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Medical Price Transparency and its Marketing Implications

medical sticker shockThe digital revolution has broken down barriers across the globe, removing the distance between companies and the customers they try to reach. Medical marketing has been a little behind the times, but it’s starting to catch up as the health care industry finds innovative ways to connect with consumers.

Full Disclosure

One of the most interesting developments of the digital age is the disclosure of the charges associated with health care.

In the past, these figures were generally unavailable to most consumers — who only equated the cost of care to their insurance copays and premiums, which clearly do not cover the actual expenses.  Hence, a false sense of value was created. There is a belief that patients will make more informed health care decisions if they are aware of the true costs of medical products or services.

Even now, hospitals and health care providers have been slow to disclose their charge amounts, but that could change in the near future. There is a growing trend across all industries is to give the consumer as much information as possible, and health care is no different than the auto industry or any other businesses that were once shrouded in secrecy.

Moreover, a provision in the Patient Protection and Affordable Care Act (ACA) requires hospitals to publish standard charges for items and services.  Department of Health and Human Services has not yet issued a rule implementing that provision, it could drive price transparency significantly.

The first thing that consumers realize when this data is made public is that very few people, if any, find themselves responsible for the full amount of these charges anyway. So, if nobody is paying full charges, what’s the point of disclosing these figures?

What Does it Mean?

According to an NPR piece from earlier this year, the old adage “knowledge is power” has been the primary driver behind the release of charge data. Those hospitals who have higher charges will feel compelled to lower their charges so that patients won’t abandon their network in favor of those with lower charges.

Those who choose not to release their figures risk being seen as shady or having something to hide, hurting their perception in the eyes of the public.

Hospital charges also have an impact on the managed care system. While all insurance providers have contracts with hospitals that allow them to pay at lower rates, some of these contracts are based on a percentage of hospital charges. The more a facility charges, the more they stand to generate from these payors, regardless of whether the charge amounts are fair.

Disclosure can also be as critical for patient outcomes as it is for a hospital’s reputation.

Even as the Affordable Care Act has made insurance mandatory, health insurance companies have raised copays and deductibles to offset the risk of covering pre-existing conditions and a lack of younger, healthier, uninsured enrollees. Some patients will end up paying hospital charges — having chosen to incur penalties rather than enroll on the Exchanges or having not yet reached the deductible set by their insurance providers. And without knowing what a trip to the doctor will cost, these consumers may just opt not to visit.

A Step in the Right Direction

Very few hospitals are overly eager to share their expenses with the public. Many Americans already believe that health care organizations are primary concerned with revenues, and many providers feel that publicizing cost data will only serve to further damage their reputations in the court of public opinion.

While this may be true for those facilities who charge exponentially above regional averages, other hospitals will see this as a positive development and will be glad to share their figures.

Why? Because they can turn negatives into positives. They can state that they always check to make sure patients have valid insurance and that they’re willing to work with people who don’t. They can advertise that they have lower rates than their competitors, serving as further evidence that they put patient care ahead of profits.

And for patients? Now, for the first time, patients can really compare these facilities and see which hospitals back up their claims with reasonable rates. Patients can also see what they’re really paying for when they make their insurance premium payments. Weighing these expenses against the quality of care delivered by these organizations, patients should — theoretically — develop a better sense of value. Ratings & reviews sources are popping up all over to help consumers gauge quality, but a sense of patient accountability is also critical.

Medical marketing has a long way to go before it can meet the standards of other cutting-edge industries. The disclosure of hospital charges is a great start for health care, and it marks the first time the health care industry has opened its doors to public judgment in this way.

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