Demand for price transparency grows

When consumers purchase a car, a piece of electronics or jewelry, they wouldn’t think of agreeing to pay for it without first knowing the price. But when seeking medical care, some patients must do exactly that.

When it comes to healthcare, including hospital services, the issue of price is a complex matter. This lack of price transparency has stemmed in part from the enormous growth of high-deductible healthcare plans. “Patients are now thinking twice about having a medical service when their physician recommends it, because they can’t find out what the final price will be,” says Managed Healthcare Executive Advisor Don Hall, MPH, principal, Delta Sigma LLC, Littleton, Colorado.

Back in

2006, only 4% of consumers had high-deductible plans--which were authorized by the Bush administration in 2003. But by 2013, 20% of U.S. residents had high-deductible health plans that were employer sponsored.

Neeraj Sood, PhD, director of research, Schaeffer Center for Health Policy and Economics, University of Southern California, attributes the rise in high-deductible health plans to rising healthcare costs. “Employers are using this tool to control healthcare costs,” he says. “The idea is if people have to pay more money out of pocket, they will reduce healthcare expenditures and hopefully will do so in smart ways.”

But consumers are pushing back as the trend grows. “There is suddenly a strong demand for understanding the pricing of healthcare,” says Leah F. Binder, MA, MGA, CEO, The Leapfrog Group, Washington D.C. “So we will have to figure out how to get these prices into consumers’ hands. But it’s difficult because the healthcare system isn’t set up to do this. We don’t know how to define price, let alone give consumers an accurate answer.”

Hall says that retail prices are meaningless because virtually all providers discount retail rates--some by as much as 50% to 60% of what they initially asked for--so it appears that they are giving a large discount. “But providers don’t let health plans publish their rates, which would show what they negotiate,” he says. “So consumers are in this conundrum, not knowing what the real price will be.”

In May 2013, the Centers for Medicare and Medicaid Services (CMS) tried to improve transparency by releasing chargemaster data. “Unfortunately, no one pays this price,” says Doug Ghertner, president, Change Healthcare, Brentwood, Tennessee. “Therefore, it is relatively meaningless in the context of helping the consumer make an informed decision. Even individuals without insurance oftentimes are able to negotiate a discount off the ‘retail’ price if they ask.”

The quality component, plus other factors

Adding to the complexity is the reality that cost isn’t indicative of quality--although consumers often mistakenly believe that high-cost care equals high-quality care, Ghertner says. 

When comparing different healthcare providers, some providers are paid thousands of dollars more than others for the same service in the same geographic area, regardless of the quality of such services. For example, the cost for maternity care at selected acute care hospitals in Boston, all of which rated highly on several quality indicators, ranged between $6,834 and $21,554 in July 2014.

This is because there are many factors that go into determining the cost of hospital services, and each institution has its own set of factors--or cost structure--to manage.

A study of more than 2,000 consumers published in the Journal of Patient Safety showed that if consumers were asked to shop by price only, they would pick the highest-priced provider because they thought they were the best quality. “But when they were able to view hospital safety score grades, regardless of price 97% chose the provider associated with the highest grades,” Binder says. “What the study shows is that price may be the first factor consumers consider, but quality is the most important.”

Next: Determining real price/quality

Determining real price/quality

A number of organizations are trying to address the increasingly loud call for healthcare cost and quality transparency. CMS, as well as a host of non-profit and for-profit organizations, are working to provide this data in an easy-to-digest, single viewing experience. “Side-by-side cost and quality information will become increasingly available in time,” Ghertner says. “But the real challenge will be engaging consumers to use it.” A recent survey by Catalyst for Reform found that 98% of the health plans surveyed have a transparency tool, yet only 2% of members use it. 

Change Healthcare, for example, is working to bring price and quality transparency to healthcare in a consumer-friendly fashion.

“We take a proactive approach with our users through our proprietary set of claims-driven, preference-driven alerts,” Ghertner explains. “In essence, we are constantly analyzing user claims data and looking at utilization of individuals’ common and recurring services--things such as maintenance medications, physical therapy, and office visits--and we are shopping on their behalf. We then send an alert to that individual that says, ‘Did you know you could save $270 on your physical therapy? Click here to find out how.’ When we do this, roughly 60% of people log on to our platform or that of our client and do something with the information. This type of engagement has been proven to drive long-term behavior change--something that’s good for consumers, plan sponsors and the healthcare industry as a whole.”

I

n addition, Sood says there are state-run websites that report pricing information to varying degrees of accuracy by zip code and type of service. For instance in New Hampshire, which has a more advanced website, you can find out prices paid by patients depending on their type of insurance. In California, however, you can only get a rough sense of what charges are.

So just how much can patients save by using price transparency? According to a study by Sood and colleagues, patients who used an Internet price transparency tool cut their spending by 14% on lab tests, 13% on imaging and 1% on primary care clinical services.

The implementation of ICD-10 in October could help the situation. “It will significantly improve efficiencies by giving providers the ability to document a patient’s condition, classify it by severity and even address non-compliance issues, all contributing to improved patient outcomes and, over time, the hope for improvements in quality,” says Cheryl Larson, vice president, Midwest Business Group on Health, Chicago, Illinois.

Business healthcare coalitions play a role

Along with consumers, business healthcare coalitions have been demanding price transparency for years without success. Consequently, they have been taking this upon themselves. 

Ghertner says employer and business coalitions have been instrumental in driving public opinion and industry efforts to make this data available to their members. “Given the complexity of assembling the analytic and consumer interfaces needed to be effective in this arena, we’ve seen those coalitions encourage health plans to either build their own tools or look to third-party solutions to bring these tools to the market,” he says.

But Binder says more cooperation is needed. “Business healthcare coalitions are frustrated that plans haven’t been as forthcoming as they can be in providing claims data.”

Hall says employers are coming together to try to use their collective size to put more pressure on healthcare providers and healthcare plans to provide more information. 

Final thoughts

With the increasing popularity of high-deductible health plans and the growing focus on the individual market, consumers are expected to become decision makers in their own healthcare. “They are being told to make value-based decisions and to shop for healthcare like they would shop for a car or major appliance, but they don’t have access to the tools they need to do so,” Ghertner says. Consumers want help, and many of them are turning to their plan sponsors for it. In fact, an Accenture survey shows that 87% of consumers want tools to help project their healthcare expenses. 

Karen Appold is a freelance writer based in Leigh Valley, Pennsylvania.