United States

What is Cost Transparency in Healthcare?

Jan 01, 2017
From the Healthcare & Life Sciences Institute

While there are several approaches adopted to make the consumer aware of the various treatment costs, KPMG defines transparency as a structured approach of providing treatment cost information to consumers. Market players usually share information through various tools, however, the most important item is sharing various levers that are indicative of treatment costs, including:

  1. Price that reflects any negotiated contracts that the health plan has with different providers;
  2. Price that is inclusive of all costs to the consumer including hospital, physician, ancillary, and pharmacy;
  3. Price that indicates consumer’s out-of-pocket cost in terms of co-pays, co-insurance and deductibles, based on their unique benefits plan.

As healthcare costs continue to rise, consumers are expected to take greater share of their healthcare premium. This is particularly important to high deductable plans, which many employers are moving towards to reduce premiums. The result is more out of pocket costs to consumers. Healthcare purchasers, including large employers and health plans, are seeking to implement strategies that can help to bring costs under control. In their efforts to manage costs, they recognize the need to provide consumers with information on procedure cost based on plan benefits. While the information on quality has become more transparent in recent years, much work needs to be done to provide price transparency, and connect price and quality data to help consumers asses their treatment options.

This KPMG Global Healthcare Center of Excellence Issue Brief summarizes the current state of cost transparency efforts and considerations that health plans need to make in providing cost transparency tools to the consumer.

Transparency Adoption Model

It is important for health plans to provide portals, which are integrated with other consumer information and provide price information in an effective and user-friendly manner. Today’s health plans and employers are in need of standup, mature transparency tools as a table stake capability.

The following model describes how health plans can and should adopt different transparency tools:

Stage 1: Basic Tools

  • Basic Provider Search
  • Encounter Cost Calculator

Stage 2: Integrated Platform

  • Enhanced Provider Search
  • Patient Reviews
  • Out-of-Pocket Costs
  • Savings Alerts
  • Mobile Access
  • Treatment Cost Estimator

Stage 3: Advanced Applications

  • Rx & Pharmacy
  • Appointment Scheduling
  • Online Consults
  • Affinity & Social
  • Network Physician Referral Tools

Stage 4: Employer Portal

  • Toll-Free Phone Concierge
  • Incentive Programs
  • Benefit Plan Design
  • Marketing Utilization Campaigns
  • HR ROI Dashboards

Stage 5: Employer Portal Shopping Network

  • Loyalty Programs
  • Pre-Emptive Alerts
  • Individualized Shopping
  • Recommend Insurance Products
  • 3rd-Party Offerings