Two trends are forcing greater consumerism and price sensitivity in health care. One is that Medicare, Medicaid, and some commercial insurance carriers, are starting to show patients and employers the prices facilities charge for common procedures. Another factor is that patients with high-deductible health and account-based plans have an incentive to consider cost when choosing services and providers.
How consumer-savvy are patients? They can search for providers by quality measures on a number of websites including HealthGrades.com and QualityCheck.org. But it’s not as easy to find out what providers charge for, say, an MRI or sinus surgery and compare prices to quality measures.
There are several little-understood truths about price that would surprise most patients. (For references, see some representative reports from the National Institute for Health Care Reform and Kaiser Health News.)
Truth #1. Not all providers within a network charge similar prices for the same procedure. Charges for the same procedure performed on similar patients can vary from lowest to highest by 300 – 500 percent.
Truth #2. The greatest variation in price is due to facility charges, not physician charges.
Truth #3. The fair price for a procedure is often less than most providers within a network will charge.
Truth #4. Higher price does not mean better quality.
Surprised? Patients are – or will be as prices become more transparent. Eventually they may realize they don’t have to change doctors in order to get a better price. They just have to request a different site of service.
I visited the Blue Cross Blue Shield National Doctor and Hospital Finder website to see whether I could compare providers by price. The national site lists lower-cost alternatives to the emergency room for common symptoms such as animal bites and mild asthma. But it didn’t have any price or quality data on providers in my area. Neither did my state BCBS website.
If my experience is typical, there is still progress to make before patients like me have visibility into the true price of health care. To date, price transparency is a privilege won by those with negotiating power, namely payers and large employers.
As payers and employers begin to share price information with patients, hospitals and health systems would be wise to figure out how to measure, improve, and promote their value in the marketplace. Specifically, how do they compare on price and quality with competing providers? Which services lines are good comparative values? What is the true cost of services? How is value communicated to patients and employers?
There are several things hospitals and health systems can do to prepare for consumer scrutiny and shift to a value-based business model.
- Measure how price is dispersed across service lines, physicians, and facilities.
- Pinpoint excess costs. One way to identify excess is to look for large or unexpected variations in price, readmission rates, complications, unnecessary services, and treatment in the wrong setting (e.g., avoidable ED visits).
- Know the fair market price for services. Also know where prices vary depending on patient severity of illness – and make sure you communicate this variable to patients and employers.
- Reduce complex calculations and tools to the information that matters most. It isn’t a simple thing to calculate price, quality, or value. But there are straightforward measures to communicate quality and value simply—more than 30 states use the 3M APR DRG methodology for comparative reporting of hospital quality, for example.
- Integrate quality and value information into the hospital workflow. It’s not enough to report how quality outcomes compare with the price passed along to patients and payers. In the course of their jobs, physicians, case managers, financial managers, and others need to be able to respond to the information in ways that lower prices and increase value.
If you haven’t yet browsed online price transparency tools, you might want to see where patients go for information. Here are some places to start:
- OpsCost.com– Search by city and service for average price and reimbursed amount; based on Medicare data from CMS on prices for the 100 most common procedures at over 3,300 hospitals
- HospitalCostCompare.com – Search by hospital, diagnosis, or location to see average charges and the markup over average Medicare reimbursement
- Sites sponsored by state hospital associations, such as WAHospitalPricing.org, and those using the PricePoint System (such as ORPricePoint.org , TXPricePoint.org, WIPricePoint.org, and WyoPricePoint.com)
- ConsumerHealthRatings.com – Select the option to compare cost, prices, health insurance, and medical coverage. Then compare health care prices among providers. Here is a hyperlink to the page to compare prices by care settings.
- FairHealthConsumer.org – Estimate dental and medical costs by procedure and location. One limitation is that you have to select the procedure by CPT code and procedure description, not a simple thing for most patients to do.
Kristine Daynes is marketing manager for payer and regulatory markets at 3M Health Information Systems.