By Lola Butcher

For the time-being, most patients are not weighing cost heavily into their healthcare purchasing decisions, but this may change now that such information is becoming more widely available. Rather than being left behind in this transparency evolution, hospitals should aim to make their prices available.

Ever since consumer-directed health plans emerged, payers and policymakers have been advocating for a transparent marketplace in which patients can make purchasing decisions based on cost and quality data. For many patients, that day has arrived. Insurers, state governments, and vendors are introducing online tools and other services that allow patients to easily compare costs of hospitals and physicians.

Much of the cost information being provided is pulled from claims data. A growing number of states and not-for-profit organizations, such as FAIR Health, have posted public databases that allow cost comparisons of common procedures/services, such as arthroscopic knee surgery. More sophisticated tools provide patients with tailored estimates that drill down into an individual's insurance plan, deductible, copays, etc.

This is still the experimentation stage of the healthcare transparency movement, says HFMA's Richard L. Gundling, FHFMA, CMA, vice president of healthcare financial practices. "It's evolving. Payers, providers, and patients are experimenting with information to see what will be used in decision making."

See related article: Lessons Learned from Hospital Transparency Pioneers 

Payers Encourage Shopping

A number of health plans are experimenting with various approaches to encourage members to use cost information in choosing providers.

Online tools. Cigna recently launched an online service that allows health plan members to compare physicians and hospitals based on price for more than 200 medical procedures. The Cigna site also provides quality information on providers.

View Cigna screenshots  

The Cigna service allows health plan members to assess medical costs, including specialist, facility, and ancillary fees. "You can look up a knee arthroscopy by doctor and get a precise estimate for what you will pay to get care through that doctor-that includes not just the doctor's fee, but also related services such as diagnostics and anesthesia, as well as hospital or facility costs," says Jim Nastri, Cigna's vice president for cost and quality transparency.

The service takes into account the patient's current deductible status and coinsurance responsibility and provides an estimate of the patient's payment responsibility. It also assesses the balance in the patient's health spending accounts.

The cost information is pulled from medical claims in the past year. Cigna claims that their tool has an accuracy rate of within 10 percent of the patient's cost 90 percent of the time.

Incentives for shopping. Harvard Pilgrim Health Care, with members in Massachusetts and New Hampshire, is providing financial incentives for members who search out lower-cost options for elective outpatient procedures and diagnostic tests. Members can call the insurer's SaveOn program before choosing a provider for a colonoscopy, CT scan, mammogram, or other service. A SaveOn nurse helps members identify the low-cost providers, helps with any paperwork needed to use those providers, and makes scheduling changes, if needed. In addition to lower out-of-pocket costs, members receive up to a $75 reward for using SaveOn, depending on the cost savings achieved.

Some Anthem Blue Cross and Blue Shield members in three states have access to a similar service called Compass SmartShopper. Members can find low-cost providers for certain diagnostic and elective services on a website or through a telephone call. Patients who choose a less-expensive provider than their physicians recommended will receive a check for between $50 and $200, depending on the savings.

What It Means for Hospitals

Although the information that allows for comparison shopping is becoming available,
most patients are not yet choosing providers based on cost, says Gundling. Traditionally, most patients have relied heavily on so-called "trusted advisors" who recommend physicians and hospitals-and that continues to be an important influence on patient choices.

"That $100 or $50 difference in costs doesn't make as much difference as if your best friend had good results with a certain provider for the same procedure," says Gundling. "Patients think, 'I'll see that doctor, too.'"

A recent Health Affairs study backs up Gundling's assertion. Researchers cited several reasons for why patients are not accessing public cost reports ("Consumers' and Providers' Responses to Public Cost Reports, and How to Raise the Likelihood of Achieving Desired Results," Health Affairs, vol. 31, no. 4, April 2012):

  • Most patients have little or no out-of-pocket expenses for healthcare services-so they have no incentive to choose providers based on cost.
    • Patients who have hefty deductible or coinsurance responsibilities often reach their annual out-of-pocket spending cap if they have a major healthcare problem.
  • Out-of-pocket cost information is the only thing that most consumers find relevant, and that is not yet available to most patients.
  • Consumers often do not understand cost measures and may not trust reports.
    • For example, consumers might believe a longer hospital length of stay (LOS) is a positive factor and, thus, distrust any report that suggests a shorter average LOS is better.
  • Many consumers believe that higher-cost providers are higher-quality providers.

Gundling compares healthcare purchasing decisions to the ways shoppers use a different value equation at Target than at Nordstrom. "Target and Nordstrom could offer the same silk scarf from the same manufacturer, but when you go to Nordstrom, you are willing to pay more for it-and you feel like you got better quality because you paid more for it," he says.

All of this likely explains why hospitals have not been at the forefront of cost transparency: Their patients are not demanding the information.

Patients as Consumers

However, while most patients are not yet using cost to make high-value choices, they are gradually becoming more sophisticated consumers. "A couple years ago, not that many people were making distinctions between hospitals in terms of quality," says Joe Mondy, Cigna's director of public relations. "It was expected that quality was uniform or the quality for one type of procedure would be indicative of the hospital's quality for all types of procedures."

That is no longer the case. In developing its online tool, Cigna conducted focus group research that showed patients were very interested in quality scores when they were considering serious procedures that involved an inpatient stay, says Marie Jinks, Cigna's director of eBusiness. "When it came to a procedure that required an overnight hospital stay, patients really wanted to focus on the quality of both the doctor and the hospital where that particular procedure was performed," she says.

Based on that research, Cigna designed its online tool so that patients can see quality and cost ratings of physicians-and the various hospitals where those physicians work.

The First Step

Gundling encourages hospital financial leaders to post cost or pricing information. Hospitals should encourage patients to become fully educated on their health plan benefits and what they can expect to pay for healthcare services.

Hospitals can help by providing information about a patient's expected financial obligations in writing-with appropriate caveats about what the pricing estimate does and does not include. "The first step is to provide something," he says. "If you can't provide any information, people are very distrustful."

Focus on making pricing information as simple as possible, Gundling continues, which will benefit patients as well as their employers and insurers. That is its own competitive advantage in the marketplace, he says.

Finally, figure out the best way to communicate the value that your health system delivers. "We all go shopping, and we know that value means getting the highest quality for the best price," says Gundling. "But as patients, we haven't figured out what we want yet."

Lola Butcher is a freelance writer and editor based in Missouri.

See related article: Lessons Learned from Hospital Transparency Pioneers 

Publication Date: Thursday, May 17, 2012