Augmenting Price Transparency With New Strategies

Showing patients how costs vary by provider and facility may not be enough to improve value across the board. But coupling new benefit and network designs with enhanced price transparency tools has the potential to change consumer behavior.

Although they have proliferated in recent years, price transparency tools may not transform consumer behavior sufficiently to tame healthcare spending on their own.

A study published in JAMA found that offering a price transparency tool to employees at two large companies did not lower outpatient spending. ^a Other research has linked price transparency to lower claims payments for some services, but only for the small slice of the member population that used the tool. ^b

One issue is that patients may not feel comfortable overriding their physicians’ advice to see a specific provider, says JAMA study co-author Ateev Mehrotra, MD, associate professor, Department of Health Care Policy, Harvard Medical School, Boston.

“One consistent theme in interviews with people who were offered a price transparency tool is this concern that, ‘My doctor told me to see that cardiologist,’” Mehrotra says. “‘I am not going to see another cardiologist even if he is $60 cheaper.’” Patients also are concerned that seeing a specialist outside of their physician’s network will compromise information sharing between the providers, he says.

Low utilization is another issue, even though surveys suggest patients are interested in price transparency tools. The problem is that many patients find the tools difficult to use. Forgotten usernames and passwords for member portals also create barriers to utilization, Mehrotra (pictured at right) says.

Yet the key reason why price transparency alone has not turned most healthcare consumers into smart shoppers is benefit design, Mehrotra says.

Piloting Reference Pricing

James C. Robinson, PhD, MPH, the Leonard D. Schaeffer Professor of Health Economics at the University of California School of Public Health in Berkeley, Calif., believes reference-based benefit design, also known as reference pricing, can promote greater cost consciousness among healthcare consumers. Reference prices set a maximum allowable cost per service, with the patient assuming responsibility for the difference between what the plan will play and what the provider charges.

The issue with traditional, deductible-centered coverage is that most consumers are not paying the “last dollar,” Robinson says. “Reference pricing creates an incentive for people to care.”

Reference-based benefit designs provide good coverage if patients choose lower-cost providers, Robinson says, making them a better option than high-deductible plans, which may have deductibles of $5,000 or more. Reference pricing also can reduce spending. Robinson co-authored a study in Health Affairs that found reference pricing for cataract surgery saved the California Public Employees Retirement System (CalPERS) $1.3 million over two years. ^c Reference pricing also helped CalPERS save $2.8 million on orthopedic surgery and $7 million on colonoscopies in the first two years of implementation, according to two other studies. ^d

Reference pricing does not constrain consumer choice as much as narrow networks, which are also gaining popularity with some employers, Robinson (pictured at right) says. Specifically, reference pricing may allow patients who like to price-shop “in the middle of the road” to pick healthcare options that suit them.

Despite these benefits, referencing pricing is still a curiosity in the employer community, Robinson says, with many employers betting instead on high-deductible health plans. “The advantage of high-deductible plans is that they are easy, and health plans can shift more risk to members without making significant administrative changes,” he says. “Reference prices are more complicated because you do have to determine what is the reference-price limit for each procedure or test, which may vary by market.” Reference prices also require outreach efforts to help members understand the new benefit design.

Aetna, headquartered in Hartford, Conn., has offered reference pricing since 2013. The insurer sets maximum allowable amounts that apply only to the facility portion of the charge (not to professional services) for 11 high-cost procedures.

Charity Boutte, Aetna’s director and head of core transparency products, says plan sponsors can realize annual savings of approximately 30 percent by using reference pricing for these procedures. “The vast majority of members have utilized services below the maximum allowable amount,” she says.

Promoting Lower-Cost PCPs

During a time when consumerism is shaping health care, Mehrotra says, so is a counter trend: the push to improve care coordination. “Consumerism in health care is built on the idea that patients will shop for every service they get and go to the provider with the most value,” Mehrotra says. “At the same time, the industry is trying to enhance coordination of care through accountable care organizations [ACOs] and medical homes, which discourages people from getting care outside their ACO or medical home.” Mehrotra suggests that one way to reconcile these two forces may be by steering patients to choose lower-cost primary care physicians (PCPs).

Mehrotra coauthored a study in Health Affairs that found that total spending per year among patients who chose lower-priced PCPs was nearly $700 less than among patients who saw higher-priced PCPs, even though utilization was similar. ^e “Patients who went to the high-priced PCPs also received high-priced X-rays, lab tests, specialty visits, ED visits, etc., so there was an interesting multiplier effect,” he says.

The research suggests a simpler cost-saving strategy might focus on PCP choice. For example, a price transparency tool might show the difference in cost not just for the PCP visit but also for how much a patient would have to pay out of pocket for a bundle of services initiated by that PCP visit.

Contracting With Centers of Excellence

Another strategy that can help steer patients to higher-value providers is the concept of centers of excellence, says Emma Hoo, director, Pacific Business Group on Health, San Francisco. Designating centers of excellence allows patients to search among a short list of reputable providers that have already been vetted for value, thereby eliminating much of the legwork involved with typical price transparency tools.

She points to PBGH’s Employers Centers of Excellence Network (ECEN), which negotiates bundled payments with select providers across the country for total hip and knee replacements as well as spine and weight loss surgeries.

“By providing these centers of excellence, we pre-identify some of the providers to help the individual navigate through the service,” Hoo (pictured at right) says. “On the back end, we have established a bundled payment that brings together laboratory, imaging, professional, and inpatient services and created a coordinated experience for the member.”

Participating employers include Wal-Mart, Lowe’s, McKesson, and JetBlue. Early cost savings data have been positive. For example, Lowe’s has generated annual savings of $2 million from avoiding inappropriate joint and back surgery in instances when surgery would not have improved outcomes.

Still, these centers may have negative consequences, including decreasing access for minorities, Mehrotra says. ^f He also questions their effectiveness at improving quality and reducing costs over the long run.

Developing Next-Gen Tools

Experts believe that in addition to benefit and network designs, making improvements to transparency tools can help improve utilization and ultimately drive more consumers to shop for health care.

Simply making transparency tools easy to find and use can go a long way. “Employers have found higher levels of engagement by integrating the transparency tools into their member portals and tying it to the provider directory or wellness information,” Hoo says. Linking quality information, such as through CAqualityratings.org, also enhances utility.

For the past 10 years, Aetna has been enhancing its price transparency tools to make them more relevant and user-friendly. Today, the health plan’s core tool is its Member Payment Estimator, which allows members to compare out-of-pocket estimates for up to 10 providers at once for more than 650 medical services. To provide an estimate, the tool uses Aetna’s claims adjudication process and takes into account the actual provider rate and the terms of the member’s plan, including any deductibles and coinsurance, Boutte (pictured at right) says.

In September, Aetna added five-star patient reviews and ratings to the tool in partnership with DocSpot. In addition, a blue-star icon designates high-performing specialists who are part of Aetna’s Aexcel network based on volume, clinical performance, and efficiency standards. “We’re providing more and more context around those costs,” Boutte says.

Aetna plans to launch a new version of the tool this spring. As part of the redesign, members will see what they would pay out of pocket for an office visit listed next to the provider’s information when searching the provider directory. If they need costs for specific procedures, they can click a link to go to the Member Payment Estimator. Later this year, the tool also will show how costs of services differ at additional sites of care, including emergency departments and urgent care centers.

Based on a 2012 study, Aetna found that members who used the tool and then received care for the same service saved $170 out of pocket per care episode. Since the tool was introduced, its utilization has increased by between 7 and 169 percent year over year (click on the exhibit below).

Lessons Learned

Experts offer the following advice for health plans and provider organizations seeking to help patients make informed choices.

Match the strategy to the service and market. Robinson recently co-authored an article in Health Affairs that describes the conditions for successful implementation of reference pricing. ^g For example, reference prices work best with “shoppable,” non-emergency, discrete services, for which consumers have the time and ability to compare prices. This description applies to services such as magnetic resonance imaging (MRI), colonoscopies, lab tests, and even pharmaceuticals.

Reference prices also work best in “contestable” markets where consumer demand for low-priced services drives more competition.

Use direct outreach. “Instead of passively waiting for people to log on to a [price transparency] tool, plans should actively reach out to members to show them where they can save money,” Mehrotra says. He recommends that health plans enhance their prior-authorization process by offering concrete recommendations that detail how much a member would save by switching to a specific alternative provider.

One specialty benefit management company called members during the prior-authorization process to let them know about less costly MRI providers in their area. Among these patients, the cost per test dropped $220. Patients also were less likely to use hospital-based facilities, according to findings of a study by HealthCore researchers. ^h

Even outreach by mail can be effective—and may be more practical on a large-scale basis. One of PBGH’s members included a “Did You Know?” graphic on explanation-of-benefits forms that showed health plan beneficiaries how much money they could save by going with a lower-cost provider the next time they needed that service, Hoo says.

Provide cost information on the go. Boutte believes that both patients and providers are looking for better tools that allow them to have conversations about costs. For that reason, Aetna has made its price transparency tool available via mobile app. The health plan also has created a provider payment-estimator tool so physician offices can provide estimates at the point of care.

Thinking Like Consumers

Could price transparency strategies backfire and lead patients to choose higher-priced providers, assuming they will get better quality? That is not likely for most consumers, especially for high utilizers of healthcare services such as patients with chronic illnesses, Mehrotra says. Based on his research via patient interviews and surveys, he found that “most patients do not equate high price with high quality.”

As cost sharing continues to increase, Robinson says providers should view healthcare value from the patient’s perspective. “People need signals about where to save money, but whether they need price transparency is less clear,” he says. “They may not need to know that a procedure costs $500 at Hospital A versus $1,000 at Hospital B—they just want to know they should go to Hospital A for the best value.”

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Laura Ramos Hegwer is a freelance writer and editor based in Lake Bluff, Ill.

Interviewed for this article: Ateev Mehrotra, MD, associate professor, Department of Health Care Policy, Harvard Medical School, Boston; James C. Robinson, PhD, MPH, Leonard D. Schaeffer Professor of Health Economics, University of California School of Public Health, Berkeley, Calif.; Charity Boutte, director and head of core transparency products, Aetna, New York; Emma Hoo; director, Pacific Business Group on Health, San Francisco, Calif.

Footnotes

a. Desai, S., Hatfield, L.A., Hicks, A.L., et al., “Association Between Availability of a Price Transparency Tool and Outpatient Spending,” JAMA, May 3, 2016.

b. Whaley, C., Chafen, J.S., and Pinkard, S., “Association Between Availability of Health Service Prices and Payments for These Services,” JAMA, October 2014.

c. Robinson, J.C., Brown, T., and Whaley, C., “Reference-Based Benefit Design Changes Consumers’ Choices and Employers’ Payments for Ambulatory Surgery,” Health Affairs, March 2015.

d. Robinson, J.C., and Brown, T.T., “Increases in Consumer Cost Sharing Redirect Patient Volumes and Reduce Hospital Prices for Orthopedic Surgery,” Health Affairs, August 2013; and Robinson, J.C., Brown, T.T., Whaley, C. et al., “Association of Reference Payment for Colonoscopy With Consumer Choices, Insurer Spending, and Procedural Complications,” JAMA Internal Medicine, November 2015.

e. Mehrotra, A., Huckfeldt, P.J., Haviland, A.M., et al., “Patients Who Choose Primary Care Physicians Based on Low Office Visit Price Can Realize Broader Savings,” Health Affairs, December 2016.

f. Mehrotra, A., and Dimick, J.B., “Ensuring Excellence in Centers of Excellence Programs,” Annals of Surgery, February 2015.

g. Robinson, J.C., Brown, T.T., and Whaley, C., “Reference Pricing Changes the ‘Choice Architecture’ of Health Care for Consumers,” Health Affairs, March 2017.

h. Wu, S., Sylwestrzak, G., Shah, C., et al., “Price Transparency for MRIs Increased Use of Less Costly Providers and Triggered Provider Competition,” Health Affairs, August 2014.