently?
Why should it be any different for a healthcare organization, which is ultimately also a professional business?
Regardless of size or structure, a healthcare practice should be managed like a well-run business, ensuring financial and operational efficiency. This is especially crucial as many healthcare practices operate on thin margins and struggle to stay afloat.
Now, let's flip this scenario and think from a patient’s perspective.
At Serenity Diagnostic Center (name changed), the staff was committed to helping patients, but collecting payments was becoming a challenge. Recently, a patient named Sarah came in for a sleep study, assuming her insurance would cover most of the cost.
Weeks later, she was stunned to receive a bill for $900. Frustrated by the unexpected expense and lack of upfront information, Sarah delayed payment and questioned whether she’d return.
Situations like this favor neither the provider nor the patient. The staff realized that without providing clear cost estimates before treatment, they were risking both patient trust and their ability to collect payments.
The Complexity of Healthcare Costs
For many patients, navigating healthcare insurance is far from their day-to-day concern—they have other priorities and challenges in their lives, especially when dealing with a healthcare issue.
Concepts like co-pays, co-insurance, deductibles, in-network versus out-of-network coverage, and provider fees are often confusing and unfamiliar. Patients aren’t expected to become insurance experts, nor should they have to spend time deciphering the complexities of their benefits when they are focused on their health.
On the other hand, healthcare providers sometimes overwhelm patients with excessive details about their insurance benefits, including information that may not be relevant or helpful.
This can lead to more confusion than clarity. Ultimately, what most patients want to know is their final out-of-pocket cost after insurance is applied. This information is critical for planning their care, particularly for non-emergency procedures.
Much has been written about patient price transparency from the patient’s perspective. However, there is a lack of clear understanding among healthcare providers about how to approach this issue as practitioners or administrators.
There is no standard practice across all healthcare providers. Some share upfront cost estimates with patients, while others do not. Similarly, some collect the full patient responsibility upfront, while others only collect the co-pay or no upfront payment at all.
Based on our experience working with a variety of providers in different setups, we’ve gathered insights into best practices—what works and what doesn’t—depending on the profile of the healthcare practice.
As an emerging topic, patient price transparency lacks standardization across healthcare practices, leaving little guidance on best practices for implementation. At Aarogram, we have engaged with hundreds of providers to explore their perspectives on this issue.
Through these interactions, we’ve gained first-hand insights into what works—and what doesn’t—across various types of healthcare practices when addressing patient price transparency. In this piece, I aim to dissect the topic and provide practical guidance to help healthcare providers navigate and implement effective patient price transparency strategies.
The Provider’s Dilemma: To Be or Not to Be Transparent?
To be transparent or not to be transparent? That’s the dilemma many healthcare providers face when deciding whether to share upfront out-of-pocket costs with their patients—or soon-to-be patients.
For those outside the healthcare world, it might seem baffling that this is even a question. After all, when you walk into a restaurant, you expect to see a menu with prices. So why should healthcare be any different?
Part of the reason upfront pricing is not standard in healthcare is that prices are specific to each patient. They depend on a multitude of factors, including the patient’s insurance company, insurance plan, the provider’s network status with the insurer, the type of service, and the provider’s contracted fees with the insurance plan, among others. As a result, it can be challenging for providers to offer upfront patient estimates instantly—or even at all.
However, this shouldn’t be a barrier in today’s modern age. AI technologies like Aarogram now enable providers to generate accurate, service-level patient estimates instantly, making price transparency more accessible than ever.
The Cost of Price Uncertainty
Patient dropout and no-shows are costly challenges for healthcare practices, with rates ranging from 5% to 30% and each missed appointment potentially costing $100 to $200, leading to significant revenue loss and operational inefficiencies.
One key factor contributing to these issues is the lack of upfront price transparency.
When patients are unsure about the cost of their care, it leads to hesitation, anxiety, and ultimately, missed appointments. Without clear pricing, patients may feel unprepared or unwilling to commit to a visit.
Patients also expect upfront information about their costs. 83% of patients want to see accurate out-of-pocket costs before receiving healthcare services. This is especially important if you're struggling with patient collections. The success ratio of patient responsibility collections is often less than 50%!
When your patients have a clear, upfront understanding of their cost estimates, they are more responsible for their payment and less likely to cancel their appointments at the last minute. Transparent pricing ultimately not only builds trust between patients and healthcare providers but also enhances overall patient satisfaction and influences online patient reviews.
Historically, Revenue Cycle Management (RCM) focused primarily on billing and payments from insurance companies. However, providers can no longer afford to ignore the patient side of revenue in RCM.
This shift has expanded the scope of RCM, driven by factors such as declining insurance coverage, uncertainty surrounding prior authorization requirements, and unclear benefit terms from insurers.
This issue is especially pronounced for independent or group practices offering non-emergency, ambulatory, or episodic care and diagnostic services. In the past, patient responsibility accounted for just 10-15% of total medical bills. Today, it represents 35-40% of total medical bills in the U.S. healthcare system.
Furthermore, front-end revenue process errors, often worsened by unclear insurance coverage, result in more than 50% of claim denials. Even 1% of lost net revenue for an average-sized facility can mean a loss of $125,000 per year in profits, with larger practices losing even more.
Case for Price Transparency
Put yourself in the shoes of a patient- as a patient, would you rather receive a surprise bill that you were never informed about and be chased by your healthcare provider, or receive upfront price transparency for your out-of-pocket healthcare costs? If the provider doesn’t collect patient payment upfront, a patient’s bill becomes a surprise bill if it comes to them a few months after the service is rendered with the patient assuming the insurance is going to pay for the service.
If the patient knew what their out-of-pocket responsibility upfront, even an estimate, was going to be, then the bill wouldn’t be a surprise for the patient, and the patient wouldn’t feel cheated.
Why should healthcare providers adopt price transparency in their practice then? Here, we make a case that price transparency is in the interest of not only patients but also providers.
It’s important to build trust with patients. In addition to communicating clinical service quality, providing accurate upfront cost information can be a powerful tool for building trust during the intake process.
There are very few touchpoints before a provider sees a patient—such as visiting the provider's website, calling the provider's office to inquire, or booking an appointment—and patient cost estimates should be addressed by the provider during these interactions. Cost is one of the top concerns patients have before deciding to use a provider's services.
Some providers worry that patients may choose to go elsewhere if they find out their insurance doesn’t offer good coverage, or the patient responsibility is too high. However, this is not a valid reason to avoid sharing cost estimates upfront. Here’s why:
- Transparency Benefits Both Parties: If a patient’s insurance doesn’t cover their costs, it’s better to know this upfront. Informing patients about their out-of-pocket costs before receiving services increases the likelihood they will pay. If they only learn about their costs months later, when they receive an explanation of benefits (EoB) and a surprise bill, it creates a tense situation. Providers are then left either chasing payments and risking damaging the patient relationship or writing off the revenue.
- Price Transparency Builds Trust: While some providers fear that patients might shop around for lower-cost options, the reality is that few healthcare providers can offer an easy, real-time way to get accurate upfront cost estimates. If you can offer instant, upfront pricing, it becomes a significant competitive advantage and it shows patients that you are transparent, honest, and professional. It builds trust not only in the quality of your clinical services but also in how you handle pricing. For many patients, cost is a significant factor when choosing a healthcare provider. So why not help them make an informed decision?
- Competition Advantage: Independent medical practices usually have lower fees compared to large hospitals since they have less negotiation power with insurance companies. This disadvantage can be converted into an advantage for independent practices by showing this price comparison against other large hospital systems to attract patients and compete with large hospital systems on the basis of price, along with quality clinical care.
The Current Regulatory Landscape
As part of the No Surprises Act (NSA) introduced in January 2022, federal regulations now require healthcare providers to provide a good faith estimate (GFE) for costs to patients in advance of receiving certain common procedures.
Amidst the staff crunch, patient expectations, and the pressure of the NSA, it is now more crucial than ever to get patient price estimates accurately and efficiently.
The NSA has made it compulsory for healthcare providers to share their fees publicly. It’s possible now that you can go to many large hospital systems’ websites and download a ‘machine-readable’ file, usually a spreadsheet, of fee schedules consisting of thousands of data points. This is not made to make it easy for the patients and it’s almost useless to patients in determining their out-of-pocket cost estimates.
Unsure if you need cost estimates? Click here to learn more.
Opportunity to Innovate
How should healthcare practices and providers react? In my opinion, this also presents a unique opportunity to innovate in healthcare and change things for better:
- Focusing on the Spirit of the Law: I believe we need to look beyond just meeting the requirements of the NSA and focus on the intention and spirit behind the law. Compliance regulations can drive market innovation by ensuring all players—large or small—adhere to the same rules.
- Beyond Compliance: Beyond fulfilling legal requirements, there is significant room for hospitals and healthcare practices to make the patient experience less stressful and smoother by making pricing information more relevant and easier to interpret.
- Leveling the Playing Field: Establishing a level playing field is a critical first step in making meaningful changes that are often difficult to achieve. This is especially promising for independent practices, as it enables them to compete more effectively with large health systems.
- Embracing Consumerism in Healthcare: Providers now have a huge opportunity to ride the wave of ‘consumerism’ in healthcare, where patients have more control over how they receive care when they know they have to pay for it, even partially, out of their pocket.
Technology to the Rescue
Traditional methods of insurance verification and patient cost estimation are often manual, time-consuming, and prone to errors. These inefficiencies lead to claim denials, patient dropouts, and staff frustration. As healthcare practice owners navigate the complex landscape of healthcare delivery, leveraging technology can be a powerful tool to enhance price transparency and improve patient experiences.
Many healthcare practices are enhancing pricing transparency by automating patient cost estimates with tools like Aarogram’s AI-powered automation system.
Such tools provide upfront clarity on the patient’s out-of-pocket responsibility, benefiting both providers and patients.
Aarogram's AI agent, for example, automatically verifies benefits with accuracy and generates customized patient financial responsibility sheets for your organization. These sheets clearly communicate the patient's insurance details and their out-of-pocket costs. This not only improves the patient's experience but also can lead to higher collections rates for the practice.
The Power of Upfront Cost Information
Now, let’s say the provider is upfront about patient pricing.
What’s the next step?
Patient price transparency is just the beginning of the overall patient journey. Providers can then choose to use patient estimates purely for informational purposes or opt to collect the patient’s financial responsibility upfront, depending on their preferences and workflow.
This approach varies significantly from one provider to another. Some providers prefer to collect upfront and don’t want to wait until after the claim is processed.
They need to reconcile patient balances once the Explanation of Benefits (EoB) is processed, as there are often discrepancies in the patient’s financial responsibility due to the lengthy claim processing times and changes in the patient’s insurance status between the service and the final bill.
Whether to collect patient responsibility upfront or not is a separate, nuanced topic. We’ve written a detailed blog post on this subject that you can read here: Upfront Patient Payment Best Practices to Drive Patient Collections at Your Practice. Beyond the question of upfront collection though, there are still several ways providers can leverage this information. Knowledge is power when it comes to upfront information about insurance coverage and patient cost estimates. Here are some of the ways we can innovate for the benefit of providers and patients:
- Prioritize Appointments: Focus on scheduling patients whose insurance offers full or substantial coverage.
- Flag Insurance Issues: Identify problems such as inactive insurance or incorrect details promptly to reduce denial risk.
- Discuss Financial Responsibility: Communicate with patients who have high out-of-pocket costs or no insurance coverage to set expectations.
- Offer Financial Counseling: Provide financing options, such as installment plans, to help patients manage affordability concerns.
- Partial Upfront Charges: Collect a portion of the estimated amount to increase appointment commitment and reduce no-shows.
- Full Upfront Charges with Discounts: Encourage upfront payment by offering a discount on full financial responsibility
- Post-Claim Credit Card Charges: Obtain consent to charge a credit card on file for the estimated balance after the insurance claim is processed.
- Self-Pay Rates: Offer competitive self-pay options when the patient's responsibility after insurance is too high.
- Discounts for Efficiency Savings: Pass on savings to patients by offering discounts when the provider reduces resources and staff expenses on insurance verification and collections.
By adopting these strategies, providers can enhance patient satisfaction while improving their financial workflows.
Win-Win for Both Providers and Patients
In conclusion, adopting patient price transparency is not just about compliance or meeting patient expectations—it’s a strategic move that benefits both providers and patients.
Transparency builds trust, improves patient satisfaction, and can lead to better financial outcomes for healthcare practices.
By leveraging modern technologies like Aarogram's SmartVerify AI Agent and embracing the spirit of recent regulations, providers can position themselves competitively in the evolving healthcare landscape. Price transparency is not only feasible but essential in today's healthcare environment. It empowers patients, streamlines operations, and ultimately contributes to a more sustainable and patient-centered healthcare system.
