Lack of price transparency impeding informed care decisions

Without better data to support choices, healthcare costs remain a ‘black box’ for patients, says Sen. Lamar Alexander.

Consumers are being blindsided by the high costs of their healthcare because of the lack of available price transparency data to make informed buying decisions.

That’s the contention of Sen. Lamar Alexander (R-Tenn.), chairman of the Senate health committee, who presided over a hearing on Tuesday aimed at finding ways to reduce healthcare spending and empower patients with information.

While the Internet has made it easier for consumers to go online and compare prices for all kinds of products, Alexander complained that the cost of healthcare has remained a “black box,” the contents of which remain a mystery to patients.

“Because Americans themselves are footing more of their healthcare bills, more are showing an interest in shopping around,” said Alexander. “We can improve what information is easily available about the costs and quality of healthcare, so patients can make their best healthcare decisions for their families, themselves and their wallets. Without better information, healthcare stays in that black box, making it hard for Americans to be good consumers, make good decisions and pay reasonable amounts for necessary healthcare.”

Also See: Healthcare organizations make slow progress on price transparency

Bill Kampine, co-founder and senior vice president of analytics at Healthcare Bluebook, which provides employers and consumers with transparency tools, told lawmakers that hidden price and quality variability have a significant impact on both patient health and affordability.

“Based on our analysis of commercial healthcare claims data, when consumers have the tools to shop for care, compare providers on cost and quality, and choose better value in-network providers, both consumers and employer plan sponsors can save 50 percent of the costs on these shoppable services,” testified Kampine, who noted that in the commercial insurance market alone this would return $250 billion back to the economy.

According to Kampine, consumers who shop for their care before receiving treatment are two to three times more likely to select a cost-effective provider than those who do not shop, save an average of $1,500 on imaging and diagnostics, $2,000 to $5,000 on outpatient procedures, and as much as $8,000 or more on inpatient procedures.

Ty Tippets, administrator for the St. George (Utah) Surgical Center, told the Senate committee that over the past five years, his organization has offered upfront pricing on its website for more than 220 procedures.

“Since posting prices online, our patient base has expanded,” Tippets testified. “For example, we recently served a patient from Montana who needed a knee ACL reconstruction. After finding our price online, he called to make sure we did not have a typo. The best price he found in Montana was $30,000, just for the hospital fee. Our listed price, which is fully bundled and includes doctor fees, facility fees and anesthesia, is $6,335. We routinely see 60 percent to 80 percent in savings—sometimes higher— over other settings for the same procedures.”

To further price and quality transparency, Kampine recommended that the Senate committee increase access to detailed Medicare data.

“Broad access to detailed encounter level data for physician office and outpatient surgeries, in both the hospital outpatient department and ambulatory surgery center settings, is deficient,” he testified. “Greater access to detailed data that allows comparison of quality outcomes for outpatient services, specifically the HOPD and ASC settings, would improve transparency of provider cost and quality for consumers.”

Leah Binder, president and CEO of The Leapfrog Group, a not-for-profit organization representing employers and other purchasers of health benefits, told the Senate committee that her organization has been calling for data transparency when it comes to the safety, quality and affordability of healthcare for the past 18 years.

“Price transparency is never enough,” testified Binder, who said Leapfrog is one of the few organizations that both collects and publicly reports hospital safety and quality data on a national level. “It will backfire if it is only price transparency. That’s because bad care is never a bargain and—unfortunately—it is possible to encounter bad care in this country. And, in fact, errors and accidents in hospitals—safety problems—are considered the third leading causing of death in this country, so it’s actually quite common.”

While a medical procedure may be offered at a good price, she contends that “it is no bargain if the patient suffers from an infection or medical error, the procedure wasn’t needed in the first place, or the procedure is poorly performed and has to be corrected.”

According to Binder, the National Academy of Medicine estimates that one-third of health spending is wasted mostly on one of those three issues.

“For example, a hospital with a high risk-adjusted Cesarean section rate will cost more even if the price of each procedure seems low,” she said in her testimony. “Price transparency in this case should be coupled with transparency about C-section rates and other maternity quality data. Leapfrog monitors a standardized rate of C-sections and finds substantial variation, where one hospital may have twice the rate of another down the street without a medical reason.”

Binder noted that “variation applies for virtually every service provided in healthcare, even including services many believe are uniform in practice, such as MRIs,” adding that “a misdiagnosis on an MRI will lead to unneeded or even unsafe treatments down the line, so the actual cost far exceeds whatever price the MRI provider charged.”

Also See: Healthcare cost estimators aim to show consumers price disparities

Nancy Giunto, executive director of Seattle’s Washington Health Alliance, a not-for-profit organization that shares data on healthcare quality and value in the state, told the Senate committee that trusted and objective information is often not readily available in one place that is easily accessible to consumers.

Just as challenging for consumers is finding data that is “easily understandable” in a format that compares healthcare providers, according to Giunto. She noted that many of the consumer-facing tools that have been developed—such as health plan cost calculators and price comparison tools available through all-payer claims databases—have not had enough uptake.

To help increase use of these tools, Giunto recommended “prioritizing health literacy” and eliminating medical jargon so that objective, easily understood information is available on demand. “Don’t assume consumers or employers understand our very complex system.”

At the same time, she made the case that “data alone does not change behavior, transforming data to action requires stakeholder involvement and commitment and accountability.”

Ultimately, Giunto pointed out that healthcare transparency must include all aspects of value including cost, quality and patient experience. “Cost transparency is very important but it’s not enough,” she concluded. “We must be able to look at costs and understand what we get for it.”

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