7 minute read 21 Mar 2023
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Price transparency beyond compliance: leveraging tech to drive value

By Kaushik Bhaumik

EY US Health Technology Leader

Enterprise technology services executive and consulting leader, with a focus on the healthcare sector.

7 minute read 21 Mar 2023
Related topics Health

Recent CMS regulations on price transparency demonstrate that investing in tech can help payers and providers reduce costs and much more.

In brief

  • Price transparency requirements from CMS are setting the stage for major shifts to the competitive landscape on price across the health care ecosystem.
  • While most payers and hospital systems already comply with these regulations, consumers aren’t yet able to digest this highly complex price data.
  • To drive access, cost savings and other benefits, industry leaders need to consider leveraging the tech and operational strategies described below.

Amid growing focus on value across the health care ecosystem, regulations on hospital price transparency,1  publication of rates, consumer out-of-pocket obligation estimates, calculation of the medical loss ratio (MLR) and other areas relevant to pricing2 have emerged from the Centers for Medicare and Medicaid Services (CMS). These rules were designed to empower consumers to make more informed and cost-effective decisions about the health care services they receive, and 94% of commercial payers are already complying by making cost estimates available to enrollees through sites or apps.3  The majority of these payers also provide enrollees with real-time insights into their personalized cost-sharing liability for specific items and services as well as the accumulated amounts they’ve incurred to date toward a deductible or out-of-pocket maximum.

Despite this progress, consumer awareness and usage of this pricing information has been minimal to date, largely because highly detailed and often complex pricing data isn’t yet available in a medium that’s digestible for the general public. Another barrier hindering meaningful analysis of this data is the lack of standardized, machine-readable files under hospital price transparency rules, and CMS is currently working on guidance to address this issue.

While these and other barriers persist around access to price transparency data, many payer industry leaders believe there’s a lack of ROI around investing in pricing-related strategies that go beyond mere compliance. And for hospital systems in the US, while the rate of compliance with baseline provisions contained in these regulations was initially much lower than that of payers, recent estimates show a big jump in compliance rates as CMS ramped up enforcement efforts, from 27% in early 2021 to 70% in late 2022.4 Combined, these factors signal that much work remains to provide consumers with the price transparency CMS has envisioned. These insights also indicate that health leaders are not yet positioned to drive the enormous cost savings and overall value that come with transforming consumer experience and decision-making through price transparency.

A seismic shift

As organizations across the health care ecosystem prepare for major shifts to its competitive landscape around price, health leaders must leverage more swift and proactive decision-making related to contract negotiation and pricing strategies. From reduced costs to better patient experiences and outcomes, more fair provider compensation, a faster sprint to value-based care and much more, the benefits of bringing a transformation mindset to drive access and transparency in pricing and contracting are significant. 

Now that detailed pricing data for health care services is widely available to consumers for the first time, payers can expect major changes in four key areas.

  • Consumer engagement and insights

    User-friendly price data can be leveraged to help guide consumers to lower-cost sites of care. This shift could have a material impact on premium levels. But by communicating total cost-of-care differences to employers, payer organizations can minimize the need for difficult broker conversations.

  • Pricing strategy

    Retail-like concepts are likely to emerge in response to the expected narrowing of prices, with third-party enablers expected to enter this space in the near term. The retail strategies we anticipate include premium pricing for greater benefits and unbundled prices with “buy-up” opportunities, which will likely impact consumer loyalty by creating more incentives for consumers to “shop around.”

  • Contract negotiations

    Insights gleaned through real-time tracking of how peer organizations are reimbursing their provider network will be essential, as payers increasingly need to understand how consumers make tradeoffs among price, convenience, experience and loyalty.

  • Changes in MLR calculations

    New changes to this formula are creating yet another financial incentive for consumers to prioritize cost over loyalty.

While these changes are not insignificant, they offer value for each stakeholder group. For payers, unprecedented visibility into peers’ competitor pricing strategies will be useful during bilateral negotiations, driving down costs and enabling better outcomes for the price paid. For providers, price transparency offers meaningful access to expected out-of-pocket obligations before or at the time of care, and it can help alleviate compensation woes around underpricing from a volume perspective. And for consumers, financial incentives encourage more cost-effective decisions and a more proactive role in one’s own care. But to reap the full benefits of this shift in price transparency, payers will need to leverage a strategic approach.

Operational considerations

As noted above, while nearly all commercial payers are making transparent pricing data accessible in accordance with CMS regulations, consumers are not yet able to digest that data in impactful ways. This gap in access exists because, despite the fact that payers have rolled out consumer portals, mobile apps, phone contact centers, concierge navigation services and the like, these features are only a small part of creating the integrated, no-surprises experiences that incentivize consumer engagement and decision-making. 

To keep pace with competitors and drive long-term value, payer organizations will also need to build a robust, interoperable technology architecture that leverages data analytics and other tech-related capabilities to provide visibility into network adequacy, patient experience, contract management information, claims efficiency and much more (see Figure 1). This approach requires focuses on four key areas:

  • Access

    To date, less than 40% of enrollees have created log-in credentials to access cost estimates via apps and other tools.5 In addition, less than 10% of consumers today demonstrate awareness of these tools’ availability, demonstrate an understanding of variations in service cost or show confidence in considering cost in health decisions.6  As such, payers need to educate consumers on how to use cost estimator tools and why they should consider out-of-pocket costs in advance of seeking care, which will empower consumers to compare costs and make decisions with greater ease and certainty.

  • Technology

    For most payers, system updates are needed to help integrate medical shopping capabilities with a private exchange so consumers can compare total expected costs before buying a coverage plan. In addition, payers should consider building or buying a location-based app that offers members real-time visibility into nearby providers that meet members’ cost, quality and preference criteria while also providing online scheduling capability. Tying medical shopping into other payer services and functions, such as consumer-directed account administration and virtual care options, is another leading practice. And to achieve greater consistency between pre-service estimates and final cost-sharing amounts, payers can leverage claim bundling rules and make provider coding assumptions based on prior claims experience.

  • Contracting

    To drive greater efficiencies during the contracting process, payers need to build out internal rate comparisons for as many current procedural terminology (CPT), health care common procedure coding system (HCPCS) and diagnosis-related group (DRG) codes as possible. In addition, identifying and calibrating the right network will help payers validate that reimbursements are compared against and consistent with similar contracts. Last, leveraging negotiated rates from other payer-provider contracts in the geography and determining targeted comparison points (e.g., rate range across care settings and provider ratings, service utilization, member experience) will help payers develop a baseline for market price and other key areas.

  • Increased member engagement

    ·Once payers have developed a next-generation medical shopping tool, deploying it to member service and care management teams will aid members in selecting high-quality, low-cost providers who align with their care preferences. Direct financial incentives (e.g., gift cards or rewards points) will help motivate members to shop for care and unlock lower cost-sharing amounts, as the rules permit financial incentives to count in the MLR calculations under the Affordable Care Act. Another leading strategy is personalizing care recommendations to members’ preferences based on collaborative care plans and consumer data held in comprehensive member preference databases. Additionally, the medical shopping tool can be leveraged to smooth prior authorization processes by proactively initiating contact with providers when a member chooses to schedule a service subject to medical review.

Consumer Access to Price Transparency

Figure 1: Features of an interoperable, no-surprises technology architecture around price transparency

Next steps

As the price transparency landscape continues to evolve rapidly, payers likely have 12 to 18 months before usable pricing information becomes available to value chain participants. As such, now is the time for payer organizations to prepare for potential disruptions, threats and opportunities (see Figure 2).

Figure 2: Price transparency action plan for payers


Industry leaders who treat the recent regulations around price transparency as just a compliance exercise will miss an opportunity to drive cost savings, better outcomes and deeper enrollee loyalty. By leveraging the operational and tech transformation strategies described above, payer organizations can offer both consumers and providers a better mechanism to understand their health care costs, which ultimately will go a long way toward providing the health care reform around value that we all envision.

About this article

By Kaushik Bhaumik

EY US Health Technology Leader

Enterprise technology services executive and consulting leader, with a focus on the healthcare sector.

Related topics Health