Where Does Healthcare Price Transparency Stand Today?

In a video interview with Pharma Commerce, Chris O’Dell, Turquoise Health’s SVP of market solutions, describes how the recent executive order on healthcare price transparency aims to make pricing in the healthcare industry more accessible and understandable for patients. This initiative is a continuation of efforts by both the Trump and Biden administrations, with the goal of improving transparency around hospital and payer reimbursement rates. The central idea is to require all hospitals and insurance companies to publicly disclose their contractual reimbursement rates, meaning patients will have clearer insights into what insurers pay hospitals for services.

Historically, these prices were not transparent, making it difficult for patients to understand the actual costs of healthcare. While earlier laws introduced in 2019 improved pricing transparency, there have been enforcement challenges. The new executive order seeks to address these issues by ensuring hospitals and payers comply with transparency requirements. A key update in the order is the inclusion of prescription drug prices, which had previously been excluded from transparency rules.

The broader impact of this order is to make healthcare pricing as transparent and predictable as other consumer services, like booking a flight or a haircut. Although the system is not fully realized yet, this executive order lays the foundation for a future where patients can easily access upfront pricing before seeking healthcare services. This transparency is expected to simplify the decision-making process for patients, ultimately fostering a more informed and competitive healthcare environment.

O’Dell also comments on the biggest challenges healthcare organizations currently face in terms of price transparency; where the healthcare industry currently stand in terms of compliance with price transparency regulations; specific strategies Turquoise Health provides in order to help healthcare providers navigate and meet the new price transparency requirements; and much more.

A transcript of his conversation with PC can be found below.

PC: Where does the healthcare industry currently stand in terms of compliance with price transparency regulations, and what steps need to be taken to achieve full compliance?

O’Dell: There's been a lot of evolution over the course of the last four years, so when these regulations came out, only 20% to 30% of hospitals were complying, and I really think they hoped this is going to go away. “We don't want to publish our rates. I hope this just falls by the wayside.” Lo and behold, the Biden administration comes in and starts enforcing it and says you actually have to publish your rates.

We saw a huge uptick in compliance over the course of the last four years, and now, 95-plus-percent of hospitals publish a machine-readable file. You'll see that sometimes called an MRF. What that means is that is just the standard format that they publish their rates in. Ninety percent of all payers also do the same thing. We see good compliance in that the files are out there. They're saying, “we've complied, here's the file.”

The area where I think there's room for improvement is what is in the actual file. We saw a huge improvement come in July of 2024, where hospitals had to start publishing their exact drug rates, the units of the drug, how they got reimbursed—they had to do it in a standard format, so the quality of the file improved immensely. Just because you have a file out there doesn't mean it's very useful. Over time, they've added new regulations to say we're going to enforce this and we're going to make it more standard. That's exactly, what this executive order is trying to do. It's saying we're going to enforce it, we're going to make it more standard. If you're one of those 5% that's not doing it, you're going to get a letter. If you're not doing it in the standard way that we published, you're going to get a letter. Perhaps most importantly, if you are a prescription drug payer or a prescription drug provider, it's time to start publishing your rates too. There's a term that I think is kind of a boring term when you say it, but will become very important to this, which is called historical net price. And that's what we don't have for drugs today, and that's what I think that the executive order is trying to bring out.

Historical net price just means, what is the actual price of the product after you give discounts and rebates? I won't try to explain it, but the drug value chain is incredibly complex. There're lots of middlemen, per se, and each middleman is taking a little bit of the drug price. They're saying, I'll take a little rebate, or I'll take a little discount along the way.

Historical net price is effectively just a complicated word to say, you set a sticker price on a drug, but what did it actually get bought for by the doctor's office who's going to put it into the patient? So that difference is historical net price, and what your historical net price is can be than what my historical net price is, so you might be getting a different contract discount rebate than I am, and that's still to this day, completely invisible. It’s very difficult to make prices public or to help a consumer understand what they're going to pay for something if we have no idea what the drug price is that the PBM, pharmacy, or payer are going to pay or get reimbursed for something.