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How Healthcare Companies Are Taking a Page Out of T-Mobile's Playbook

By Motley Fool Staff – Nov 23, 2016 at 7:30AM

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Consumers are demanding price transparency -- and companies are finally starting to listen.

The healthcare industry is notoriously opaque when it comes to pricing -- a trait it shares with some wireless service providers and the cable industry. But with customers increasingly demanding pricing transparency, smart healthcare companies are following T-Mobile's lead and becoming more upfront about costs.

Find out what Motley Fool analysts Kristine Harjes and Vincent Shen think of the trend in this clip from crossover week on Industry Focus: Consumer Goods.

A full transcript follows the video.

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This podcast was recorded on Nov. 15, 2016.

Vincent Shen: This is something that's been very prominent recently in headlines, and that's with price transparency. On the retail side, you don't see this quite as much. A really good example that I could think of was T-Mobile. T-Mobile and its CEO, John Legere, he has his Un-carrier initiatives. Basically, these have been breaking industry standards in terms of billing, practices in terms of what your data is, how those things work out. These Un-carrier initiatives are designed to be very friendly to the consumer, and honestly put some egg on the face of the competing wireless service providers like Verizon and AT&T, by saying, "They have these really shady billing practices, they're charging you for overages, we're going to stop doing that." Even on your cable bills, in some cases, Comcast has gotten flak, for example, for adding fees below the line so they can basically market, "Your monthly service will be $50," but in actuality there's $15 more of fees and they're just reclassifying it. So there are some moves on the retail side with price transparency. But in the healthcare side, it's really something we're seeing in the headlines quite a bit in terms of the EpiPen and some other controversies. What's going on there?

Kristine Harjes: Those were some really good examples. When we first brought this up as a topic, the way that I saw this going was, we would talk about how, McDonald's, you walk in and there's a menu and there's prices and you know how much things are going to be, then I was going to paint this stark contrasting picture of healthcare where everything is so murky and you can't see what anything's going to cost until you get the bill. But yeah, those examples you described have a lot of symmetry. For example, there is this big issue in healthcare coverage where you might not know exactly how much you're going to be charged for some sort of procedure. So you go to a clinic and you know that the clinic is in network. But, you don't know that every single doctor that might see you within that clinic -- or maybe just one person involved in your surgery -- is not actually in network. And then you get slammed with this big bill, and it's a surprise, it's always a surprise. California, in September, passed this law called ABO72. That's supposed to protect people from this by limiting the patient's financial obligations to what they would have paid had the provider been in network.

So, you start to see these little incremental steps, because people are demanding it. They can no longer accept that when you go to a hospital, you don't get a menu like you get at McDonald's, that says "Here's what everything is going to cost, and the right to refuse an extra $42 Band-Aid." You just get the bill at the end. We do have a shift going on within the industry where people expect to know what they're going to pay beforehand.

Shen: I honestly could see that as a huge point of differentiation for certain service providers within the healthcare space. You can go to one hospital that is much more open and transparent about what you're paying for and everything, and on the other side it's a bit murkier, and I can see people valuing that transparency and turning there.

Harjes: Yeah, it's a competitive advantage. It's a competitive advantage for hospitals. You see them starting to post reviews online of open and honest feedback. It's a differentiator for insurers, for example, if you have an app that's really easy to use, people can see what they're going to pay, and they value that.

Kristine Harjes has no position in any stocks mentioned. Vincent Shen has no position in any stocks mentioned. The Motley Fool recommends T-Mobile US and Verizon Communications. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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