Educating Consumers about Healthcare Price
Transparency is the Best Solution to Controlling Costs
Health reform won’t
stop providers from overcharging for care, only consumers can do that. Here’s
my story of how I could have paid tens of thousands of dollars more for two
minor outpatient surgical procedures, had I not understood how the healthcare
system worked. It illustrates just how much we need a healthcare system with
price transparency built in – something we will not get under the Affordable Care
I am a doctor and the
father of a 12 year old boy who has cerebral palsy. My son is fortunate to be
healthy and active with minor medical needs. But as he has grown, he
experienced some issues with contractures in his right lower leg which recently
required a minor two hour outpatient surgical procedure.
When my son’s surgery
was scheduled, I started getting price estimates from the surgeon,
anesthesiologist and the facility, since we have a high deductible insurance
plan. The physician’s fees were straight forward and relatively easy to obtain.
Not so with the
facility. My son’s surgery was scheduled at the local hospital’s outpatient
surgical facility which sent the procedure codes to an external reviewer. Three
days later the reviewer came back at $37,000. The hospital referred me to my
insurance company. The PPO network said that they could not reveal the prices
until after the case was performed.
The hospital said it
expected to discount the price, which would be in the range of $15,000 to $25,000.
Then I asked my son’s surgeon if he ever operated at any independent Ambulatory
Surgical Centers (ASC). One phone call and 10 minutes later, I have the exact
price for his surgery: $1,515.
Five years ago, there
were virtually no tools that could help consumers figure out what they should
pay for a healthcare. Today, with the availability of new technology and new
methods to analyze claims data, service providers can develop tools that will
help companies examine what different providers in their network charge for
tests, procedures, treatments and services in their market. With that
knowledge in hand, they can find a fair price for what is needed. The better
educated people are about what a fair price should be, the better equipped they
are to talk with providers and facilities about fees before a procedure is
Customized tools are
available for self-funded employer plans, so employees can search provider
pricing within their own networks. We have found that even within the same plan
the price for a routine test can vary by thousands of dollars.
and Consumerism: No Price Transparency
Even after the
Affordable Care Act, large gaps which cost consumers and self-funded employers
a lot of money, must be addressed. The ACA does not address the wide disparity
in healthcare pricing or encourage, much less mandate, pricing
transparency. While my case was an extreme situation of potential
overcharge, there is still an enormous amount of price variability in the
health care system, even within individual health plans. Employers and their
employees will continue to pay way too much for common healthcare services,
often as much as five times more than they should.
The ACA will also
impact the ability to encourage consumerism in plan design. Some of the provisions
may foster consumerism such as the excise tax on rich benefits plans and the
increased threshold for medical expense itemized deductions. Other
provisions will limit an employer’s ability to foster consumerism, such as the
elimination of lifetime limits, the requirement to provide certain services at
100 percent coverage, and the limitations on Flexible Spending Accounts.
The ACA does not help
employees or employers learn the real costs of care. The Massachusetts Attorney
General report entitled Investigation of Health Care Cost Trends and Cost
Drivers from January, 2010, provides a good overview of the wide variation in
healthcare pricing and the factors that lead to it. It says price
variations are not correlated to quality of care, the sickness of the
population being served, volume of Medicare or Medicaid patients, whether a
provider offers services at an academic teaching or research facility, or
differences in hospital costs of delivering similar services at similar
The report concluded
that price variations are correlated to market leverage, as measured by the
relative market position of the hospital or provider group, and then compared
with other hospitals or provider groups in the local area.
considered other legislation (HR 4700, HR 2249, HR 4803) which would have
addressed the transparency issue, but these bills did not make significant
progress in passage. Employers are left to find their own solutions to these
Employees into Educated Healthcare Consumers
Most employees don’t
realize that if they use in-network providers the cost of their care could vary
by over 500 percent depending on which in-network provider they choose.
If they need an MRI, they could get it for $500 at one imaging center and pay
over $3,000 at another center. Their colonoscopy might cost $950 at one
location and over $3,500 at another. The same holds true for almost every
service they need.
Why don’t they know?
First, they don’t have any idea how much healthcare services should cost or
what is the fair price they should pay. Second, they are rarely told how
much the service will cost before they get their care, and many times they
don’t even realize that they can ask. Finally, many benefit designs with fixed
co-payments remove patients need to know or care.
Even when employees
have access to insurance company portals, these portals are rarely used and
most don’t provide clear pricing information.
employee purchasing behavior, it is clear that the current system is not
producing favorable results. Most employees pay too much for care.
And this occurs regardless of employer location, insurance company or provider
consistently spending 4 to 15 percent more on healthcare than they would if
their employees made value based care decisions. It is important to note that
this spending is not for higher quality care. Numerous studies have shown
that higher healthcare prices do not indicate high quality care. Health reform
has the potential to make this situation even worse as the push to create
Accountable Care Organizations (ACO) encourages providers to
consolidate. Employers will need to carefully consider the
value offered by new provider network arrangements, and ensure that they come
with transparent offerings with respect to both quality and cost.
Ways to Reduce Costs and Still Deliver Quality Care
Think of it as a
cost/value gap. People would never knowingly overpay for a car or home. They
would do research ahead of time, find out what current market rates are and
approach the buying process as knowledgeable consumers. In healthcare, that’s
unusual. Employers and employees can deliver the same value at a lower cost, if
they approach the situation as educated consumers.
Employers are the key
to solving the cost/value gap in healthcare. Employers make the ultimate
decisions regarding benefit designs that encourage consumerism, the networks
that direct patients to high value providers, and the education and tools to
support employees in selecting healthcare services.
Many employers have
implemented wellness and disease management programs often with incentives for
participation or even penalties for failure to engage in healthy behaviors.
However, when it comes to encouraging employees to make better choices about
buying healthcare services, most employers have not supported or encouraged
real consumerism. Here are a three methods that can help.
1. Put consumerism into
all health and wellness programs. Every nurse or
member of a call center support staff should have access to pricing and
transparency tools needed to fully educate a patient on cost of care. There are
tools available that show the range of prices charged by the health plans and
providers in their network, so employees can make educated choices about which
providers they should use. Why recommend an employee get a colonoscopy but not
also suggest where they might get a high quality study at one-third the cost of
some locations? Employers could triple their cancer screening rates
without spending any additional money if they design their programs
2. Make sure employers
understand their network prices and quality variations. Employers should
look at their data. They may be surprised at the variations and opportunities
in price. At a minimum, it may affect how benefits are designed. Some
employers are even taking additional steps, such as setting up narrower
networks to ensure their employees get the best care at the best price.
3. Don’t be satisfied
with just a provider directory. Employers may want to rethink
the traditional approach of the provider directory that places the providers
first and may not even include pricing information. To be effective
consumers, employees must first know how much care should cost. Then they must
have the ability to find providers who offer fair pricing. Make sure this
information isn’t hidden on a little used portal; put it at the employee
desktop. Make it available in their hands in the doctor’s office by way of
their mobile phones. Make sure every nurse or health coach they talk to
can support them.
The Affordable Care
Act may not address health transparency issues, but there is no reason why,
with t technological tools in hand, employees or medical professionals like
myself for that matter, have to overpay for care. Employees that are given the
chance to understand healthcare pricing, particularly under Consumer Directed
Health Plans (CDHP), are often very appreciative of the results. More
importantly, employers can achieve substantial savings that allow for continued
health benefits at affordable rates.
Dr. Jeffrey Rice
is CEO of www.healthcarebluebook.com.
The Healthcare Blue
Book provides employers with analytics to help them understand their provider
network costs and comprehensive programs to support employees with healthcare
consumerism. The Healthcare Blue Book is a leader in supporting employers
with high deductible health plans, consumer directed health plans and reference