Seeing Through Transparency

Seeing Through Transparency

Companies must give employees the right tools so that both can benefit from health care transparency.

When it comes to buying things, we make three assumptions. First, price equals quality—the higher the price, the better the quality, whether it’s clothes, cars or pizza. Second, when we ask for price and quality information, we get it. How much is that suit? What are the safety features of that car? How much more for extra sausage? And third, we use that information on price and quality to make an informed decision based on what’s most important to us.

At present, none of those things is true about buying health care services.

Regarding the first, studies consistently reveal wide variations in health care prices and quality, with no correlation between the two. For example, a study that appeared recently in the journal Health Affairs analyzed more than 24,000 stays at 110 hospitals in 10 metropolitan markets. It found that hospitals that charged more for care performed worse than cheaper hospitals on specific outcome measures such as surgical deaths and complications.

Regarding the second, obtaining price and quality information about a specific hospital, doctor or procedure before a person needs care is tough. Last year, the Journal of the American Medical Association published a critique by researchers of 62 health care price websites hosted by a state government agency or a statewide provider organization. They found most of the sites lacking in useful information for patients.

As for the third, even when price and quality information is available, there’s no guarantee someone will use it to make an informed decision about where to get care. Word of mouth and acceptance of insurance continue to be the two primary ways people pick a doctor, as demonstrated by a survey released last fall by the American Osteopathic Association.

Despite all that, the business community has bought into the theory that it will reduce its health care expenses by shifting the financial risk for care to employees through high-deductible health plans (HDHPs). By making employees assume more financial risk, they will become better shoppers for health care services because their own money is on the line. Employees will spend less, leading to smaller claims and, ideally, lower premium increases for employers down the line, along with the up-front savings from shifting to high-deductible health plans from more traditional types of health insurance plans.

The most recent annual report on employer health benefits from the Kaiser Family Foundation and the Health Research & Education Trust of the American Hospital Association reports that 23 percent of employers that provide health benefits to workers offered them a HDHP option in 2013, with 20 percent of all workers with coverage enrolled in a HDHP that year. Both figures are about double what they were four years earlier, and both figures are expected to double again in a few years, as the belief that they can control costs continues to grow.

If theory and belief are to become fact and certainty, employers must help employees become effective health care shoppers. Here are three strategies employers should deploy to turn their workforce into educated health care consumers.

Make price and quality data available. It’s there if you know where to look. Medicare, for example, last year made hospital charges for the 100 most-common hospital stays publicly available (see here). And earlier this year, Medicare decided to make physician charges available on a case-by-case request. Medicare also makes quality data available through its Hospital Compare website. There, prospective patients can find the rates of readmission, complications, deaths and infections for every Medicare-certified hospital in the country.

A number of health insurers also are making price and quality information directly available to employers, as it’s in their financial best interest to have enrollees seek the best care at the lowest possible price. Many hospitals, doctors and other health care providers voluntarily are posting price and quality information on their own websites as the demand for performance transparency grows. And in some states with reluctant volunteers, new laws, such as the one that took effect in Massachusetts this year, require hospitals and doctors to cough up price information within two days of a patient’s request.

Put technology in their hands. The number of online tools, mobile applications and consulting services designed to help patients comparison-shop for health care services is exploding. Market research firm Aite Group projects that the annual health care transparency business will more than triple to $3.1 billion by 2016 from $1 billion in 2013.

Tools range from online cost calculators available to enrollees of health insurers to mobile apps loaded with provider-specific price information customizable by location. A report released last fall by the IMS Institute for Healthcare Informatics identified 931 health care apps that help patients select a hospital, physician or other provider. More recently, and specifically geared toward transparency, the Robert Wood Johnson Foundation awarded $120,000 to the winners of its “hospital price transparency challenge” for apps, tools and data visualizations for consumers. (Learn more about those products here.)

Reward them for good shopping. It’s the wise employer that would create financial incentives for employees to become aggressive health care consumers. One way is offering benefits that encourage employees to seek out and use lower-cost alternatives to traditional suppliers of health care goods and services. The results of a generic drug comparison project by Consumer Reports released last spring found a 447 percent difference between what pharmacies charged for five common generic prescriptions. Employers could make information like that available to their workers and devise incentives that steer them to pharmacies with the lowest prices.

Employers already are doing that with retail clinics, which typically charge less for office visits than do physicians. According to the KFF/HRET report, 56 percent of employers have benefits plans that cover retail clinic visits, and 17 percent offer financial incentives to go to a retail clinic rather than a physician’s office for care.

0414-ExplanationBenefits_S01.jpgSources: KFF/HRET; Mercer

David Burda (, is editorial director, health care strategies, for MSP-C, where he serves as the chief health care content strategist and health care subject matter expert.

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