Featured articles by Richard L. Clarke and Sandy Lutz
Transparency has become one of the key words of the decade, both within and outside of healthcare. Healthcare providers are expected to provide report cards on the quality and outcome of their services, and now, with the growth of consumer-directed healthcare, they are expected to provide customized prices for particular episodes of care. This issue of Frontiers will focus mainly on price transparency. How difficult is it to accomplish? What is the best way to approach this issue? Are there some best practices to learn from? Five experts on the topic were asked to weigh in and provide some guidance.
In “Price Transparency: Building Community Trust,” Richard L. Clarke, (CEO of the Healthcare Financial Management Association) describes the forces that have led to the demand for transparency in healthcare, talks about the goal of transparency, and makes some recommendations to help providers accomplish this goal. In the final analysis, he says, developing a rational process of price setting should lead to community trust. In “Transparency—Deal or No Deal,” Sandy Lutz (director of the Health Research Institute at PricewaterhouseCoopers, LLP) suggests that pricing will have little meaning without quality: “It is one dimension of the value customers are seeking through transparency.” Lutz makes some recommendations for how to get started, and cites some examples from other healthcare institutions that have begun this journey.
The commentaries begin with James C. Robinson (professor of economics at the University of California, Berkeley). For Robinson, hospitals must leave behind the framework of cost-based pricing and move to value-based pricing. He describes the principles of value-based pricing and contends that pricing strategy is one component of organizational strategy and explains why. In the second commentary, Ford Titus (CEO of ProHealth Care in Waukesha, Wisconsin) suggests that transparency is just one step of a larger process; coordination of data is essential to making the data and comparisons meaningful. Titus describes initiatives under way in Wisconsin that are both on an individual and state level. Price transparency, he tells us, should lead to cost management, and quality transparency should lead to quality improvement. Both of these are necessary for value-based purchasing. Finally, we hear from Robert Bonney (senior vice president of St. Luke’s Health System in Kansas City). Bonney recommends that hospitals use a combination of fixed prices for certain events or patients and prices based on charges billed for others. He elaborates on this system and describes the advantages of using the charges as real prices.
As our authors suggest, becoming price transparent—providing clear and easily accessible prices for a unit of service—can have many advantages, not the least of which is building trust between stakeholders. The question remains, however: How feasible will it be to accomplish this in the current healthcare environment and who needs to be involved to make it happen? The insights provided by our authors should clarify some of the issues and help you get started on the journey to transparency.
Audrey Kaufman, Editor