Transparency in Healthcare

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2009 Can Transparency Really Reform
America’s Healthcare?
High expectations
Transparency in healthcare pricing has become
the industry’s hottest topic, as well as our nation’s
hope for real healthcare reform. The American
Hospital Association (AHA) believes “people
deserve meaningful information about the price of
their hospital care.”1
But the question remains as to
how patients, payers and providers can realistically
expect to find common ground on the subject, much
less implement a defensible solution that will begin
to turn healthcare away from the current model of
inflated charges that offset the “deep” discounts of
primary networks.
The problem with transparent charges
For most payers, transparency involves explicit detail of a provider’s charges
generously made available to the patient, in hopes that the end consumers of
healthcare will make better-informed decisions as educated “shoppers.” Yet
if all options available represent excessive prices by each of the providers in
consideration, how does this transparency really drive any price reform that
will ultimately benefit patients? According to Mike Leavitt, Secretary of the
Department of Health and Human Services, “Americans know the price of
almost everything they pay for, except for one of the most important things
they pay for—their healthcare.”2
The real solution lies in transparency of
provider costs, not simply provider charges.
continued on back >
1 American Hospital Association Board of Trustees, “Hospital Pricing Transparency,” April 29, 2006, American Hospital Association,
http://www.aha.org/aha/content/2006/pdf/5_1_06_sb_transparency.pdf (accessed December 17, 2008).
2 Department of Health and Human Services; Secretary Leavitt; Capitol Hill Publishing Corp.; 2008. “Transparency in healthcare a priority,”
http://thehill.com/healthcare-may-2006/transparency-in-healthcare-a-priority-2006-05-10.html.
NCN in 2009
A Hard Look at Healthcare
JANUARY 2009

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Let’s be realistic
Starting with a provider’s cost and allowing
margin above that cost brings healthcare
pricing back into accountability. Certainly,
provider expenses for a procedure performed
at a teaching hospital will differ significantly
from the expenses on that same procedure
in a rural hospital. So if transparency is to
have a positive impact on healthcare costs,
pricing methodology must include relative
benchmarks that allow for variances such as
location, severity, facility size and dozens of
other factors.
In defense of defensibility
For transparency to bring about true
healthcare reform, its basis for pricing must be
clearly applicable to any healthcare provider
without burdening the independence of those
providers to self-guide, respond to trends, make a profit and all the other facets
allowed by free enterprise. The defensibility of such methodology only stands if
costs—not charges—are the root of the information transparently shared with both
the patient and payer as compensation for healthcare is rendered to providers.
About NCN—NCN is the national leader in cost management for out-of-
network claims. We use cost-based data and transparent reporting to maximize
savings on healthcare claims. At NCN we claim a better way for payers, providers
and patients.
Copyright © 2009 NCN LLC. All rights reserved.
Rural
Hospital
Metropolitan
Hospital
Teaching
Hospital
Facility Cost
Cost + Relative Reimbursement
Facility Charges
$90K
$60K
$30K
$0
Transparency from a cost-up approach vs. a detailed list of charges
will lower reimbursement benchmarks and benefit payers.
NCN20010109-WD
JANUARY 2009
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