Health Price Transparency isn’t the Panacea Everyone Seems to Think

Patients don’t want to shop for healthcare

Introduction

Normally in the space we discuss healthcare and health insurance and today is no different.  Today we are going to discuss why price transparency in healthcare is not helpful in controlling costs.  

Price transparency in healthcare sounds like a no-brainer: give patients the costs upfront, and they'll shop around like they do for cars or groceries, driving down prices through competition. It's been touted as a silver bullet by policymakers, think tanks, and even some industry insiders. But after digging into the data and reflecting on how real people interact with the system, I'm convinced it's not the panacea everyone seems to think. In fact, the subtitle says it all—patients won't shop for healthcare, at least not in the way proponents imagine.

The Promise of Price Transparency

  Let's start with the basics. Price transparency in healthcare refers to making the costs of services, procedures, and drugs publicly available so consumers can make informed decisions. The idea gained traction in the early 2010s, culminating in executive orders and regulations under both the Trump and Biden administrations. The 2019 executive order "Improving Price and Quality Transparency in American Healthcare to Put Patients First" aimed to empower patients by requiring hospitals and insurers to disclose negotiated rates. By 2021, hospitals had to post standard charges online, and by 2024, insurers followed suit with tools for members to estimate out-of-pocket costs.

Proponents argue this unleashes market forces. In theory, if patients know that an MRI at Hospital A costs $500 while Hospital B charges $2,000, they'll flock to the cheaper option, forcing high-price providers to lower rates or lose business. This aligns with classic economic principles: information asymmetry is a market failure, and transparency corrects it. Groups like the Wisconsin Institute for Law & Liberty claim it could lower costs by encouraging high-deductible health plans (HDHPs) where patients pay more upfront, incentivizing shopping. McKinsey & Company echoes this, suggesting transparency could reshape markets by making prices more competitive.

Some early wins support this. A Brookings study found measurable effects for certain shoppable services, like imaging, where prices dropped slightly after transparency rules kicked in. Turquoise Health reports that high-cost providers are lowering prices to stay competitive. And a NIH review highlights how transparency can increase competition, potentially reducing overall spending.

But here's the rub: this assumes patients behave like rational economic actors in a free market. In reality, healthcare is anything but. Let's dive into why patients aren't shopping—and why transparency alone won't change that.

Barrier 1: The Nature of Healthcare Demand

First off, much of healthcare isn't "shoppable." Emergencies account for a huge chunk of spending—think heart attacks, car accidents, or appendicitis. In these cases, you're not pulling out your phone to compare prices; you're rushing to the nearest ER. Even for elective procedures, time sensitivity often trumps cost. If your doctor says you need knee surgery soon to avoid complications, are you really going to delay for a bargain hunt?

A Commonwealth Fund report notes that while transparency might help for fungible services like lab tests or colonoscopies, it falls flat for complex care where quality trumps price. Moreover, patients often don't know what they need until a doctor diagnoses them. You can't shop for a treatment you haven't been prescribed yet. This isn't like buying a TV; it's more like hiring a mechanic after your car breaks down—you trust their expertise, not a price list.

From my experience building software for providers, I've seen how fragmented the system is. Prices vary not just by provider but by insurer negotiations, making "apples-to-apples" comparisons nearly impossible. A 2021 Peterson-KFF Health System Tracker analysis showed massive price variations even within the same city, but patients rarely leverage this info.

Barrier 2: Insurance Complexities and Hidden Costs

Insurance is the elephant in the room. Most Americans have coverage that shields them from full costs, so why shop? If your out-of-pocket is capped at $1,000 regardless, saving $200 on a procedure feels trivial. HDHPs were supposed to change this by making patients more price-sensitive, but adoption hasn't led to widespread shopping. A McKinsey survey found 64% of patients have never compared healthcare prices.

Deductibles and coinsurance add layers of confusion. What looks like a low price might balloon after insurer adjustments. Balance billing, network restrictions, and prior authorizations further muddy the waters. In my work at Sentia, we've automated these processes to strip away the BS, but transparency tools often fail to account for personalized insurance details. A ScienceDirect study showed that transparency reduces spending only for price-conscious individuals— a vast minority.

Provider consolidation exacerbates this. A Brown University policy brief points out that merged health systems steer patients to higher-priced facilities, overriding transparency efforts. Patients follow doctor referrals, not price sheets.

Barrier 3: Behavioral and Psychological Factors

Humans aren't robots. Behavioral economics tells us we make decisions based on heuristics, not exhaustive research. In healthcare, trust and convenience reign supreme. You stick with your familiar doctor or hospital because switching feels risky— what if the cheaper option botches the job?

Studies bear this out. A New England Journal of Medicine piece from 2018 called price shopping a "cornerstone" of consumer-directed care but noted low engagement. The AMA Journal of Ethics questions if transparency is useful if patients ignore it, yet argues it still has value for large purchasers like employers. But for individuals? Not so much.

Cognitive overload is real. Sifting through price files requires tech savvy and time—luxuries many lack. Low-income or elderly patients, who need care most, are least equipped to shop. A JAMA Network Open commentary cites evidence of "little to no benefit" from patient-directed transparency.

As a CIO, I implemented patient portals with cost estimators, only to see dismal usage. People log in for results, not shopping carts.  Practices and hospitals use it to estimate costs and get cash payments from patients up front, before the procedure, but patients never used it

Transparency in Action

Let's look at the data. Post-2021, compliance is spotty—many hospitals post incomplete or unusable data. But where it's available, has it worked?

A 2024 Analysis Group report finds transparency more effective with strong shopping incentives, but without them, impact is limited.  Healthcare Financial Management Association (HFMA) notes improved trust and collections from upfront clarity, but that's more about billing than market competition.

Clearstep Health and Applied Medical Systems highlight benefits like informed choices, but pros are outweighed by cons like low adoption. A Commonwealth Fund analysis of past insights shows patients need both info and incentives to choose wisely—transparency provides the former, but not the latter.

One damning stat: In states with early transparency laws, like New Hampshire's price tool, only 1-2% of users shopped for services. Nationally, it's similarly low. The National Academies note even modest costs deter utilization, but transparency hasn't shifted behavior significantly.

Unintended Consequences

Pushing transparency might backfire. Providers could collude on prices, knowing competitors' rates. Or, low-price providers raise fees to match, reducing variation without lowering costs. HealthEquity's blog praises clarity for engagement, but warns of complexity.

It also burdens providers with compliance costs, passed to patients. In my software world, we've built tools to handle this, but small practices struggle.

Beyond Transparency

If not transparency, what? We need structural changes. At Sentia Health, I advocate for platform-based insurance: automate everything from procedures to payments, cutting administrative bloat (which eats 25-30% of premiums).

Reference based pricing eliminates the negotiations and inflated prices commanded by some healthcare providers. This has shown promise in California where costs were reduced by 20%.

Together, these alone cut more than 50% out of the cost of health coverage.  

The Sentia Platform

Here is what our platform does:

1.  Provide a data driven EMR.

2.  Integrate the coverage into the EMR.

3.  Pay for covered procedures as they are documented.

4.  Pay a reference-based price, we suggest 150% of Medicare, but ONE price.

5.  Separate the cost of the coverage service from the cost of the risk.

6.  Charge $10/month for the service, plus the true cost of the risk.

That eliminates medical coding, verification, adjudication, pre-authorization, denials, delays, insurance networks, rate negotiations, sales/brokers/agents, money for a third-party EMR, skyscrapers in every major city, hundreds of thousands of employees, all the monkey business and reduces cost by about half for the patient and about a quarter for the hospital. 

It also eliminates Epic/Cerner AND BUCAH.

Sentia has this system in production, right now, today.

Conclusions

Price transparency is a step forward, but it's no panacea. Patients won't shop for healthcare because the system isn't designed for it—emergencies, insurance veils, and human behavior all conspire against it. Evidence from implementations shows modest gains at best, limited to niche cases.

Instead of pinning hopes on informed consumers, let's automate the inefficiencies. As I've outlined in my Substack series on reforming health insurance, platforms like Sentia can slash costs by half without relying on patient heroics. Policymakers, take note: true reform means rethinking the model, not just posting prices.

We have built a comprehensive health information system to keep the patient healthy and on the right track. This system includes the automation of the health insurance industry completely, eliminating more than half the costs by Sentia as the coverage company, employer based captive or TPA or by direct payments to doctors and practices.

Here are additional points detailing the costs incurred by the legacy insurance companies that you pay currently, in addition to wasting about half your premium, according to Grand View Research and current as of 2023 and that Sentia would eliminate completely:

Medical Records:

• The average practitioner spends $35,925 annually on electronic medical records
• The average patient spends $106 annually on electronic medical records
• The average patient encounter or visit cost for electronic medical records alone is $32

Medical Coding:

• The average practitioner spends $20,286 annually on medical coding
• The average patient spends $60 annually on medical coding
• The average patient encounter or visit cost for medical coding alone is $18

Compliance and Efficacy Reporting:

• The average practitioner spends $17,165 annually on compliance and efficacy reporting
• The average patient spends $51 annually on compliance and efficacy reporting
• The average patient encounter or visit cost for compliance and efficacy reporting alone is $15

Totals:

• The average practitioner spends $73,376 annually on completely avoidable costs
• The average patient spends $217 annually on completely avoidable costs
• The average patient encounter or visit cost for completely avoidable costs alone is $66

Yes, you read that correctly $66 per visit. There must be a better way. There is a better way and Sentia has it. Remember also that these costs are over and above the 50%+ your insurance company wastes or shoves into their pockets.

We have designed and are building an ERP style practice/hospital management system that will pinpoint and eliminate cash leaks and inefficiencies in enterprise medical facilities. Implementing this system should be fairly simple and will completely revolutionize the way healthcare is delivered and paid for, saving countless lives. We have shown a way to use this system to make the best healthcare system in the world also the most efficacious and the most affordable.

If you liked what you read contact us here, on our site, SentiaHealth.com, our parent company SentiaSystems.com, or send us an email to info@sentiasystems.com or info@sentiahealth.com.