Leveraging Competition in Healthcare to Bring About Price Transparency
by Randy Cox
Executives and administrators in the healthcare industry will tell you that competition in their business is not new. It just looks different. There tend to be few if any TV or internet ads touting 50%-off discounts, or facilities matching the rates of the clinic down the street. But 21st century American healthcare has plenty of positioning on price, expanding of services provided, healthy marketing departments, and reports analyzing trends in patient volume compared to other facilities in the region.
No, competition is there. But other than the plastering of quality awards and ER wait times across websites and along freeways, much of the competition in healthcare is not consumer-facing.
You might ask, “Isn’t invisible competition the same as no competition?”
The quick answer is yes. Providers don't typically act like competing businesses on the outside. Their expenses are often unreasonably high, and they don't seem to care if a patient has a 2-hour wait or gets milked for thousands more than necessary. Nor is there any way to properly evaluate the merits of one surgeon or clinic compared to another, causing patients to be more easily taken advantage of, both in their pocketbooks and in poor quality of care.
But the medical industry is not a true monopoly (yet), and so its competitive forces can be leveraged to benefit consumers.
How exactly is that to be done? A common but naive view held by many in my industry is that simple, direct price comparisons will bring about the type of competition that will address most of the problems in healthcare affordability. It won’t, and here’s why.
The imaging centers and surgery centers we talk to have experimented with listing some of their prices on a few of our competitors’ sites, sites that use sort-by-price lists or some notion of a “fair price”. At first it seems natural that mimicking an electronics or hardware retailer is a step forward for consumers wanting to “shop” for medical care.
The effect of this type of comparison however is the cheapening of care. Providers are obviously opposed to this. Ironically, so are patients. Though it would seem that quick and easy price comparisons could provide less expensive care, people are strongly against the treatment of their health being trivialized and commoditized, even with routine procedures that have little to no risk, and yes, even if it saves them money.
When it comes to a person’s health, anything that smells like trivialization will be met with distrust. Price transparency accompanied by hype, advertising, and plays at “online shopping” are largely ineffective, and may actually drive people away, rather than attract them.
Medical institutions continue to resist being represented on sites that cheapen care in any way, not primarily because it affects their margins, but because it discredits the quality of their establishment. And, interestingly, we’ve received a number of reports that patient customers who are referred by “sort-by-price” sites are typically described as trashy, unreliable, unserious.
Pricing Healthcare takes a different approach. We certainly believe in publishing prices (hence our name), and we believe that facilities’ prices should be compared. But we do not line prices up in a lowest-at-top sorted list like so many do. We take pains to represent facilities and their services in the best possible way.
Because of competitiveness among facilities, they are willing to promote themselves on our site, and to list prices for many of their procedures. We thus use competition to bring about price transparency, rather than the other way around.
We aren’t opposed to searching by location, by facility type, or by procedure, but we believe that when showing results, there are a number of problems with oversimplifying comparisons on price.
First, in some cases there may be dozens of reasons why services with the same name (and the same medical code) may not in actuality be the same, and may in fact require additional outlays that are difficult to enumerate. This is true even for treatments that have become fairly standardized in terms of what procedures and services are involved.
Knowing beforehand what a procedure will cost is of immense value to individuals and employers, and it of course needs to be visible. An upfront price puts limits on how much a person can be taken for, and increases options for those on a budget. But what is and isn’t included for that price needs to be accurately listed next to the procedure. The proper design of pricing data visibility can thus 1) make price a great resource in the hands of someone trained to use it properly, while 2) preventing the untrained eye from putting too much value on the sticker price alone.
Second, it can be dangerous to detach medical treatment from all other considerations besides affordability. Perverse utilization of care (either too much or too little) can be caused as easily by price transparency as by per-procedure provider reimbursement.
It takes a fair amount of reading and research for a patient to become educated sufficiently to use provider comparison tools wisely. And even with all the information available online today, there is still a need for consultation with a physician.
Third, quality matters. There can be considerable differences even between highly skilled, conscientious, experienced surgeons. Equipment, nursing staff, attention to detail in a myriad of aspects at the facility, can also make a big difference in how well a procedure is performed and a person’s quality of life afterward. How are these to be valued when it comes to one’s health? What kind of price can be given to care quality, not to mention the ability to avoid unnecessary post-treatment expenses? These types of things should be considered carefully, much more than the sticker price.
Physicians’ principled adherence to giving the best care with no consideration of cost has merit. Not that prices shouldn’t be known ahead of time, but that having too much focus on something as quantifiable as cost detracts from things of much greater importance and enormous variability.
As American healthcare institutions are given the chance to present themselves and their services in the best possible light on price transparency sites, we believe there will be less trepidation about the publishing of rates.
One of the exciting things we’re seeing at Pricing Healthcare is a growing number of hospitals, surgery centers, imaging centers, and in fact healthcare facilities of all types across the country, wanting to publish pricing information. By doing so, they brand themselves as patient-friendly in terms of price and quality transparency. In turn, patients worry less about sticker shock and become more comfortable obtaining proper care. Ridiculously priced outfits will certainly lose volume, but we believe patient volume overall in the U.S. will increase, with more individuals and families able to afford to pay for the care they need.
Randy Cox is the Founder and CEO of Pricing Healthcare, an open, independent, direct-pay marketplace where healthcare facilities present services and prices online. Facility pages, including pricing information, are free for anyone in the world to access.