Cost Transparency in Health Care: Examining Cost, Care and Choices
Transparency is becoming important for consumers, whether they’re comparing the cost of knee surgery or examining a provider’s patient safety record.
Cost transparency is widely regarded as key to moderating health care costs. Greater access to cost information leads to better decisions, supporting a more efficient delivery system. By one 2012 estimate, the lack of transparency and competitive pricing was responsible for between $84 and $174 billion in wasteful health care spending.*
More skin in the game
Transparency is already important to consumers. According to a recent study by the Robert Wood Johnson Foundation, 82 percent of people who have compared health care prices say they will do so again, and with good reason.** For many of them, the level of cost sharing in their health plans has increased in recent years. No longer shielded from the financial consequences of health care decisions, they are more motivated to take control.
New consumer tools
Reliable data is becoming more available to help Wisconsin consumers educate themselves about health care service costs.
Wisconsin PricePoint provides comparative costs for many inpatient, outpatient and emergency services, including surgeries. Wisconsin PricePoint also generates a report of the top 25 professional services by county, comparing charges.
Consumers are savvy and realize that more expensive care is not necessarily better care. They look at quality and outcomes as much as cost. Wisconsin Checkpoint is an information source.
Wisconsin Health Information Organization (WHIO) publishes data for three areas: family medicine, internal medicine and pediatrics. Its website MyHealthWI.org grades providers on appropriate care and good use of health care dollars.
Seeing the bigger picture
Online resources offer valuable information, but are just a guide. Other factors come into play. One provider may charge less for professional services, but the savings may be offset by additional lab services, or a lab service which is priced higher.
The number of diagnostic tests ordered can also vary significantly, rendering prior apples-to-apples cost comparisons less useful. Some providers are more conservative, ordering only tests which are clinically necessary and directly inform treatment options.
Another consideration is the provider network, which can put constraints on which providers can be used but also results in value. The favorable negotiated reimbursement rates that come with commitment to a provider network most often result in lower premiums.
Of course, what consumers ultimately pay is determined by their insurance coverage—specific deductibles, cost-sharing structures and possibly vehicles such as health reimbursement accounts, health savings accounts or flexible spending accounts. Choosing the best health plan is really the first step in smart health care spending, followed by good individual care decisions.
A positive ripple effect
Better knowledge of health care costs often goes hand-in-hand with other insurer initiatives. Well-informed members who also take advantage of condition management or 24-hour nurse line services will make better decisions both from a quality of care perspective and a cost perspective. Unnecessary emergency room care, for example, is a significant contributor to wasteful health care spending.
Ongoing commitment will be needed
Fully realizing the benefits of health care cost transparency will depend on the commitment of multiple participants in the care delivery continuum, including providers, insurers, brokers and benefits professionals, advocacy groups and health care consumers themselves.
About the author
Mike Eckstein, MBA, PAHM, has degrees in health care administration and business. He is a licensed intermediary and has achieved the designation, Professional, Academy for Healthcare Management (PAHM). Mike has been with Health Tradition and Mayo Clinic Health System for 19 years.
* “Eliminating Waste in U.S. Health Care,” Donald M. Berwick, MD, MPP and Andrew D. Hackbarth, MPhil. Journal of the American Medical Association, April 11, 2012.
** “How Price Transparency Can Control the Cost of Health Care,” Robert Wood Johnson Foundation, Health Policy Snapshot Series, March 2016.