How Price Transparency in Healthcare Will Impact Provider Networks and Empower Patient Choice

Many patients are still saddled with high deductibles and need more control over the costs of their medical treatment. Pricing transparency can change this by providing an avenue for informed financial decision-making.

To succeed, price transparency must combat pricing and quality information asymmetries. A 3-pronged approach is needed: providing better information, aligning incentives, and remodeling the pricing infrastructure.

Provider Networks

Many patients are surprised that healthcare costs vary widely from one provider to another. These surprise bills, which can exceed what they expected to pay for a procedure, are one of the leading causes of medical debt. Price transparency tools can mitigate these surprises and empower consumers to select the best individual and system-wide healthcare costs.

However, it’s important to note that the effectiveness of healthcare prices transparency initiatives largely depends on how easily and comprehensively they are made available to patients. Crude versions of pricing transparency, such as the release of hospital chargemasters, can be confusing and inaccurate for consumers.

Further, not just the prices matter; savvy providers must also provide top-notch service and outcomes data to earn consumer loyalty. This will create genuine competition for the consumer and drive down overall healthcare costs. Ultimately, providing accurate and reliable healthcare cost information empowers patients and physicians, both stewards of the health plan budget, to make the most effective choices for patient welfare.

Patient Choice

Despite the benefits of transparency, there are challenges. First, the current price information that is publicly reported is often based on billed charges rather than on actual costs paid by patients and insurers. This can make determining how cost transparency initiatives impact healthcare systems’ bottom line challenging.

Private firms are attempting to address this challenge by using claims data to create healthcare “shopping” tools that include cost and quality information. These companies typically sell their products to self-insured employers and health plans, who encourage employees or enrollees to use the tools to help them shop for the best medical procedures and providers.

Research shows that patient engagement with price transparency tools varies by service and provider. For example, some found that the members who most frequently searched its Member Payment Estimator tool were younger and had higher annual deductible spending than those who didn’t explore.


With price transparency, patients are more likely to shop and choose providers offering services at affordable prices. This translates to lower medical expenses for the patient and increased accountability and efficiency among healthcare providers.

However, price information is currently limited by confidentiality (gag) and most-favored-nation clauses in payer-provider contracts. In addition, the current data sets compiled by hospitals to comply with transparency regulations could be more consistent and consistent. Researchers and developers using these data may be unable to draw reliable conclusions without attention to consistency and usability.

Private firms have developed software to analyze claims data to estimate costs for specific procedures, providing a healthcare shopping tool. Their tools are marketed to self-insured employers and health plans, who encourage their employees and members to use them to shop for healthcare providers. These tools are most receptive to younger consumers, who might be predisposed to use them based on their experience shopping online for everything from restaurants to airplane tickets.


Patients should be able to see the prices their insurer has negotiated with providers, even when those rates differ from the hospital’s standard charges. This information would enable Americans to project their out-of-pocket costs more accurately and make trade-offs among healthcare options.

However, the current federal policy must fully address how hospitals and other providers disclose these negotiated rates to consumers. It also leaves many unanswered questions about the accuracy of these data. Hospitals have complied with the transparency rule by sharing machine-readable files, but researchers and entrepreneurs still need to understand and use these data.

This research suggests that price transparency for shoppable services could yield significant savings—up to a billion dollars in 2025. Consumers and employer-sponsored plans with high deductibles and Health Savings Accounts could share these savings. However, it is essential to emphasize that these potential cost savings are only one component of the benefits of price transparency. Other complementary, groundbreaking policies—like expanding insurance coverage, increasing Medicaid reimbursement rates, and tackling business-as-usual pricing practices—are equally critical to addressing rising healthcare costs.

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