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Leveraging Competition in Healthcare to Bring About Price Transparency

July 23, 2014 in health care costs, health care quality, Hospital Bills, Member Stories, Quality of care

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.

Invisible Competition

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.

Price Comparisons Can Backfire

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.

Where Price Transparency Can Add Value

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.

A Bright Future

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.

To see how Pricing Healthcare presents facilities and their prices, go to a page of Utah dentists accepting new patients or a list of California facilities publishing price lists.

For my colonoscopy, I chose quality over cost

December 21, 2013 in health care costs, Quality of care

I finally got that colonoscopy that I started shopping for almost a year ago. I’m really good at proscrastinating when fasting and voluntary diarrhea is involved.

I had a good experience in the end. I probably spent more than I should have, but…

1) I wanted to go someplace close to home. You’re not supposed to drive after this procedure and I didn’t want to drag a designated driver too far out of the way.

2) So I compared a doctor recommended by my PCP, who is at Beth Israel Deaconess Medical Center with a team of docs at Faulkner Hospital. Yes, the Faulkner is owned by Partners, but rates I’ve seen for the Faulkner are more in the community hospital range. I’m pretty sure BIDMC would be more expensive, but I don’t have the exact charges

The problem was, I couldn’t get any quality info from the Faulkner. I called four times and spoke to someone twice. They said they couldn’t answer my questions about: polyp detection rates, complication rates, withdrawl time and how often the doctor reaches the beginning of the colon (the cecum).

So I went to BIDMC, which had offered quality info earlier this year and where I had a frank conversation with my doctor (although not until just before the procedure).

I came away with an interesting, gross to some of you, set of slides of my doc’s work. Dr. Chuttani always, apparently, gets to the cecum and takes a picture. You can click to the next page to see mine (I don’t want to force it on you). Did you doctor show you results of the procedure?
Read the rest of this entry →

The Rise of U.S. Health Care Consumers: Lessons from Abroad

January 5, 2013 in health care costs, Health Insurance, International Health Care, Medical Care, Quality of care

Can you imagine buying gas from a station with no signs to let you know the prices? Or having the clerk at a clothing store pick the “right” jeans for you, with no opportunity to figure out for yourself which ones fit best? In a sense, this is how Americans buy something far more important: health care.

Economists and policy makers have long emphasized the challenges in treating health care as a consumer good. Supply generally drives demand; there is little correlation between cost and quality; and end users have neither visibility into costs, nor much incentive to find out. Lack of price transparency makes it nearly impossible to find health care cost information even for someone motivated to look for it. Consumers also have little basis for evaluating quality; often the data that is available is dense and hard to interpret. In other words, most Americans do not have the practice or capacity, let alone the information they would need, to make informed health care decisions.

But it does not need to stay this way – and, indeed, it cannot if health care reform is to succeed. Under the Affordable Care Act, 12 million consumers are expected to purchase their own health insurance via a health insurance exchange by 2014, growing to 28 million in 2019. Americans, including lower-income individuals qualifying for subsidized health insurance, will have new health plan choices, and new means of comparison shopping. Even without reform, health insurers are designing and employers are increasingly offering products that shift costs and choices to the consumer.

Remarkably, as a nation and a health care industry, we have not prepared our population for the increased responsibility and decision-making power they will soon assume. Yet there are places around the world that have a lot to teach us in this arena, and they’re not necessarily the ones you might guess – or the ones health economists tend to focus on. Read the rest of this entry →

I want information about costs AND quality

January 1, 2013 in Medical Care, Quality of care

I’ve been thinking about this push from e-Patient Dave to redefine and rename “transparency.”

“If I mention ‘transparency’ to people in my community,” says Dave, “most have no idea what I mean. But when I say ‘We need to see what things cost – and nobody can tell us,’ everybody does see what a problem that is.”

And so, says Dave, what we need is “Visible prices, please. Before we make our purchase decisions.”

OK – no disagreement. Transparency is one of those wallpaper words.  Everyone uses it; but it feels plastic.  And, I strongly agree that we can’t make wise spending decisions about where to go for care if we have no idea how much anything costs.

Huntington Hospital in Pasadena, CA is one of the few hospitals I know of that posts prices for procedures, based on your insurance coverage.

But cost is only part of what we, patients, need to see in clear, user-friendly terms.

The other critical factor in choosing where to go for care is QUALITY.  Which doctor or hospital will give me the best results after knee surgery or the best chance of catching problems through a colonoscopy or the best normal delivery?

I don’t think any of us want to get to the point where we are buying care based on price alone.  So transparency, or whatever we call it, has to help us decide where to get the best care at the lowest price.  So Dave – what do we call that?  Don’t say “value.”  Anyone?

Protected: Check out the differences in hospital quality across Massachusetts

December 3, 2012 in Quality of care

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What’s a “good” colonoscopy?

November 23, 2012 in health care costs, Medical Care, Quality of care

No bad jokes.  I’m serious.

I’ve reached the wonderful age at which I’m supposed to have this test as part of my general health care.  I had one 10 or so years ago, so I know what I’m in for.  The best thing to be said is that the drugs gave me a deeply restful nap.

The first time, I went wherever my doctor told me to go.  This time, I have a couple of references from my doctor, but I’m going to ask some more questions before I decide whom will perform the delicate procedure.

I’ve talked to a few docs and looked at some websites.  Here’s my list of questions.  Is there anything I should add?

1)     About the prep – what will give me the best cleaning out with the least discomfort?  There’s no point in going through all this if the doc can’t see what s/he is doing.

2)     What’s the doctor’s detection rate?  One medical society (the American Society for Gastrointestinal

Borrowed from Asian Scientist where study found that 30% of colonoscopy patients had polyps.

Endoscopy) says a doctor should find a polyp in 25% of men and 15% of women (why the difference?), but I know that some physician groups around Boston say the average is 40-50% among docs who really look for polyps.

3)     How much time does the doctor spend, on average, on the test?  I think more is better, is that right?

4)     Does the doctor always get to the end of the colon? OK, I may not be able to ask this. Read the rest of this entry →