Fueled in part by the multibillion dollar Castlight IPO the industry is abuzz with “transparency.” In this context transparency typically refers to giving consumers information that helps them pick their healthcare providers. The information usually relates to a provider’s price for specific services, and to a lesser extent the provider’s accessibility and quality. Making this information available, advocates of the approach argue, helps consumers make better healthcare decisions. In particular, the pricing information will hopefully help consumers with large out-of-pocket cost exposures, including the 26M with Health Spending Account eligible plans, pick cheaper options. Further, providing consumers actionable pricing information helps establish a trust relationship and thus becomes a starting point from which to initiate a broader set of care coordination activities. The idea of price transparency appears to be a no brainer, and I absolutely believe should be encouraged. However, is it central to population management; is it not central but a crucial piece of the puzzle; or is it just one of many exciting new tools at the population manager’s disposal? That is more opaque.
At the heart of the question is the practical utility of using price transparency to fundamentally change consumer healthcare consumption. While not negating the deserved success of innovators like Castlight, there are at least five issues population mangers need to consider when assessing the magnitude of the opportunity and/or considering complementary programs to use alongside transparency.
1. Finding the cheapest option is only a part of creating a truly effective shopping experience. All else being equal when shopping for expensive services being able to compare price is great. Hence the interest in transparency solutions in the first place. However, finding the cheapest provider for any single sought-after health care service is only one piece of information patients need to be truly informed consumers. Just as important is: (i) ensuring the care being shopped-for is in fact needed, (ii) ensuring that when some form of care is needed the consumer is shopping for the right type care, and (iii) ensuring the selected provider is of high quality in performing the service. For example, finding the most affordable orthopedic surgeon, even a high-quality one, may seem like an easy way to save healthcare dollars when the patient has a back ache. However, it is really not that helpful if the underlying condition is rheumatic in nature in the first place, or, psychosocial and better managed by a primary care provider
2. Somewhat limited scope of services for which consumers can effectively price shop. Even when the care being sought is the correct intervention there are only so many services that lend themselves to price comparison shopping. Breaking the $8,404 per capita annual medical spend into its components reveals that many items may not be easily “shop-able.” Certain items certainly are, notably routine outpatient labs, some outpatient high-end imaging, out-patient physicians, use of ED versus Urgent Care for non-emergent care, some medications, and to a lesser extent which hospital to use for select elective procedures. The imaging I would contend is easiest and most obvious to capture, driven in part by the large difference in costs between hospital-owned and free-standing imaging centers. The US spends roughly $100B annually medical imaging. This is a big number and certainly worth going after. However, shrinking this requires reducing the number of unneeded tests as well as getting a better price for each test performed. (The US uses twice the MRI and CT, and three times the PET, per capita as the OECD average.) Even when the imaging is warranted, emergent or specialized tests do not lend themselves to price shopping. Finally, sometime sshopping is possible but not practical, e.g., long drive-times, physician-recommendations of facilities, etc. Regarding physician services, price shopping may be easier, but for insured consumers the pricing spread is typically smaller than imaging, with contracted price anchored by the Medicare Fee Schedule. (In- vs. out-of-network price deltas are quite large, but even the most IT constrained health plan can employ third-party provider directories to help consumers find a participating doctor.)
3. Imperfect alignment between cost-shopable activities and high cost patients. In healthcare it is often easiest to save money by focusing on the people who actually spend most of the money. The relatively high concentration of health spending by the sickest 5% of the population, 50% of spend among commercially insured individuals, suggests that large portions of the market may not be able to price-shop easily. This top 5% of the commercially insured, each spending more than $15,600 a year, are likely to be in clinical situations that do not lends themselves to price comparison (e.g., high morbidity, multiple co-morbidities). Further, as these high-spenders quickly exceed their annual deductibles, the benefit to them of cost-shopping is limited. Again, there is plenty of money even in the almost 100M commercially insured Americans who spend less than $3,200 a year on health, a natural target for online price transparency, but transparency alone is likely to have less an effect on the sickest of the sick.
4. Provider influence and other determinants of care consumption. At least for now, save for the choice of primary care providers and some pharmaceuticals, many care decisions are heavily influenced by the ordering/referring physician. This is true even when there is no benefit structures to inhibit patients from going against the physician’s recommendation. In many ways, what type of care to get next from whom is exactly the advice the patient is paying the doctor for in the first place. Outside influences also play a heavy role. Pharmaceutical direct-to-consumer advertising can materially impact both patient medication use and prescribing behavior, as can health system advertising. Without great quality, satisfaction, and accessibility/convenience data to contextualize price, consumers may be forced at times to rely on referrals and media to make decisions, even when it means paying a premium.
5. Even when consumers shop on price, total unit-cost information is incomplete. Save for select individual decisions, e.g., which out- patient lab to use, most healthcare costs are not stand-alone purchases. Services are part of an episode of care. Choosing providers that have the lowest expected total cost of the episode is ultimately the information consumers need. This becomes particularly true for complex situations where the diagnosis, imaging, medical management, surgery, rehab, and recovery services are integrated into a clinical service line.
In some industries price comparison tools are revolutionary. For example Kayak® and Hotels.com® for travel. The services these websites compare are either commoditized, have meaningful rating systems, and/or have known brand experiences to help consumers contextualize their various options. Excluding routine services like blood tests, select high-end imaging, and some low-intensity elective procedures, healthcare's trade-offs of cost, quality, service, and access are less clear.
Beyond price shopping tools, consumers, particularly those disproportionately driving healthcare expenses, need guides to cast a light on the care process itself-- augmenting, enhancing, and mitigating somewhat the utility of price transparency tools. Specific help needed by these patients include:
Coordinating the multiple visits and care providers treating a care episode-- reducing unneeded unit consumption regardless of price,
Helping consumers untangle the complexity of multiple insurance claims overlaid on complex benefit designs,
Creating with consumers achievable health goals and setting reasonable expectations, and then assessing the various care options against their health goals and expectations,
Forming the right care team, both providers and non-clinical support, to execute on a plan of care,
Budgeting for the cost of illness (including treatment and recovery), and,
Creating mechanisms for primary care practices to provide all of the above, and the appropriate incentives for them to do so.
While the above list may appear daunting, there are solutions that cost-effectively provide this level of guidance to healthcare consumers. For example, Quantum Health combines advanced behavioral science with a highly trained staff of healthcare advocacy teams that guide each consumer through their healthcare journey. Price transparency is a useful tool for helping healthcare advocates like Quantum best serve the broader needs of the patients, and eliminate the 30% of healthcare services that are unneeded. I.e., if Quantum Health is a group of “Healthcare Warriors” fighting for the patient, price transparency is a valuable weapon. As with any battle, victory is predicated on effectively combining multiple weapon systems and tactics into a unified strategy.
the multiple visits and care providers treating a care episode, reducing unneeded unit consumption regardless of price,Helping for primary care practices to provide all of the above, and the appropriate incentives for them to do so.
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3. Dotinga R. “Huge Rise in CT, MRI, Ultrasound Scan Use.” US News & World Report, Jun 12, 2012.
4. Squires. DA. Explaining High Health Care Spending in the United States: An International Comparison of Supply, Utilization, Prices, and Quality. Fact Pack. The Commonwealth Fund. May 3, 2012.
5. IMS Institute for Healthcare Informatics. “Declining Medicine Use and Costs: For Better or Worse?” May 2013