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Healthcare Marketing: What Health Systems Should Know About Cost Transparency

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January 26, 2018

Healthcare experts, Daniel Weinbach, Richard Klass, and Justin Irizarry, presented to an audience of healthcare marketing firm executives and leaders from hospitals and health systems at the 2017 Connections Conference. The annual event attracts medical advertising professionals from around the globe and is hosted by the Society for Healthcare Strategy and Market Development (SHSMD), part of the American Hospital Association.

Reporters from Strategic Health Care Marketing were in the house, and wrote the following article that appears in the December 2017 issue of the magazine. Read an excerpt from the article below or click here to read the entire piece.

You probably wouldn't buy an appliance or book a cruise without knowing what it will cost. Yet historically, health care systems have expected patients to undergo various diagnostic tests, procedures, and treatments without any idea of what they will be charged. But times are changing quickly.

Today, as consumers become responsible for increasingly larger portions of their health care costs, some are reducing their consumption of medical services in an effort to contain the financial impact. While most are not yet comparison-shopping based on cost, this is expected to change in the future. This could mean they'll be willing to move their business to health systems that disclose what various services cost. As a result, not sharing your pricing upfront could end up costing you much.

Rocky Landscape
As a healthcare marketer, this may leave you wondering how you can best help your organization navigate transparency and health care consumerism. Your organization may also feel pressure to compete by slashing prices and undercutting competitors. But such strategies likely will backfire. A more effective approach is to create a value proposition that enables people to feel comfortable giving you their business. After all, most consumers see high-quality care as well worth the cost. Therefore, savvy marketers should take steps to differentiate their organization's services to attract more people.

This was the message at a session of the recent 2017 SHSMD annual conference presented by healthcare advertising agency guru Daniel Weinbach, president and CEO of The Weinbach Group, Inc., a Miami ad agency; Richard Klass, co-founder of KCI Partners, Inc.; and Justin Irizarry, co-founder and CFO of OrthoNOW, LLC (an urgent care group specifically for orthopedic injuries, with locations in South Florida, Georgia, and Michigan). They focused on the need for transparency, and encouraged participants to lead their organizations in this area through the rapidly changing health care world.

The Confusing World of Health Care Costs
While the idea of transparency may sound simple, most health care professionals know that it's anything but. In fact, being transparent about price is much more complicated — and confusing — in medical services than sharing a price list for a restaurant or beauty parlor, and the reasons are many.

"To my knowledge [a major reason is that] health care is the only market where the consumer using the service is not the one paying for it, and where the provider might not know what he or she is being paid [for the service]," explains Irizarry. "The patient goes to a facility, pays a co-pay, receives a service, gets care, and the provider submits a claim to the insurer," he says. Then the insurer might pay part of the cost, but the patient may still be responsible for the co-insurance (a percentage of the allowable amount that the individual pays for different categories of services). Different insurance plans, and levels of plans, have different contracted rates, and the rate varies not only by payer but also by physician, location, facility, and line of service," he says.

Further complicating matters is that pricing is different depending on who pays. "When you look at defining the price of a service, there's a wonderful thing called a charge master, which is a list price of services," he says. "It's usually a multiplier of what is allowed by Medicare. This is an amount that is rarely ever collected by a provider."

All of this translates into a very wide spread of pricing for the same procedure — in South Florida, it can be as much as plus or minus 800 percent, Irizarry says. Such variation and confusion can leave patients frustrated, and this uncertainty can impact a facility's patient satisfaction ratings. Further muddying the waters is that some efforts to publish health care pricing over the past few years have fallen flat—often because consumers don't understand all of the jargon and find the whole topic overwhelming. Nonetheless, Irizarry, Weinbach, and Klass all agree that customers expect transparency, and organizations that don't address pricing will be left in the dust.

Click here to read the entire article.