Price Transparency Strategy Needs Improvement

Marcia Frellick

April 05, 2018

Although patients support healthcare price shopping in theory, few are doing it, dampening hopes that price transparency alone will drive down escalating healthcare costs, say authors of a health policy report published online April 4 in the New England Journal of Medicine.

Ateev Mehrotra, MD, MPH, from Harvard Medical School, Boston, Massachusetts, and colleagues note that previous research has shown only 1% to 12% of patients who were offered transparency tools online or through an app used them. Those who did use them rarely did so before they got care.

Patients like the idea and do not seem fearful that lower prices will mean lower quality, the authors say. But rather than shopping for better-value care as they navigate increasingly higher-deductible plans, consumers are more commonly deciding whether to have the care at all.

The authors spell out some of the barriers to price shopping and suggest that some other reforms, namely, tiered networks and reference pricing, may be more successful.

Jeffrey T. Kullgren, MD, assistant professor at University of Michigan Medical School and the Institute for Healthcare Policy and Innovation in Ann Arbor, told Medscape Medical News that before giving up on price transparency and seeking better strategies, consumers need to be better trained on how to compare healthcare prices and how to think of shopping for healthcare in the same way they shop for other goods.

Barriers to Price Shopping

The researchers say that among the top barriers to uptake of price shopping are that patients are reluctant to change from the provider they know, and many want to stay in the same health system because they feel it will better coordinate their care.

Also, high-deductible plans often offer little incentive to look for lower prices because many patients know their yearly spending will be higher than their deductible, they add.

Valuable comparisons depend on common language around costs, and that has varied among transparency initiatives regarding whether they include out-of-pocket or total costs, for instance.

Reporting out-of-pocket costs comes with its own set of difficulties.

To calculate them accurately, "one must have a provider's prices specific to an individual health insurer and real-time access to both the benefit design of the insurer and the patient's health spending to date in the year," the authors explain.

With surgical procedures, some estimates may include physician reimbursement or the hospital fee; others include both.

Overall, many patients still are unaware they can compare prices, and if they are aware, they often have too little information to compare them.

Kullgren says barriers also include that consumers are missing the information with listed prices of care that would tell them what quality they could expect with a certain provider, such as, in the case of primary care, whether they would easily be able to get an appointment or how good the provider is in managing chronic conditions.

"That kind of information has often not been reported with the price information," he said. "That's one reason the response from consumers has been tepid."

Consumers Do Not Think of Healthcare as a Commodity

Another major factor, Kullgren said, is that consumers need to be trained to think of healthcare as a consumer good and shop for it the way they would comb the internet for the best price and best shipping terms for something like a pair of shoes.

That will take showing consumers how to use the price transparency tools and carving out a place in the continuum of care for conversations about comparisons. In the typical primary care model, a physician completes an exam, prints out follow-up instructions, and may refer a patient to radiology or a dermatologist or dietitian. However, there is no built-in space for a conversation noting that the person has a high deductible they have not yet met and how can they get a lower price or perhaps put off the procedure until they have met the deductible, for instance, he said.

High-deductible health plans were thought to be an answer to getting consumers to shop for prices, but they have not worked that way, Mehrotra and colleagues say.

They write, "Patients who are enrolled in high-deductible options are only slightly more likely than those enrolled in traditional plans to consider a change to another healthcare professional (11% vs. 10%) or to compare out-of-pocket costs across providers (4% vs. 3%)."

Same Procedure, Huge Price Differences

Still, widely swinging price ranges show the potential savings to the healthcare system in getting better-value services. It is why governments and health systems have made such investments in transparency's success and why 28 states have passed legislation around transparency, the authors say.

"The median price of magnetic resonance imaging...of the spine in Massachusetts ranges from $500 to $1,670. In Los Angeles and the San Francisco Bay Area, a screening mammogram is priced anywhere from $129 to $694, and the cost of insertion of an intrauterine device ranges from $440 to $1,230," they note.

Some Models Have Greater Promise

The authors highlight two reforms they say may have the greatest potential to reduce spending. One is reference pricing. In this model, patients pay the difference between a reference price, typically set by an employer, and the provider's price. The hope is that patients will focus more on which provider to use than whether to seek care at all.

"Evaluations of reference-pricing strategies for joint-replacement surgery, colonoscopy, and prescription drugs have shown reductions in spending between 14% and 21%," the authors write. Much of that is from patients finding providers who charge below the reference price, but some results from higher prices coming down to be competitive, they explain.

Although reference pricing has been shown to be effective, few employers offer it, largely because it is complex to administer and patients must be educated about which providers are above or below the reference points, the authors say.

The other approach is tiered-provider networks. Provider tiering ranks healthcare facilities and providers by cost. Lower-cost providers are preferred, and patients pay less if they select them.

Research has shown these can be effective, the authors write, saying, "In one study, the tiering of health systems decreased overall spending by approximately 5%."

Kullgren says all these options should be on the table, but it is not time to give up on price transparency but, rather, to teach consumers better how to use it.

Tiered networks and reference pricing are some scalable solutions that can help large populations make better decisions and also influence better provider behavior, he said.

The downside is these solutions depend on consumers understanding their insurance and making sound decisions.

"We know from a host of other literature that people don't understand well their health insurance benefits," Kullgren says. "Even if policymakers were to pursue solely some of the options laid out in the paper, we still need to do better in helping people understand their insurance benefits and help them use their understanding to make good choices."

Mehrotra reports receiving grants from CalPERS, grants from Laura and John Arnold Foundation, grants from the National Institutes of Health, and grants from the Robert Wood Johnson Foundation outside the submitted work. The remaining authors and Kullgren have disclosed no relevant financial relationships.

N Engl J Med. Published online April 4, 2018. Abstract

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