Creating Price Transparency for Outpatient Surgery Will Help Align Patient Expectations and Improve Patient Outcomes

Current Doctor-Patient Communications Involve Miscommunications

Suppose a patient damages his knee. He goes to see an Orthopedic Surgeon. The surgeon conducts some tests and concludes that the patient has torn his meniscus and needs arthroscopic surgery to fix it (see Figure 1)

Figure 1

1 mensicus


After informing the patient of this, the patient then asks the surgeon, “How much will this surgery cost me?”

The surgeon replies to the patient’s question with something akin to, “I have no idea,” or “I can’t tell you.”

That simple statement goes a long way towards killing the patient’s trust of the doctor. And without trust, patients are less likely to comply with the doctor’s recommendations, which, in turns leads to worse patient outcomes, less satisfied patients, fewer patient referrals, and more billing disputes.

And all this happens due to a miscommunication between the surgeon and the patient.

What the Surgeon Is Thinking

When the surgeon tells the patient that he cannot tell the patient how much the surgery will cost, this is what the surgeon is thinking.

First, the surgeon is focused on the patient’s medical problem, in this case a torn meniscus, and he’s thinking about the process he must undertake to fix the problem – which method will produce the best outcome for the patient?

Second, going into the surgery, the surgeon has several potential methods in mind. For example, the best procedure for the patient may be either

  1. Arthroscopy, knee, surgical; with meniscectomy (medial AND lateral, including any meniscal (CPT #29880);
  2. Arthroscopy, knee, surgical; with meniscectomy (medial OR lateral, including any meniscal shaving) (CPT #29881);
  3. Arthroscopy, knee, surgical; with meniscus repair (medial OR lateral) (CPT #29882); or
  4. Arthroscopy, knee, surgical; with meniscus repair (medial AND lateral) (CPT #29883).

However, the surgeon won't know which he thinks will be best, until he gets into the operating room and gets a better idea of exactly what the situation looks like. The surgeon wants freedom to act, that is, he doesn't want to commit to an exact method ahead of time.

Each of the procedures, (i) – (iv) above, involves a different billing code and a different fee. So going into the surgery, there is uncertainty about what the exact procedure, and thus the surgeon’s fee, will end up being. And as indicated, the surgeon doesn’t want to commit to any specific method beforehand.

Third, surgery involves inputs and actions from many different providers. The fee for each provider’s contribution depends on various factors, some of which are uncertain before the surgery is performed (see Figure 2).

Figure 2

2 team

The surgeon chooses his team members based on merit, relationships, etc. Each provider bills the patient separately and directly for his contribution to the process, and the surgeon doesn’t know which insurance networks these providers are members of, nor does he know the fees they will end up charging the patient.

What the Patient Is Thinking

Now let’s consider what the patient is thinking when he asks the surgeon how much the surgery will cost the patient.

The patient is focused on being treated, and he’s thinking about the end results: “When will I be better and how much will it cost me?”

When the surgeon says he cannot tells the patient how much the surgery will cost, this response leads to stress and anxiety on the part of the patient for two different reasons. First, people don’t like uncertainty; it creates stress and anxiety. To reduce the anxiety the patient is feeling about the procedure, he wants firm expectations about what the procedure will entail. And second, the patient doesn’t understand all the various components or the uncertain nature of what’s involved (see Figure 2). So when the surgeon simply says, “I cannot give you a price,” this creates a sense of suspicion and mistrust on the part of the patient. Why would the surgeon not be able to give him a price, unless the surgeon is hiding something?

Finally, the patient generally chooses a surgeon who is in his insurance network. In this case, the patient assumes that if the surgeon is in his insurance network, then so are all the other contributors to the patient’s procedure (see Figure 2). However, this is not always the case. As indicated above, the surgeon chooses his team members based on merit, relationships, etc. He has no information about whether or not each team participant is in the patient’s insurance network.

Doctor-Patient Expectations Are Misaligned

We see that the patient’s expectations become misaligned, due to

  1. Patient stress and anxiety caused by not having firm expectations about what the procedure will entail or cost;
  2. Patient mistrust of the surgeon because the surgeon refuses to give the patient a price quote; and
  3. Patient sense of being cheated if and when he’s billed for much more than he had anticipated, because some of the contributors to his procedure end up not being in his insurance network.

Misaligned expectations are a serious problem because peoples’ expectations determine how they view their experiences. Science shows that when expectations are met or exceeded, people tend to feel satisfied and/or pleased. But when expectations are not met, the negative feelings people experience are stronger than the positive feelings they get when expectations are exceeded. Negative feelings may include anger, disappointment, or a sense of being let down.

The results of patients having misaligned expectations are that patients are less likely to comply with the doctor’s recommendations, which, in turns leads to worse patient outcomes, less satisfied patients, fewer patient referrals, and more billing disputes.

Patients Will Question Providers about Prices They Find Posted on the Internet

In addition to helping align patients’ expectations, having a good understanding of a procedure’s processes and expected costs is increasingly essential to providers themselves.

More and more sites are popping up that provide patients with price estimates for healthcare procedures (see Figure 3). Physicians who are unable to reveal and defend their prices against those posted online will generate distrust from patients, as described above. As such, physicians will be forced to better communicate their prices and processes to patients or risk losing patients to other providers who can.

Figure 3

3 posted price

“How Does Your Price Compare?”


Payers Are Changing Reimbursements to Providers

In an effort to curb costs, more payers are either

  1. Making reimbursements to providers contingent upon good patient outcomes (“Pay for Performance”) (see figure 4), and/or
  2. Reimbursing providers a fixed fee to cover all the components of a patient’s procedure (“Bundled” or “Fixed Payments”) (see Figure 5).

Figure 4

4 p4p


Figure 5

5 bundled knee


By being able to communicate processes and expected costs to patients before-hand, providers are able to defend their prices and generate greater trust and compliance from patients, and, consequently, better outcomes and higher billing recapture.

At the same time, by understanding the totality of procedures and expected costs, providers are empowered to better manage fixed or bundled payments from payers.


Having a better understanding of the components and estimated prices involved with outpatient procedures empowers physicians in three important ways. 

  1. Physicians are able to better align patient expectations, thereby increasing levels of compliance, which will improve patient outcomes, which, in turn, will increase both patient referrals and revenue capture.
  2. Physicians will be able to better defend and justify their prices to patients, thereby enabling physicians to compete for patients.
  3. Physicians will be better able to manage fixed or bundled payments from payers.

ecosystem, healthcare, pricing, information

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