Healthcare Price Transparency – Not there yet.

Picture1Blog post by Colin Hung

Last month I had the opportunity to attend the annual conference of the Healthcare Financial Management AssociationHFMA16.

I must admit, I was pretty biased before heading to the conference. I had a preconceived notion that the conference would be focused exclusively on the challenges of revenue cycle management – a common theme from past events. That notion was completely incorrect. There were a lot of sessions dedicated to “patient financial experience”, the movement from volume to value and using Big Data to improve clinical/financial outcomes. There was even a session on the impact of MACRA on the bottom line.

One particular topic discussed by many at HFMA16 fascinated me: price transparency.

There has been a growing call for price transparency in healthcare. For years it was an interesting thought exercise: would knowing/publishing the price of a procedure lower healthcare costs for everyone? Many economists and researchers believed it would.

Earlier this year researchers from the University of Chicago published a study about the impact of state-legislated gasoline price transparency in Italy. What the researchers found, was that prices did indeed fall (by an average of 1 cent) when gasoline stations had to post their prices on roadside signs. In the study conclusions, the researchers single out healthcare as market where legislated price transparency could be effectively applied:

When price information is difficult to obtain, a third party such as a firm or a public agency can introduce price posting to stimulate price competition between firms. For example, in the healthcare industry government agencies could introduce comparison sites in the attempt to reduce the price of drugs and medical procedures. Our results show that the price reduction generated by the price posting decreases market prices, and the savings realized by consumers largely compensates for the cost of the installation of signs. Given the relatively low cost of online price posting, we believe that a similar tradeoff between benefits and costs is applicable to healthcare and other markets as well.

At HFMA16 much of the talk amongst attendees was on Florida’s healthcare price transparency bill (HB1175) that Gov. Rick Scott (R) signed into law earlier this year. Under this bill, anyone who provides care in the state of Florida would be required to give “timely and accurate financial information and quality of service measures” to patients and “written or electronic good faith estimate of charges to a patient or prospective patient within a certain timeframe”. Other states like Ohio and New York are also on the verge of passing similar laws.

Compliance with these laws has lit a fire in the healthcare financial management space. Dozens of vendors on the HFMA16 show floor were demonstrating their price transparency tools and utilities. Companies like: RelayHealth, Swervepay, McKesson, and Clinicspectrum [There were many others, but I only stopped to chat with these four].

Reed Abelson wrote an excellent summary on the rise of these tools in his New York Times article:

The idea behind these web tools, which have been available from health insurers and start-ups for several years, is to harness the power of so-called big data. The companies cull medical claims and other sources of information to help people become sophisticated shoppers for medical care — and they promise to curb the overall cost of health care in the process. By some estimates, the savings from this newfound transparency could run in the billions of dollars a year.

Yet the limits of this data are becoming increasingly clear. Even when people have access to the newly available information, they may not use it. And when they do, they may not rely on the insight. It is impossible to know, for example, whether a dermatologist who costs twice as much as another can more successfully diagnose skin cancer.

Abelson highlights an interesting phenomenon. Even when presented with pricing information for medical procedures, patients may choose not to use is as part of their decision making process. I can certainly understand that in an emergency situation or where healthcare resources are scarce, pricing information makes little difference. I believe, like Abelson does, that it is healthcare’s complexity that makes price transparency alone insufficient.

Consider this example:

Reg. Unleaded Gas Cellphone Package Hip Replacement*
Organization A 2.311 $1.50 /minute $59,450
Organization B 2.301 $40 /month $44,000
Organization C 2.970 $300 /year $19,250

*Prices taken from BlueCross BlueShield Study on Knee and Hip Replacement Surgeries in the US

When it comes to gas, it’s pretty easy to figure out where you are getting the best value. When it comes to cellphone plans, it gets a little bit trickier to determine which offer is the best deal. Part of the decision depends on the type of cellphone user you are (infrequent vs constant texting vs streaming) and part is tied to price.

When it comes to hip replacement surgeries, however, the decision becomes much more complex. Is Organization A giving you an all-in price vs Organization C which is only showing the OR related costs and not the recovery in the hospital? What if there was a 6 month waiting list for Organization C? or what if that particular organization had a higher than average readmission rates following hip surgery? Would you still choose Organization C?

For me, this is the gaping void of price transparency. Just knowing the price doesn’t help with decisions. We need more information – quality measures for example, efficacy numbers, patient reviews and perhaps one day even summarized peer reviews (yes I am dreaming). Put another way, today we are just starting to get price transparency in healthcare, but what we really need is value transparency.

We are long way off from value transparency in healthcare. Standardization of quality measures in the US is an ongoing battle. Online reviews of doctors and healthcare organizations are not yet trusted by either the reviewee or potential patients. Sharing price information remains difficult.

Despite these challenges, I am encouraged by today’s baby steps on price transparency. At the very least, patients can see ahead of time what their out-of-pocket costs may be. This may not influence their decisions yet, BUT it will at least help them be less anxious and perhaps less stressed about the financial aftermath of the procedure.

Please join in our #hcldr tweetchat on Tuesday July 12th at 8:30pm ET (for your local time click here) when we will be discussing the following topics:

  • T1 How would knowing your exact out-of-pocket cost for a visit/procedure change your behavior or thinking?
  • T2 In addition to price, what other info would you need in order to make a judgement on the VALUE of the procedure/visit?
  • T3 Do you feel healthcare price transparency should be legislated and healthcare orgs forced to comply? Why?
  • T4 What do you hope to see in terms of healthcare transparency in the next year? What do you hope not to see?

References

“Unveiling the Cost of Care: How Transparency Changes the Patient Perspective”, Helen Adamopoulos, Beckers Hospital Review, 20 December 2013, http://www.beckershospitalreview.com/payer-issues/unveiling-the-cost-of-care-how-transparency-changes-the-patient-perspective.html, accessed 8 July 2016

“Tying price transparency to incentives is necessary to change consumer behavior”, Merrill Goozner, Modern Healthcare, 18 January 2014, http://www.modernhealthcare.com/article/20140118/MAGAZINE/301189968, accessed 8 July 2016

“Price Transparency and Retail Prices: Evidence from Fuel Price Sign in the Italian Motorway”, Rossi and Chintagunta, University of Chicago, 11 August 2015, http://www.chicagobooth.edu/~/media/8472B253A89D4503BFBFE5DF6B7582AE.pdf, accessed 8 July 2016

“Online Tools to Shop for Doctors Snag on Health Care’s Complexity”, Reed Abelson, New York Times, 16 June 2016, http://www.nytimes.com/2016/06/17/business/online-tools-to-shop-for-doctors-snag-on-health-cares-complexity.html?_r=0, accessed 8 July 2016

“Price Transparency without value transparency?”, Brandon Maughan MD, Leonard Davis Institute of Health Economics, February 2014, http://ldihealtheconomist.com/he000091.shtml, accessed 8 July 2016

“How Price Transparency Can Control the Cost of Health Care”, Robert Wood Johnson Foundation, March 2016, http://www.rwjf.org/en/library/research/2016/03/how-price-transparency-controls-health-care-cost.html, accessed 8 July 2016

“Health Care Price Transparency: Can It Promote High-Value Care?”, Martha Hostetter and Sarah Klein, Commonwealth Fund, 1 May 2012, http://www.commonwealthfund.org/publications/newsletters/quality-matters/2012/april-may/in-focus, accessed 8 July 2016

“The Benefits of Cost Transparency”, Dina Gerdeman, Forbes, 15 December 2014, http://www.forbes.com/sites/hbsworkingknowledge/2014/12/15/when-retailers-reveal-production-costs-consumers-are-more-likely-to-buy/#3f98a35072da, accessed 8 July 2016

“2014 Total Cost of Care Report: Comparison of Medical Group Costs across Minnesota”, Tina Frontera, MN Community Measurement, June 2015, http://mncm.org/wp-content/uploads/2015/06/2014-TCOC-Report-Final.pdf, accessed 8 July 2016

“Does price transparency lead to better value in healthcare?”, Jeffrey Bendix, Medical Economics, 5 August 2014, http://medicaleconomics.modernmedicine.com/medical-economics/content/tags/freestanding-mris/does-price-transparency-lead-better-value-healthcar, accessed 8 July 2016

“Blog: New price-transparency law puts Florida in the consumer vanguard”, Harris Meyer, Modern Healthcare, 19 April 2016, http://www.modernhealthcare.com/article/20160419/BLOG/160419918, accessed 8 July 2016

“A Study of Cost Variations for Knee and Hip Replacement Surgeries in the US”, BlueCross BlueShield, 21 January 2015, http://www.bcbs.com/healthofamerica/BCBS_BHI_Report-Jan-_21_Final.pdf, accessed 8 July 2016

Image Credit

I better walk… – Mhobl https://flic.kr/p/nLajL1

 

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