Price transparency in healthcare has been touted as the key to transforming the U.S. health system for almost 20 years. It’s widely viewed as a mechanism whereby consumers can be activated to make better decisions about their care and drive down unnecessary costs.
It was a central theme in the Affordable Care Act (2010) and is one of the four pillars of HHS Secretary Alex Azar’s strategy to reform the system.
What have we learned?
Price transparency in healthcare matters to consumers. In consumer surveys by Kaiser, Pew, Deloitte, Accenture and others, the majority of adults rate price transparency as a major unmet need in the healthcare system. Their primary interests are prices for hospital services (major procedures and diagnostic tests), physician services and insurance premiums. Surveys indicate prices for prescription drugs and physician services are increasingly important to consumers though they lag hospital and insurance currently.
Price transparency resources are widely available to consumers today. Investors have funded a slew of transparency start-ups so consumers can compare prices for medical procedures, insurance policies and drugs (See Notable Price Transparency Startups below). Almost every state sponsors a website so constituents can compare hospital prices (National Conference of State Legislators). As of June 1, it’s a federal requirement for hospitals to post their charges in a “machine readable format”. Many large self-insured employers provide price transparency tools for their employees. And most insurers provide their enrollees online price comparison resources. Access to price comparison information for consumers is not an issue. The issue is their usefulness.
The majority of more widely used price transparency programs are sponsored by payers (insurers/ employers) to encourage price-shopping by their employees/enrollees. Most payer-sponsored price-transparency offerings facilitate price comparisons for medical procedures and insurance plans. Price transparency programs for comparing prescription drugs and physician services are significantly less accessible to consumers from insurers. Most of the investor funded start-ups feature iOS and Android apps for downloading price comparisons apps on personal communication devices. Payers appear ahead of hospitals, physicians and drug and device manufacturers in providing price comparison resources to consumers. They enjoy three advantages over others: 1-their ability to integrate pricing information with an enrollee’s insurance plan,2- their ability to offer the consumer an estimate of their out of pocket costs for a given transaction and 3-their positioning in the health system with consumers as a credible source for healthcare price information. Thus, the market for most of the investor-funded start-ups in the price transparency sector are health insurers and large employers.
The use of price transparency tools by consumers is increasing especially among younger, healthier consumers. Use is highest (above 50% of adults under 65) among individuals who have high deductible health insurance coverage as they compare prices for elective procedures and tests. It is equally high for consumers seeking insurance premium pricing. By comparison, it remains low (less than 20% of adults under 65) for prescription drugs and physician services. And surveys show those covered in Medicaid, Medicare and those without coverage use price comparison tools significantly less. The bottom line: active searches for price comparisons are those with an insurance plan that requires them to pay more out of pocket services; voluntary searches to compare prices is less frequent among others.
The impact of price transparency on cost-reduction in healthcare is modest but increasing. The confluence of heightened consumer sensitivity to personal health costs, media coverage about “sticker shock” and growing popularity of high deductible insurance coverage that cover 2 in 5 working adults is driving consumers to become price conscious. But consumers are most interested in their out of pocket costs, not the total cost of their purchase. Thus, the bigger ticket items in healthcare—specialty drugs, major acute interventions requiring a hospital stay, and others—and the most lucrative services we sell, like diagnostics and outpatient surgeries–have not experienced pricing pressures since most exceed out of pocket limits for those insured. Academics disagree on the extent to which price transparency has resulted in measurable cost-reduction to date but the presumption is that a positive correlation exists between price transparency and utilization of cheaper alternatives provided options are comparable in terms of access and quality.
So, we’ve learned price transparency is a major focus across the industry and a work in process in terms of achieving informed consumer decision-making. It’s not a peripheral item on the agenda for most organizations in healthcare: it’s an imperative to which a response is required.
Price transparency is a popular theme that’s not likely to diminish. But four factors will determine its impact on health costs:
1. Insurance Design: Insurance coverage featuring enrollee incentives to verify the necessity of their tests and procedures, the selection of cheaper drugs with equal efficacy and clinicians who practice efficient and effective medicine is likely. Linking prices to actual costs and observed-to- expected outcomes for treatments will accelerate usefulness. It is a generational transition as Millennials, Gen X and Gen Y use apps with embedded capabilities (artificial intelligence linked to personal health records) to direct their care.
2. Media coverage: Healthcare has dodged media scrutiny about its prices in recent years except for prescription drugs; that is changing. The added costs and business relationships with pharmacy benefits managers, distributors and group purchasing organizations, referral relationships, administrative overhead, indirect costs and supply chain costs are attractive stories to journalists.
3. The Amazon-effect: The Amazon-effect across the healthcare system is being heralded as the birth of a movement. Its focus: enabling employers to purchase healthcare efficiently without compromising safety and quality. They understand the correlation between healthcare prices, costs and quality are weak, so there’s momentum to apply common sense to pricing. Their tools: technology-enabled care coordination, consumer accountability and empowerment, intelligent insurance benefit design and price transparency. The evolution of employer-activism is likely to embrace price transparency as a core tenet of contractual relationships with providers.
4. Public policy: Price transparency in healthcare is politically safe: few argue against it. Doubling down on transparency-requirements, standardizing and simplifying reporting requirements, limiting access to non-cooperative providers for Medicaid and Medicare enrollees and other levers are accessible to regulators for whom action is not likely to face resistance outside those directly impacted.
But challenges remain:
· Can medical education embrace accountability for costs and efficiency in their training programs without compromising the safety and quality of care provided patients and further complicating professional discontent among providers?
· Can developers of electronic health records and enterprise platforms embed prices and underlying costs into decision-support platforms used across the system?
· Can consumers become price driven shoppers? Are the tools and resources adequate to equip them and are sticks or carrots needed to induce them?
· And will the escalating direct costs of care offset any positive effect of price sensitivity?
Arguing price transparency in healthcare is a misguided effort is like arguing against clean air and healthy eating: it’s senseless. But making the case that price transparency in healthcare has a long way to go based on current offerings and utilization is legitimate.
Investors, policymakers and developers recognize that to influence a consumer’s purchasing behavior, price transparency must be linked to their clinical needs and payment (insurance coverage/income status). Solution developers who link prices to quality scores for providers and drugs, allow personalization based on individual needs and preferences, deliver real-time insights to consumers in their teachable moments when decisions must be made, show easy-to-compare distinctions between total anticipated costs of care and integrate these with apps with clinical algorithms and lifestyle monitoring will effectively corner the market. It’s more complicated than simply offering price comparisons.
As hospitals, post-acute providers and physicians position for their futures, price transparency is a strategic imperative. Though perhaps uncomfortable, it’s preferential to being pushed out of an insurer’s network or proven to be a high-priced player without clinical outcomes that are measurably better than a competitor. Posting charge masters information might satisfy regulators, but it will not satisfy insurers, employers and individuals who want guarantees about prices and costs that reflect efficient operations.
The race to develop these solutions and bring price transparency to the forefront in every domain of healthcare is underway. It’s not a matter of if, but when and by whom.
PS I am in Scotland this week. My conversations with the Scots about their healthcare system versus ours have been insightful. Like us, they worry about its future. They worry about its funding. They worry about how much their already high social taxes will increase to pay for it. The big difference: they say almost in unison they can get care IF they need it because everyone’s covered. Price transparency is not an issue for them nor are value-based payments, star ratings et al. It’s a system designed to be government run, paid for by individual taxes and for those who want more or what they believe better care, it affords private options. Coincidentally, per global comparison surveys, the Scots like their system better than U.S. citizens like ours. And no system is without its flaws.
Notable Price Transparency Startups (information obtained from each organization’s website):
Castlight Health offers users an online platform and iOS and Android app to search for the prices of medical services. Some of Castlight’s customers include Kraft Foods Group, Life Technologies, Honeywell, CVS Caremark, and Liberty Mutual.
A Columbus, Ohio startup, SingleCare, was launched last month by longtime health executive Rick Bates as a website for comparisons of pricing between a list of providers and pharmacies.
UnitedHealthcare launched a cost transparency tool, for their members along with an appointment booking system, which the company announced at CES this year. The system, myEasyBook, is geared towards users of high-deductible healthcare plans.
MDsave, founded in 2012, the company hosts an easy-to-use online database of a number of common medical procedures and a mechanism whereby patients can pay for certain procedures using an instant voucher, customers can visit their doctor secure in the knowledge of a guaranteed, set price and without the anxiety of enormous bills appearing weeks later.
HealthSparq, a subsidiary of health system Cambia Health, offers an online platform to shop for healthcare services to 60 small, regional health plans. Consumers who want to pay out-of-pocket can use HealthSparq’s calculator. HealthSparq recently acquired ClarusHealth Solutions, an online provider search tool.
Medlio has launched an app that will act as a virtual insurance card and enables users to see their health insurance benefits information, including as co-pays and deductible balances; a map to find doctors, hospitals and pharmacies near the user’s location; an appointment check-in service on the app; and another portal to pay for appointments. The company’s cost transparency tool, called Common Cents, has not launched yet.
Healthcare Blue Book offers users a cost transparency tool for visits, procedures, and medications. via iOS and Android apps. The company offers a free version of its search tool available for anyone to use by visiting the company’s website and entering in a zip code, and a premium version, which is available to consumers only via their health plan or employer. Healthcare Blue Book also uses its algorithms to provide a “fair price” for services. Earlier this month, the company raised $7 million from a single, strategic investor, The Martin Companies, which will be used for scale and growth.
GoodRx offers cost transparency about medications instead of medical services. The company launched 2012 and partnered with Aetna in June of 2012 to provide data to developers looking to build apps with APIs managed by Aetna.
Rock Health graduate HealthinReach is a free online platform that aims to help patients find the low prices from dentists and doctors and book appointments online. The company said it offers descriptions and prices for nearly 50,000 specific procedures and has so far seen 3 million users on the website.
PokitDok launched its iOS app in December 2012 allows users to find healthcare providers in their area and do a price comparison of different price quotes. It allows consumers to get a price estimate from providers and includes alternative providers i.e.acupuncturists, homeopathic practitioners.
Some resources for additional reading:
- Government Accountability Office G Health Care Price Transparency: Meaningful Price Information Is Difficult for Consumers to Obtain Prior to Receiving Care, Sept 201;Heath care transparency: actions needed to improve cost and quality information for consumersWashington (DC) : 2014 Oct
- Melnick, G A , and Fonkych, K , “Hospital Pricing and the Uninsured: Do the Uninsured Pay Higher Prices?”Health Affairs, March-April 2008, pp w116 – w122
- Hibbard, J H , Greene, J , Sofaer, S , et al , “An Experiment Shows that a Well-Designed Report on Costs and Quality Can Help Consumers Choose High-Value Health Care,” Health Affairs, March 2012, pp 560-568
- Catalyst for Payment Reform, The State of the Art of Price Transparency Tools and Solutions, Nov 2013 Available at www catalyzepaymentreform org/images/documents/stateoftheart pdf
- Accenture: Facing the Tide of Bad Debt in Healthcare As insured patient cost sharing soars, how will providers collect?
- White C , Ginsburg PB , Tu HT , Reschovsky JD , Smith JM , Liao K . Healthcare price transparency: policy approaches and estimated impacts on spending Washington (DC) : WestHealth Policy Center
- Healthcare Financial Management Association Understanding Healthcare Prices: A Consumer Guide
- Deloitte Center for Health Solutions Survey of U.S. Health Consumers.
- Catalyst for Payment Reform, Health Care Incentives Improvement Institute . Report card on state price transparency laws Berkeley (CA) : CPR ; 2014 Mar 25
- Public Agenda . How much will it cost? How Americans use prices in health care . Public Agenda [serial on the Internet]. 2015 Mar 9 [cited 2016 Feb 1 ].
- Aliferis L . Variation in prices for common medical tests and procedures . JAMA Intern Med . 2015 ; 175 ( 1 ): 11 – 2 .
- Sinaiko AD , Rosenthal MB . Increased price transparency in health care—challenges and potential effects . N Engl J Med . 2011 ; 364 ( 10 ): 891 – 4 .
- Mehrotra A , Brannen T , Sinaiko AD . Use patterns of a state health care price transparency web site: what do patients shop for? Inquiry . 2014 ; 51 .
- Whaley C , Schneider Chafen J , Pinkard S , Kellerman G , Bravata D , Kocher R , et al. Association between availability of health service prices and payments for these services . JAMA . 2014 ; 312 ( 16 ): 1670 – 6 .
- Wu SJ , Sylwestrzak G , Shah C , DeVries A . 2014. Price transparency for MRIs increased use of less costly providers and triggered provider competition . Health Aff (Millwood) . 2014 ; 33 ( 8 ): 1391 – 8
Great insights Paul as always.