Health Bargain Hunters Use Websites to Cut Doctor Bills
By Ryan Flinn
Surgery to remove your appendix in one California hospital
could cost $180,000. Have the operation at a different facility in the same
state and the bill might be as little as $1,500.
That kind of disparity, typical across the country, combined
with escalating medical spending and the increasing amount of data available
online, has prompted several startups to get into the business of helping
companies and their employees save health-care dollars.
“This is about changing the way people shop for health care,
and as a consequence, changing the way care gets delivered,” said Giovanni
Colella, co-founder of Castlight Health Inc., a San Francisco-based company
that helps patients shop for medical care.
Medical spending in the U.S. increased 88 percent to $2.59
trillion in the last decade while out-of-pocket expenses rose 49 percent to
$299.7 billion, according to data from the Centers for Medicare and Medicaid
Castlight works by showing how much doctors, labs and
hospitals charge for their services, as well as providing quality ratings. On
May 1, the company announced it raised $100 million from investors. Other sites
such as HealthcareBlueBook.com, ClearCost Health and Change Healthcare Corp.
help employers identify less costly doctors and providers for their workers.
Travelocity for Health Care
With their out-of pocket medical expenses on the rise, more
and more employees are open to ways to save. Last year, 13 percent of U.S.
employees were covered by so-called high- deductible plans that require them to
pay for most health costs, an increase from 3 percent five years ago, according
to Mercer, a New York-based industry consultant.
Castlight targets companies with self-insured health plans
and charges them a monthly fee based on the number of employees and dependents
covered. It compiles paid claims data from employers and insurers, then
publishes that information on a website for companies and their employees. The
closely held company, which bills itself as a Travelocity for health care,
serves more than 250,000 employees and their dependents at dozens of companies.
By helping people compare the cost of medical providers,
Castlight has saved the companies they work for from 3 percent to 5 percent of
their baseline costs, Colella said.
CareOperative LLC, another closely held company, debuted
HealthcareBlueBook.com in January 2009. CareOperative lets consumers use the
service for free, while charging companies a fee for finding health areas where
they and their employees can save. The service promises to reduce an employer’s
health-care costs as much as 6 percent by finding cheaper alternatives for
employees and giving them incentives to switch doctors or hospitals. The
Nashville, Tennessee-based site has “hundreds of thousands” of visitors a year,
Aimee Stern, a spokeswoman, said in an interview.
Mona Lori Frisbie started OutOfPocket.com in 2007 as a
crowd-sourcing tool for patients. When few visitors posted the prices they paid
for services, she supplemented it with Medicare data as well as links to paid
claims data on other websites. About 300 to 500 people a day use the free
service, she says, which pays for itself with Internet advertising.
“Everyone wants to search and look, but not many people want
to contribute and share,” Frisbie said in a telephone interview. “It doesn’t
have the same effect as some of these other social media tools, where people
like to share where they’re eating and staying.”
One trouble with these services is that it’s not easy to
make direct price comparisons with medical treatments and many consumers won’t
take the time to do it even if such a service is available, said Paul Keckley,
executive director of the Deloitte Center for Health Solutions in Washington.
“This stuff is over everybody’s head,” Keckley said, though,
“there’s always going to be a certain group, we think it’s about 2 percent,
that will really act on this.”
Keckley said he expects these services to continue to
expand, albeit at a slow pace, as more employees are shifted onto
high-deductible insurance plans.
While Colella wouldn’t say if Castlight is profitable yet,
revenue is increasing “exponentially,” and the number of customers will more
than double this year, he said.
Allison Brown, director of employee services at Regis Corp. (RGS), said using the Castlight service has paid off.
“We have had people actually challenge their doctors on what
they were charged, based on what they saw in the Castlight system,” she said.
Arming patients with wide price disparities helps them
negotiate, Brown said. And those disparities can be wide. Renee Hsia, an
assistant professor of emergency medicine at the University of California, San Francisco, highlighted the pricing variations in a
research report that looked at how much California hospitals charge for
routine appendicitis. Bills ranged from $1,529 to $182,955, with a median cost
of $33,611, according to Hsia’s report, which didn’t name the facilities.
“Health care is one of those things where there’s always
going to be so much information asymmetry,” she said. “We just don’t know
enough because it’s so specialized.”
While consumer services such as Castlight can provide
valuable data, patients need to understand that cost differences may depend on
the individual decisions made by their doctors facing highly individualized
situations, she said.
“Are you going to require a few CT scans or just one, or
none?” she asked. “Are you going to require a different type of surgery? Even
if they post that charge for appendicitis, it’s going to be very difficult.”
Understanding the differences among tests, medications and
types of services is another hurdle, said David Belk, a doctor in Alameda,
California, who wrote about the topic in a report, “The True Cost of
“You know the difference between filet mignon and chuck
steak, but you don’t know the difference between generic amlodipine and
brand-name Norvasc,” which is Pfizer Inc.’s blood pressure medication, he said.
Another customer, Life Technologies Inc., a Carlsbad,
California-based maker of gene sequencing machines, hired Castlight in early
2011, and more than half of employees on the system made a different decision
than they would have without the information, according to a survey, said
Carole Mendoza, a spokeswoman.
While publishing prices may spur more-expensive providers to
lower costs, it could also prompt some physicians to boost fees if they’re on
the cheaper end of the scale, according to an editorial published in the New
England Journal of Medicine last year.
Making the Effort
Jon Cohen, chief medical officer for Quest Diagnostics Inc.,
said even with quality rankings available on doctors, most people don’t exert
much effort finding the best providers. Patients “spend twice as much time
deciding which model TV to buy as they do deciding which physician to chose,”
Cohen, who spoke at a health-technology conference last
month on why patients don’t act like consumers, said convenience is the biggest
motivator for choosing a doctor.
“They’ll say this physician has office hours in the evening,
or he returns my phone calls, or the parking is great, or the staff is nice,”
he said. His own father didn’t consult him before choosing a doctor to operate
on his hernia, he said.
The deciding factor? “He told me, ‘Well, he served donuts in
the waiting room,”’ Cohen said.
To contact the reporter on this story: Ryan Flinn at firstname.lastname@example.org