Price Transparency: Tools, Actors and Impact

JOSEPH M. SMITH, MD, PHD WEST HEALTH INSTITUTE

In consultation with Chapin White, PhD, at the Center for Studying Health System Change

An independent, one-of-a-kind initiative whose mission is to lower health care costs

Our Mission
To lower health care costs by creating innovative, patient-centered solutions that deliver the right care at the right place at the right time

Our Strategic Intent

West Health develops innovative solutions and engages collaborators to disrupt the process of health care delivery to lower the cost of chronic disease

an independent, 501(c)(3) non-profit medical research organization

an independent, 501(c)(3) non-profit nonpartisan organization

a $100 million fund providing capital to mission-aligned companies

providing a portfolio of services to mission-aligned companies

The $2.8 Trillion Question

Can the injection of price data improve competition, market behavior, and overall spending in the U.S.?

Health Spending by Primary Coverage: 2013

Private (patient) 7%
Uninsured 1%

Private

Private (insurer) 44%

Medicare 37%

Public

Derived from NHE and MEPS-NHEA.

Medicaid 11%

Competitive Context

$828B
Health Plans

Employers

$397B

Patients
$226B

$1.08T
Derived from NHE and MEPS-NHEA

Providers

Competitive Outcome: Privately Insured

Provider prices Highest in the world, by far. (Koechlin et al., 2010; Inokuchi et al., 2013; Laugesen and Glied, 2011) Administrative costs ~$100 billion higher than expected. (McKinsey, 2011) Quality and outcomes Not reflective of overall spending. Access Non-uniform

So, whats not working?

Market concentration, insurers and providers
Self-funded health plans = pass-throughs Employers: cranky, confused, aimless, spineless* Patients: slow to adopt shopping role, shielded from

most costs, blindsided by others. Brokers/consultants: livelihood relies on opacity Clinician providers: largely unaware of price/cost implications for their patients Quality: tricky to measure Tax code: encourages profligacy

* Attributed to Ian Morrison and Bob Leitman

Three Actors on Transparency

Patient
Purchaser

Provider

PatientScope of Action
Health Care Spending
1% 7%

37%

44%

Medicare Medicaid Private (insurer) Private (patient) Uninsured

11%

PatientScope of Action
Health Care Spending
1% 7% Medicare Medicaid Private (insurer) Private (patient) Uninsured

37%

NonDiscretionary
44% 11%

PatientHow Far Along?

Endpoint Treatment options presented with price data

relevant real-time detailed/guaranteed out-of-pocket provider-specific trusted/relevant quality measures

Top health plan price tools

High quality, plan specific cost data for a wide variety of providers and procedures High quality, plan/employer specific cost data; messenger for just-in-time decision making. (WHIF)* Easily navigable cost estimates for providers, procedures based on geography and health plan Comprehensive cost estimates expressed as a bundle of care; wide variety of patient services Highly plan specific and linked to health plan benefits and services Highly plan specific and linked to health plan benefits and services

Top Federal & State price tools

Quality information is specific to region, carrier, plan type, and provider Quality information is specific to region, carrier, plan type, and provider Easy-to-use interface; information is specific to provider but not carrier or health plan type Easy-to-use interface; cost information is specific to provider

Not user-friendly; information represents average reimbursement by carrier

Not user-friendly; data represents Medicare payments to providers

Top non-health plan price tools

High/low cost estimates and health plan quotes; does not clearly detail data sources Limited in usefulness; details outof-pocket estimates; does not clearly detail data sources Limited in usefulness; details outof-pocket estimates; does not clearly detail data sources Limited in usefulness; lacks enough provider quotes for services Limited in usefulness; lacks enough self-reported price estimates for services

Other Non-Health Plan Tools

An incomplete and expanding listing

PurchaserScope of Action
Health Care Spending
1% 7% 37% Medicare Medicaid Private (insurer) Private (patient) Uninsured

44% 11%

PurchaserHow Far Along?

Endpoint(s) Employers know the provider-specific / treatment specific prices they are paying with trusted/relevant quality/outcome measures Employers can comparison shop among

carriers providers (hospitals, physician groups)

Leading Edge Maine Health Management Coalition

ProviderScope of Action
Health Care Spending
Private (patient) 7% Uninsured 1%

Medicare 37% Private (insurer) 44%

Medicaid 11%

ProviderHow Far Along?

Endpoint(s) Providers know the prices of products/services they order Providers accept that part of their responsibility is to help the patient manage their cost of care Providers are not perversely incentivized.
Leading Edge Searchlight (CareFirst BlueCross BlueShield)

Summary
Transparency for the Patient: Limited (but growing) direct impact on overall spending Already well along Transparency for the Employer: Large potential impact Not far along Transparency for the Provider: Excellent scope and depth of impact Least far along Requires education/tools/aligned incentives.

Are there good arguments against transparency?

It might increase some prices / overall spending, so.. The information may be misinterpreted, so Price information is insufficient, so The relevant information is hard to

collect/display/access/update, so It will disrupt some business models, so.. We should go slowly because Others