EXECUTIVE SUMMARY

Healthcare transparency is gaining public support, but still faces multiple obstacles to becoming a broad reality across the industry. Some surgery centers are leading the way in making costs and outcomes transparent through their websites.

Healthcare costs continue rising rapidly despite the Affordable Care Act’s emphasis on affordability and accessibility.

Surgery centers benefit from cost-cutting and efficiency goals, which contribute to a trend of moving site of care to more convenient and cost-effective venues. These include moving a surgery from inpatient to outpatient.

Surgery centers often specialize, which makes their infrastructure more efficient and contributes to cost-cutting and transparency.


Surgery centers could lead the way in healthcare transparency. Typically, these facilities are the most efficient, safe, and affordable option for procedures, and their prices could be competitive beyond their local borders.

The entire healthcare system would benefit from more transparency for consumers and between businesses, says Niall Brennan, president and CEO, Health Care Cost Institute in Washington, DC.

“The healthcare system desperately needs transparency,” Brennan says. “When people think of transparency, they frequently think of it is a business-to-consumer type of transparency, about patients knowing more about the price of a specific service. I think it’s important to remember that business-to-business transparency in healthcare is just as important.”

The healthcare industry’s complex web of nondisclosure agreements and proprietary price negotiations stand in the way of cost transparency, he notes.

“Frequently, employers don’t have a good picture of how much care costs and what they and their employees have to pay,” Brennan explains. “They are shocked to find out the costs on those rare occasions when information does get out.”

The industry’s value-based transformation is making transparency more imperative. “We’re moving from a volume-based model to a relationship among stakeholders, pharma, medical device companies, and all other stakeholders,” says Ferris Taylor, MBA, executive director, HealthCare Executive Group. “We’re moving toward the consumer’s experience. They pay for what they get, as opposed to paying for the encounter, which has created in healthcare an unsustainable cost situation.”

Taylor argues that instead of lowering healthcare costs, the Affordable Care Act led to much higher premiums and deductibles. “It should have been called the Accessible Care Act because we have 20 million more people who have insurance,” he adds. “But just because they have insurance does not mean they can afford it.” Within that context, it is unsurprising that costs and transparency are key issues in the healthcare world, he says. Taylor uses calculators as an analogy for what should be happening with medical costs vs. the reality. Four decades ago, Taylor bought a hand calculator for his nuclear physics class. It cost him $400 and included four basic functions.

“Today, similar functionality is the size and shape of a business card, and it has solar charging and costs around 30 cents,” he says. “It’s a giveaway at conferences.”

Technology in healthcare also has continued to improve, but consumers are not seeing much of the cost benefits of that improvement, Taylor explains. “Rather than see $400 become 30 cents, it goes in the other direction,” he says. “The quality goes up, but the price also goes up.”

Transparency could help reverse this trend, and it can work, despite obstacles. Some ambulatory surgery centers (ASCs) have led the way in offering pricing transparency, proving that transparency, however challenging, can be achieved. For example, Monterey Peninsula Surgery Center – Ryan Ranch in Monterey, CA, has listed self-pay prices on its website for several years, says Tom Wilson, CEO of the Monterey Peninsula Surgery Centers.

“The prices are discounted off the commercial rates because we collect money up front,” Wilson says. “We want consumers to have knowledge and information to make an informed decision.”

Elective surgeries are a major consumer purchase, and patients should be fully informed about the cost, he says. “Society will spend more money on a total hip replacement than on a car, but when people buy a car, they check the gas mileage [and] crash data,” Wilson observes. “When you have a total hip replacement, you don’t have [access to] the batting average of the surgeon or the infection rate or other information. We make that information as transparent as possible so consumers can make an informed decision.”

One reason why there are fewer ASCs and other healthcare organizations providing online prices and cost transparency is because medical consumers have had competing interests in what they want from their providers. “The users of healthcare do not necessarily care about cost; they want to go to the best surgeon,” says Michael S. Sherman, MD, MBA, MS, senior vice president and chief medical officer at Harvard Pilgrim Health Care in Wellesley, MA.

Healthcare plans also focused more on quality and other factors, although this, too, is changing. Accessibility, cost, and quality all are important, Sherman says.

“More and more, our contracting strategy is to identify the highest value and most capable providers, using incentives and plans to encourage people to use those facilities and physicians,” Sherman says. “Most notably, there is a large trend toward moving site of care to more convenient and cost-effective venues, which might mean moving a surgery from inpatient to outpatient.”

Harvard Pilgrim, which is a non-profit entity without shareholders, is making this change when it is appropriate and convenient. The company’s goal is to maintain a 1% to 2% margin and keep premiums affordable, Sherman explains.

“There is a growing recognition that everyone pays for healthcare through insurance. If we’re not efficient in choosing high-value providers, then premiums go up,” he says.

For-profit payers might not have the same incentive to keep premiums low, but they also are changing, Sherman notes. “What the larger, for-profit insurers are doing is diversifying to things other than insurance,” he explains. “You have CVS merging with Aetna, all looking for revenue from other models, as they recognize public concerns and business dynamics.”

CVS is putting what is essentially a primary care center in their pharmacies, and Walmart has been moving in the same direction, Taylor observes. These new models for primary care are in response to patients’ needs for not only convenience but also lower costs. Consumer cost is more than premium costs, Taylor explains.

“If a mother of three children has one child who needs medical care because of an injury, it’s not just the cost of going to the hospital that impacts that family,” he says. The cost of diverting time away from busy schedules to rush a sick child to the doctor or hospital also is a factor.

“To have a more cost-effective environment, you must save on the deductible and overall cost and copays and also keep other aspects of your life in place,” Taylor says.

There also are societal and media pressures calling for more healthcare cost transparency. For example, major news organizations have published stories highlighting outrageous medical bills. Other articles showed how predatory some healthcare providers have become in bill collecting.

Certain health systems have sued patients for emergency and other care, sending some into bankruptcy, and the patients sometimes are their own employees. (Editor’s Note: For more on health systems suing patients and employees, please read this article published in the August 2019 issue of our sister publication, Hospital Access Management: http://bit.ly/2JsQtz4.)

“Frankly, I think it leads to an industry that is maybe losing its moral compass a little bit,” Brennan says. “And it’s definitely at the forefront of the national consciousness right now.”

Surprise billing problems are worsening, including anesthesia bills, he adds. “We’ve been struggling with this for 10 to 20 years, and there are no magic solutions,” Brennan says. “I don’t think we need a single-payer system, but we need a single-rater system and a flat rate for all services across different hospitals and payers.” (Editor’s Note: For information on balance billing, please read this article from the October 2019 issue of our sister publication, Hospital Access Management: http://bit.ly/2JrB0iT.)

Surgery centers are in the middle of the current healthcare transformation. “ASCs are a very cost-effective alternative to things that, traditionally, have been done in the hospital,” Taylor says.

One factor in ASCs’ favor is that most centers specialize, limiting their procedures to areas of expertise. Their overall infrastructure is more efficient, and surgeons can focus on performing procedures at which they excel and leave other procedures to hospitals, Taylor adds.

“You can look at your total cost, and you’ve simplified this system to the point that you can say, ‘In this one area, I can tell you what my costs are, and I can be transparent,’” he says.

Surgery centers have contained some expenses, making it possible to calculate their costs, create bundled payment plans, and be transparent and cost-effective. Monterey Peninsula Surgery Center – Ryan Ranch has bundled some procedures since 2002, making it one of the first ASCs to take this step, Wilson says. In 2012, a major payer asked the ASC to expand their number of bundled cases; today, there are 72 bundles at Ryan Ranch.

Once a surgery center determines costs and offers bundled payments to payers, it is not a huge leap to make prices transparent. “We started doing the bundles in 2002, but just put our prices up on the website four years ago,” Wilson explains. “We’ve always quoted prices to patients on what it will cost to do the surgery.”

What most people in the United States recognize is that the current healthcare system is unsustainable, Taylor acknowledges. Costs cannot continue to double every decade. Increasingly, people might have insurance, but still struggle with access to care. “We’re still focused on accessibility and haven’t addressed the cost of healthcare, which is too costly,” Taylor says. “I applaud surgery centers for saying, ‘I’m going to take this little part and do it really well financially.’”