As a healthcare consultant, I am continuously learning from the providers, insurers, and employers I work with on a daily basis. I've mentioned in previous posts that price transparency will be a game changer in a consumer-driven healthcare marketplace. Ross Bjella, co-founder, and CEO of Alithias brings truth in healthcare with his cutting edge software platform that offers accurate cost estimates which save self-insured employers and their employees millions of dollars per year. I asked Ross to share some insight on price transparency from his company's perspective, and he sent the following explanation.
With deductibles ranging from $6,850 (per individual) to $13,700 (family maximum) in the most popular plans offered under the Affordable Care Act and more employers offering high-deductible health plans, many patients now have a significant financial incentive to shop for care. Like it or not, high deductibles are making people think twice and ask more questions when they are told they need a specific test or procedure.
The hard fact is that the cost of the same procedure can vary from one provider to the next 'sometimes by over 400 percent - with no difference in quality or outcome. Patients are no longer "going where my doctor told me," and are instead shopping to find the best value by asking questions or using transparency tools.
Reliable sources for price transparency
Leading healthcare providers are starting to use price transparency as a way to highlight value. Some are now offering fixed, bundled prices for common procedures and we expect this trend to continue even with large health systems.
At the same time, employers are now hiring companies to analyze their historical claims data to estimate what their employees will actually pay for procedures in their network. Using actual claims and insurance and network-neutral third parties is the best way to ensure the estimates are as accurate as possible.
Third party organizations offer online pricing tools, but not all transparency tools found on the internet are the same. Some display only a portion of the charges, such as just the facility fee and not the physician's fee. Others ignore certain costs associated with common procedures, such as the lab fees that can accompany a colonoscopy. Lastly, others do not consider the discounts a specific network might receive from that provider, displaying only the "billed charge," resulting in a cost estimate that is far higher than a patient will actually pay.
Some providers complain that the prices displayed on transparency sites are not accurate. To be fair, estimating the cost of some procedures can be very hard because there is often no way to know in advance of the procedure exactly what the doctor might do while the patient is in surgery. For example, a patient who looks up the cost estimate for an anterior cruciate ligament (ACL) repair - typically between $12,000 and $15,000 in the Milwaukee area - may also need extensive meniscus repair which can add about $4,000 to the cost of the procedure.
So why use transparency tools if they might not be very accurate?
When analyzing data, a good transparency provider will try to make cost estimates based on apple to apple comparisons between locations. That is, each procedure is defined by a typical and fixed set of billing codes for the procedure. If Location A charges $14,000 for an ACL repair and Location B charges $19,000, Location A will likely be more cost-effective than Location B if additional procedures (such as a meniscus repair) also are performed.
But do lower cost locations have lower quality?
Surprisingly, the opposite is most often true! Lower cost locations are often associated with higher quality when it comes to healthcare. Those locations that focus on just a few types of procedures, and providers who perform large numbers of the same procedure, often score higher in most quality measures than those locations charging a lot more money. The best single indicator of quality is a simple metric: how many of that procedure has the location/provider performed in the last year. Those providers performing at higher numbers typically also have higher quality.
Again to be fair, this isn't always true. Some excellent doctors are often asked to perform procedures on patients with complicating conditions, such as diabetes, obesity, heart conditions, etc. If they weren't great doctors, no one would be asking them to take these challenging cases. The typical quality metrics may not accurately assess these doctors and their patient volume might be lower. However, if your case is not complicated, selecting a busy doctor at a lower cost location will likely be the best value.
The key to all of this is data. If your insurance company or claims administrator won't provide you or your company the actual historical claims data, find a new insurance company or administrator. No business would buy from a supplier who refuses to provide prices in advance. No business would pay invoices without being able to audit the bills. And neither should you.
Price transparency in action If your doctor says you need to schedule a procedure, ask the following questions:
Most likely, the doctor won't know how much the procedure will cost. If not, try using a transparency tool that's specific to your insurance company, employer or network.