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How financial databases are a key to price transparency

August 5, 2018

By Christopher Wolfington

Improving overall efficiency of a health care system is a worthy goal for any system, as is improving patient financial management efficiency. Recently, there has been a push from multiple sides in the health care industry to address both issues by pushing for price transparency through all-payers claims databases (APCDs). 

President Trump’s administration has been particularly concerned with price transparency and overall costs of the system. The Department of Health & Human Services released a drug pricing blueprint this year saying, “More can also be done across the Medicare program to provide beneficiaries with the lower costs and greater price transparency resulting from better negotiation.”

Following the lead of the Trump Administration, many states are implementing systems to increase price transparency. One of the ways that they are accomplishing this is through APCDs, and one of the states utilizing this type of database to its full potential is Washington. 

Washington’s APCD aggregates a wide variety of claims information, either by mandating it or asking for the voluntary submission of data. Either way, the database is large enough and contains enough patient finances that analysts can discover trends and increase price transparency. 

The first step in price transparency is knowing what the prices are. And with enough claims through different insurance providers, analysts can slice through the complicated relationships negotiated between health care providers and insurers to determine the true prices of procedures. 

The positive affect of APCDs on price transparency isn’t just a random idea, either. It has academic backing from professors of law and medicine at the nation’s leading universities. Professors Jamie S. King at the USC Hastings College of Law and Michael Chernew at Harvard University both testified to the U.S. House of Representatives that correct implementation of APCDs and transparency initiatives, “are important as we move to newer, innovative benefit designs that attempt to help patients shop.”

One of the trickier things about price transparency initiatives is that there are already some price transparency initiatives and tools. Unfortunately, many people don’t use these tools to their benefit. Some of that is a lack of awareness, both that different health care providers can charge different amounts for the same service and that tools to help you find the cheaper service exist at all. Some of that is situational—patients simply don’t have time to find the most cost effective option if they need emergency services.

Some of that, however, is that it simply doesn’t affect patients for many procedures. If a patient will hit their deductible if their needed service costs $10,000 as opposed to $20,000, then they have no incentive to choose the cheaper option if it is not cheaper for them.

Regardless, price transparency is a great step towards a better health care system, and the federal government’s push towards transparency might just help it happen.

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