Does Price Transparency Work?
Making information available to patients will not turn them into great healthcare consumers. Instead, it requires an ongoing effort of education and promotion to get them to engage in their healthcare decisions and purchasing.
The topic of healthcare price transparency garners much attention as cost-conscious hospitals, health systems, payers, and employers envision price shopping as a means to reduce costs. A recent Harvard study offered data on the subject, but it may not have been the data many in the field expected or hoped to see: The availability of a price transparency tool did not decrease consumer spending (Desai S., Hatfield L.A., Hicks A.L., et al., “ Association Between Availability of a Price Transparency Tool and Outpatient Spending,” JAMA. 2016; 315(17):1874-1881).
In the study, two large, geographically dispersed companies offered their employees an online healthcare price-comparison tool that outlined the out-of-pocket costs to visit doctors and healthcare facilities in their regions. Researchers compared the outpatient spending at these two companies and control companies without a tool in the year before and after the tool’s introduction.
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In the first year, just 10 percent of employees used the new tool. Neither company that offered the price-comparison tool saw a significant reduction in annual outpatient spending or outpatient out-of-pocket spending. In fact, they saw a slight increase of $59 and $18, respectively.
These results counter the prevailing wisdom among healthcare financial service professionals that transparency does reduce costs. One thought leader who agrees with that prevailing wisdom, Tate McDaniel, senior vice president of Engagement Solutions, Change Healthcare, recently shared his thoughts on the study, as well as whether and how transparency can lower costs.
In a recent Harvard study, the availability of a price transparency tool did not lower patient spending. Were you surprised to see this result?
The findings were not surprising to me because of the very limited model used in the study. My take was that the employers launched an online price comparison tool with little promotion to let staff know it existed. Shopping for health care is very new for consumers. Simply making information available to them will not turn them into great healthcare consumers. That feat requires an early and ongoing effort of education and promotion to help patients understand how the solution benefits them, which gets them to engage and shop.
In an effective program, what does the price transparency tool look like?
The tool used in the Harvard study was very basic. The most important omission was its price listing for hospitals and physicians without any quality data. Without quality data to inform our decisions, most of us equate higher cost with higher quality, producing the opposite effect desired from a price comparison tool.
A tool also can be more than just a way to look up prices. It should be interactive and personal. The tool should evaluate patients’ healthcare consumption and inform them on how they can save money. For example, a price transparency tool may notify patients about the cost savings related to switching to generic drugs from brand names. In my experience, patients who receive savings alerts are six times more likely to use a price-shopping tool.
Tools can incorporate medical, vision, dental, and prescription benefits in a single platform as well. Not only is this exceptionally convenient for patients, but it also adds more gateways into the system. For example, patients who access the system to fill prescriptions every month are likely to engage in other ways, such as searching for physicians.
Finally, if the tool can put personalized information in front of consumers and allow them to set preferences, such as text or e-mail alerts, patients will use it more frequently. Together, these features seem like a lot, but they reflect the needs of the patient population and the strategies that make a price transparency system successful in reducing costs.
The study captured only 10 percent of the target population. How can health systems engage more people as healthcare shoppers?
An online price comparison tool is only part of a transparency program. Its rollout begins with a comprehensive communication and engagement strategy customized to the patient population. The goal is to break down the barriers of trust and familiarity and spell out how the tool’s features and benefits benefit the consumer. Health systems can accomplish this with a multilayered strategy, including mail, advertising, e-mail, online demos, and in-person conversations. Health systems often begin introducing the tool about six weeks before it goes live.
Once the tool is available, the final effort to drive patients to the site begins with personal, actionable communications. For one plan sponsor, a welcome e-mail increased logins in one patient population by 42 percent. For another, patients received an alert that it was time for a preventive wellness visit that increased tool use 200 percent in one week.
On the ground, health systems have to put versions of these tools in the hands of staff who engage with patients face to face. By integrating opportunities to use the tools with patients and aligning personal connection, patient education and decision support into the workflow, facilities can help patients develop trust in the system. Patients see a firsthand demonstration of tools that will make health care both more convenient and less expensive.
What data should health systems collect to measure whether price transparency efforts are working?
Hospitals and health systems should identify active users of the tool and classify them by how often they access it. An engagement team can use this information to target outreach efforts and turn patients into more habitual users.
Health systems also need to track behavior back to claims, verifying realization rates that illustrate whether a price transparency tool is reducing claim amounts, unnecessary healthcare procedures and overall patient decision support. This allows healthcare leaders to see if patients are taking actions based on using the tool. For example, did the tool cause patients to visit doctors returned in search results or take money-saving steps in their care? Patients are far more apt to use a tool that they like, so health systems also must track user sentiments and turn that feedback into ongoing enhancements.
Because price transparency programs do not decrease costs immediately, it is important to set parameters for success in the data and track them over time. The Harvard study looked at data for one year, but we see metrics gradually increasing after implementation over the course of several years. At year one, I want to know the return on investment and claims-verified savings, but the real measure of success is the percentage of registered users, which tells me how well health systems have introduced this new idea and changed consumer behaviors. In my experience, shopping and savings continue to increase substantially over the next few years after initial implementation.
What advice would you offer to hospitals and health systems that want to change consumer spending through price transparency?
The most important thing is to understand that this is an ongoing engagement effort. If you just provide a comparison tool and check “price transparency” off the to-do list, you will not be happy with the result. This is a whole new scenario for healthcare consumers, so they will not automatically start price shopping online just because that is how they buy a TV. For the program to work, you need a thorough, long-term strategy and a team dedicated to patient engagement.
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Erin Murphy is a freelance writer in the Philadelphia area.
Interviewed for this article: Tate McDaniel is senior vice president of Engagement Solutions, Change Healthcare, Nashville, Tenn.
Forum members: What do you think? Please share your thoughts in the comments section below.
- Which price transparency strategies do you believe are the most effective?
- If your organization has implemented a price transparency initiative, what were the challenges, solutions, and results?