Is transparency the most powerful tool to improve health care?

At the second National Summit on Health Care Price, Cost, and Quality Transparency (the Summit), former Senate Majority Leader Bill Frist (R-Tenn) said, “There is no more powerful concept than transparency in pricing, value, and services.” The Robert Wood Johnson Foundation sponsored the Summit, which was held from March 16 through March 18, 2015. Both government agencies and private organizations made some information available about cost and quality for hospital and nursing facility services, but the information may not be as complete or as current as a user would hope.

Transparency in pricing

Because physicians, hospitals, and outpatient facilities do not make their charges public, the public is not aware of the tremendous variation in pricing. Elizabeth Rosenthal, a reporter for the New York Times, told the conference that the charges for services could vary by a factor of four or more even in the same community. The same procedures often cost far less in other countries than in the United States. According to Rosenthal, the average price of a screening colonoscopy without anesthesia in the United States was $1,185, but could run as high as $8,600, while the cost in Switzerland was $655.

Several speakers emphasized that the market for health care is unlike any other market in our economy for several reasons. Before making a decision to undergo a joint replacement, for example, the purchaser does not know who is involved in, and will bill for, some part of the procedure, what items are included, or the price of the individual components of the procedure, let alone, the total cost of the surgery and post-operative care. As a result, patients may be surprised by bills from a physician they never met and unexpected charges for supplies or use of the facility. One speaker told attendees about a patient who carefully checked to be sure his surgeon, facility and anesthesiologist all were members of his insurance plan’s network, but was billed $117,000 for the services of an assistant at surgery.

Transparency and quality

All speakers agreed that the value of a service depends both on the price and on quality. Yet, there is no consensus on the definition of high quality care. The currency and completeness of the available information varies. A nursing home may get a five-star rating on Nursing Home Compare but be deficient in an area that was not included in the reporting.

Stakeholders’ needs

The needs of major payers such as health plans and self-insured employers for cost or price information are very different from those of patients. Large organizations that are paying the expenses have access to prices, and they have bargaining power both to influence costs and to reward quality. For example, self-insured employers like Safeway use their knowledge and market power to set reference prices for common procedures rather than paying the charges that are customary in each community in a service area. With referenced pricing, the employee knows in advance what the employer’s plan will pay for a procedure and can be directed to providers who will accept the price. Some large payers make agreements with facilities they designate as Centers of Excellence based on the facilities’ quality of care. They agree to refer patients who need certain services to the designated facilities and may even pay the beneficiaries’ travel costs; the facility charges the employer or payer an agreed price.

Patients’ needs for price transparency involve both the cost of insurance and the cost sharing that they will have to pay for services. Large employers and public and private health insurance exchanges make this information available with varying levels of clarity. One approach used by both insurance exchanges and employers is to set minimum coverage standards for benefit plans. Employees or consumers use information provided by the employer or exchange to determine whether their preferred physicians are in the plan’s network and the medications they take are on the formulary. The employer or exchange may provide a decision tool such as a calculator to help the consumer determine the total cost of coverage, i.e., premiums, deductibles, and copayments. Uninsured patients will need transparency in the form of information from the provider on assistance programs that might be available.

Patients’ views of quality

Several speakers noted that the kinds of quality information reported on sites such as Hospital Compare are not necessarily easy to understand or relevant to patients. For example, the percentage of emergency department patients who receive a particular intervention may not be helpful information to a patient considering where to undergo a joint replacement. The research on patients’ use of quality information showed that they are interested in outcomes and patient experience. They are less interested in the frequency of surgical site infections than in the length of time they will be in rehabilitation and whether the surgery brought the mobility they expected. One study showed that patients responded well to the style of reporting used by the Leapfrog Group in its hospital safety scores. Specifically, the format includes a letter grade with basic information, combined with the option to drill down to more granular information.

Transparency and health reform

Many of the speakers believed that the need for transparency in both quality and pricing of health care would drive a transition to bundled payments for episodes of care and expansion of accountable care organizations (ACOs). These reforms would involve continuation of the gradual elimination of the fee-for-service payment system, replacing it with incentive payments that reward organizations for keeping patients healthy by minimizing the need for hospitalizations and the errors that lead to increased costs.