GenAI can put price transparency on steroids and make it actionable for all stakeholders

It has been exactly three years since the Centers for Medicare and Medicaid Services (CMS) unleashed price transparency rules on hospitals, requiring them to publish a comprehensive, machine-readable file with all items and services and to display shoppable services in a consumer-friendly format. The impact on consumers is extraordinary, as 91% of them in a recent Marist poll indicated that they would use up-front prices to shop for the best quality care at the lowest price. This sentiment fits nicely with the maturation of generative artificial intelligence (GenAI), which can help consumers make the right choices to balance costs, facility, and quality and help enterprises select the right partners to deliver health and care to their employees.

Yet, as of July 2023, only 36% of hospitals comply, according to the Patient Rights Advocate. Fear not, though, as that rate will continue to increase as CMS enforces the rules with increasing penalties.

Chargemaster on Google means hospitals have nowhere to hide…for now

One could argue that Coca-Cola’s secret formula is perhaps priceless, but there is a powerful argument that the hospital chargemaster, a comprehensive list of medical pricing, is even more valuable. Well, all that has rapidly been changing due to price transparency rules shining a light on the inequitable, illogical, and, one could argue, criminal levels of pricing for medical procedures. It is forcing the hospital chargemaster into the public domain.

Prices for common medical procedures can vary by as much as 18 times between the low and high ends in the same hospital. For example, cataract surgery costs a minimum of $1,006 and a maximum of $9,144 at JFK University Medical Center in Edison, NJ. Similarly, prices for the same procedure can vary by 43 times between the low end and high end in the same state; cataract surgery costs $119 at a minimum in one facility in California and $16,193 in another facility in the same state. Exhibit 1 displays the average price range for selected hospitals and states for five common procedures.

Exhibit 1: Medical pricing takes “what the consumer can bear” to a whole new level with how hospitals price medical procedures

Source: PatientRightsAdvocate.org, HFS Research, 2024

So why do we care about the fuss around price transparency?

Price transparency is table stakes in most industries, including retail, banking, and hospitality, but it is new to healthcare. So, you might wonder what the benefits in healthcare could be that require government intervention. There are many, but all of them will likely positively influence the triple aim of care: reducing the cost of care, enhancing the experience of care, and improving health outcomes (see Exhibit 2).

Exhibit 2: Price transparency can sustainably impact the triple aim of care and more

Source: HFS Research, 2024

The idea of being able to understand what one is buying and how much it costs, while basic, is radical in healthcare and will require some adaptation by both buyers (patients) and sellers (hospitals). Recent polls indicate that 88% of consumers would be more likely to seek routine care if they could get the price of care in advance. In a country where 6 in 10 have a chronic condition and the lowest life expectancy of any developed nation since the turn of this century, consumer sentiment to seek routine care is critical.

Actioning price transparency with GenAI will be key to realizing its benefits

Consider that the US has approximately 6,000 hospitals and several thousand physicians (though physicians are not currently required to comply with price transparency rules) with nearly 11,000 current procedural terminology (CPT) codes describing healthcare services rendered. That would suggest more than 150 million price points (high, low, and average). That is a lot of data—and an enormous opportunity for those who know what to do with it.

That volume of primarily dynamic data with real-world implications on people’s lives should use sophisticated computation. GenAI, in its current form, is a good starting place. A large language model (LLM) with more than 150 million price points with variations associated with coverage type, diagnosis code (DRG), facilities, and more could be what the doctor ordered. This LLM could help health consumers make informed decisions about budgeting for healthcare, choosing facilities or physicians to consult with, and empowering them to seek care.

Self-insured employers could better financially manage their employee healthcare costs, craft volume-based and value-based arrangements with providers of their choice, and remain nimble—they wouldn’t have to follow annual enrollment schedules. Radical! They could also boldly experiment to consider alternatives to advance their employees’ health and care needs without having to remain hostage to the legacy health insurers and their retrospective models.

The Bottom Line: Price transparency rules could catalyze consumers and enterprises of all stripes to update their healthcare buying and consumption habits with the help of GenAI.

Price transparency tools have been around for more than a decade thanks to the Affordable Care Act of 2010 (“Obamacare”). However, payers did a poor job of educating their members about its use, and they didn’t evangelize its usage. I know—I owned a few of these tools in my time, where the data was specific to a particular payer. The price transparency rule has opened the data universe to all hospitals in the US. While not required by law to publish their prices, many independent providers are taking the initiative to publish them anyway. GenAI can help take advantage of price transparency data, empower all the right stakeholders, and inform better decisions. This combination could be a generational opportunity to meaningfully impact the triple aim of care.