Healthcare cost estimators aim to show consumers price disparities

David Newman, executive director of the Health Care Cost Institute, does not believe that patients will ever shop for healthcare like they shop for cars, for example.

“On Saturday morning, I go to before my wife wakes up to price two red Ferraris because I dream about owning a red Ferrari,” says Newman “I don't wake up on Saturday morning to see the price of skin cancer. I don't get the same psychological gratification about looking up pricing for healthcare services.”

Many patients are too sick or overwhelmed to shop, he adds. And, in some cases, shopping conflicts with other critical goals of health reform. Take for instance, the very sick who account for about half of medical spending. “Those people should never be shopping. Those people should be in integrated delivery systems or medical homes where somebody is coordinating their care. You don't want them shopping for a discount on blood draws and hoping their results end up in their medical record.”

Also See: Healthcare organizations make slow progress on price transparency

The nonprofit HCCI has invested considerable resources in developing a robust price estimate tool called Guroo. The site provides national and regional price averages and ranges for approximately 300 common care bundles, or sets of services, from allergy specialist visits to weight loss surgery.

The tool’s goals are twofold: One is to be a source of quality price information in a murky sea of information. The other is to give researchers and large healthcare purchasers the ammunition they need to identify and attack unjustified price disparities.

Guroo is one of a crop of public-facing healthcare shopping tools, which include Healthcare Blue Book and Yahoo. The federal government has also gotten into the act, sharing average Medicare payments for select services via Hospital Compare. In addition, most states have launched websites, or all-payer claims databases, as mandated by state law.

The quality of these sites vary. For instance, a 2016 report card gave 43 states an “F” for their sites. Only three states received an “A”: Colorado, Maine and New Hampshire.

The report card, co-developed by the Catalyst for Healthcare Payment and the Health Care Incentives Improvement Institute, points to four criteria that public-facing tools should employ: a rich data source, meaningful price information, prices on a range of outpatient and inpatient services, and an accessible web site.

Robust data
There are three ways for pricing tools to estimate healthcare prices, Newman says. “The first way is what I refer to as pseudo-adjudication. You send a dummy claim through the system, and it spits out a price. That's the price right today at this moment.”

The second way is to use the negotiated contract prices between insurers and providers. Typically, only health plans and providers are privy to these price sheets. This data forms the basis of many pricing estimates given by health plans.

The third way is to use historic claims, which is what Guroo and many other public-facing tools use. “Insurers don't have to standardize on the front end how they construct their price information,” Newman says. “But there are a lot of standards associated with claims and claims processing that allow you to get standardized information on the back end.”

Guroo currently has one of the largest databases of historic claims data, employing 22 billion claim lines from private and public payers.

Every time a patient sees the healthcare provider and the provider bills the patient, that's a claim line, Newman explains. “All of the claims have the actual amount paid by the insurer and the amount attributable to the insured for their deductible, co-pay or co-insurance.”

To ensure historic data is current, HCCI regularly adjusts for inflation and procedure code changes.

Accessible, meaningful information
Guroo shares prices on care bundles, or sets of services. In comparison, other consumer websites give patients prices related to CPT codes.

“Consumers don't shop for healthcare by CPT codes,” Newman says. “They don't go into the doctor and say, ‘Oh I'd like a 99216 today.’ They say, ‘I'm here for an office visit.’ Well, an office visit typically involves a bunch of codes.”

A range of common services
Determining what should be included in each care bundle is tricky, Newman says. “You need to have the intellectual property to say, ‘What’s the most common episode that a consumer is likely to face?’ Some people go in for knee surgery and have five physical therapy visits afterwards. But my 19-year-old son gets two physical therapy visits after knee surgery for a sports injury, and he’s up and playing rugby again.”

HCCI uses algorithms developed by United Healthcare for its members to estimate the most common cost of care bundles. “United Healthcare had a team of doctors and nurses develop the intellectual property on how to code the claims to create the care bundles that you see on Guroo.”

Newman refers to the prices on Guroo as reference prices. “It is a clue to what your costs are likely to be. There's no doubt that the hemophiliac’s price after getting a knee surgery is going to be much more.”

Because the prices on Guroo are not personalized for each patient’s specific situation, they are not the best resource for patients who want to know what their actual out-of-pocket spend will be, says Newman. Insured patients should turn to their insurers for personalized price estimates, he advises. This is also what the Healthcare Financial Management Association recommends in a report from the association’s Price Transparency Task Force.

Guroo is a good place for patients without insurance to go for a general sense of healthcare prices, as well as patients whose insurers don't have a good price estimate tool, Newman says. The site is also a source of rich data for policy makers, researchers, and major purchasers that want to drill into the geographic variation in healthcare pricing.

Ultimately, Newman hopes insurers and other major healthcare purchasers will use their market leverage to reduce unjustified price differences. He points to a 2016 Health Affairs article that sums up variations identified by HCCI’s pricing tool Guroo. In one example, a knee replacement costs $17,122 more in Palm Bay, Fla., than in Miami.

“Those who suggest we should have more activated consumers suggest that consumers in Palm Bay drive the 180 miles to Miami to save money,” he says. “The economist view is we want market pressures and incentives to bring the cost in Palm Bay down close to the cost in Miami, taking into account legitimate reasons for price differences.”

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