providers

Can Price Transparency in Health Care Really Lower Costs?

By M2|2019-08-21T14:53:39+00:00August 20th, 2019|Health care spending, Health Care Trends, Hospitals, Insurance, Out-of-pocket spending, Physician-patient communication, Providers, Reimbursement, Uncategorized|

Can Price Transparency in Health Care Really Lower Costs?

Telling patients what they will pay for their health care services is a key stepping stone to more efficient use of health care dollars. Consumers, employers, payers, and the system as a whole would likely benefit if the true cost to the patient were made available before a patient receives a health care service or product.

Several states already have laws on the books requiring health care providers to make at least some price information available on at least some procedures. Some states also run centralized databases where different payers report what they get paid for different services. Additionally, the federal government requires hospitals to post a list of standard charges on the internet.

The Trump Administration wants providers to further expand the price and quality information to consumers, and issued an Executive Order (EO) on Improving Price and Quality Transparency in American Healthcare to Put Patients First in late June. The order aims to help consumers make “well-informed decisions” and expand transparency efforts that provide information “which patients can research and compare before making informed choices based on price and quality.”

More specifically, the EO directs the U.S. Department of Health and Human Services (HHS) to require hospitals to publish negotiated rates in a searchable, consumer-friendly format for 300 “shoppable” services.

You Can Shop if You Want To

Consumers are being asked to make more of these decisions on their own, as we’ve described in previous posts. My home state of Colorado has a shopping tool like the one the EO has in mind. It took me less than a minute to get the result below from the Colorado Center for Improving Value in Health Care (CIVHC) for an MRI scan of a leg joint within 15 miles of my ZIP code:

Shop for Health Care Services – MRI Scan, Leg joint (CPT 73721)

Seems pretty obvious that while the closest option, seven miles away, is Centura Health St Anthony Hospital, they would charge me $510 for the scan. If I drive another five miles, I would only have to pay $150 at Denver Health Medical Center.

“Shoppable,” but Perhaps Not “Buyable”

According to the Health Care Cost Institute (HCCI), “For a health care service to be ‘shoppable’, it must be a common health care service that can be researched (“shopped”) in advance; multiple providers of that service must be available in a market (i.e., competition); and sufficient data about the prices and quality of services must be available.” HCCI estimates that approximately half of out-of-pocket spending is spent on “shoppable ambulatory doctor services.”

The problem is, you might be able to research and compare certain services with upgraded information, thus improving your shopping experience, but you might really struggle to buy the service that is lower in cost.

Using the example of lower-limb MRIs, a 2018 study titled Are Health Care Services Shoppable? Evidence from the Consumption of Lower-Limb MRI Scans found that people typically drive by multiple lower-priced providers to get to their final treatment location. Why? Because that is where the patient’s referring provider sends them. The study shows “the influence of referring physicians is dramatically greater than the influence of patient cost-sharing or patients’ home ZIP code fixed effects.”

In particular, “physicians who are vertically integrated with hospitals are more likely to refer patients to hospitals for lower-limb MRI scans.” We’ve written previously about how costs vary dramatically by site of care. That also means patient cost-sharing varies. We are asked to pay more out-of-pocket for a service we could get elsewhere. But that would mean 1) shopping and 2) acting against the advice of a provider. Not impossible tasks, but difficult for sure.

Increased transparency means you can shop for services, but that is only half of the problem. Yes, it is important to have price and quality information. If the problem were a technical one, more information would lead to different decision making. But in fact, changing the way a consumer selects a health care service – even a “shoppable” service – is an adaptive problem. That is, it requires a change in the way people think, prioritize, and behave.

Additional information on quality and price is definitely necessary, but if I drive by two Centura Health facilities with lower cost MRIs to get to the HealthOne facility my referring provider recommended, I would also need some encouragement, at least, to go against my physician’s recommendation.

It looks like we health policy types have more work to do.

Service Business Model Innovation, the fourth case study from our recently published book chapter

By M2|2017-10-09T01:56:26+00:00April 13th, 2017|Uncategorized|

Service Business Model Innovation, the fourth case study from our recently published book chapter

As we a few weeks ago, M2HCC authored a chapter entitled “Essential Characteristics of Service Business Model Innovation in Healthcare: A Case-Study Approach” in Service Business Model Innovation in Healthcare and Hospital Management published by Springer. Today we share highlights from the fourth case study we feature in the chapter.

Sutter Health and the Sutter Medical Network
Sutter Health is a community-owned, not-for-profit health care system operating in northern California. The system has over 50,000 employees and 5000 affiliated physicians. Facilities include 24 hospitals, 34 outpatient surgery centers, 9 cancer centers, 9 neonatal intensive care units, 6 behavioral health centers, 5 acute rehabilitation centers, 5 trauma centers, and more than 4,000 licensed acute care beds. Sutter was recently named as one of the Healthgrades Top Hospitals in the U.S. for 2017.

We talked with Sarah Krevans, President and CEO of Sutter Health, and Don Wreden, M.D., Senior Vice President for Patient Experience, about how Sutter has been able to build the trust necessary to move from a diverse health care delivery system with inconsistent patient experience to a more integrated approach over the past several years. Their advice to build trust, cooperation and leadership? 1) Find a way to collaborate; 2) Embrace strong leadership; 3) Change takes time; 4) Acknowledge innovative ideas can come from anywhere.

Find a way to collaborate
Sutter was able to build trust that lead to service innovation, first, by finding ways to collaborate. Sutter’s collaboration efforts initially focused on selecting common clinical performance standards, goals and measurement mechanisms seeking to develop new and more efficient ways of delivering coordinated, consistent, high quality health care. It was essential to unite around common clinical goals so the medical group partners were motivated to work together in attaining clinical goals focused on patients. The common clinical goals were driven in part by looking at the varying practice styles of health care practitioners across the organization in a non-threatening way. For example, by aiming to reduce clinical variation, Sutter helped clinicians focus on the goal, instead of demanding practice style change.

As our Sutter case study interviewees described it, “we got our training wheels” by doing small, focused clinical initiatives where providers could agree on the goal and “could all understand how to work together.”

Embrace strong leadership
“We remember the health care market of the 1990s,” said Dr. Wreden, “where hospitals were buying medical groups without a clear strategy for clinical integration. We know now that didn’t work out in California.”

What Sutter did instead was nurture engagement of physicians in leadership roles and commit to educate and train physician leaders—which was part of a cultural evolution in the industry. Developing leaders, perhaps not surprisingly, requires a vision that embraces the importance of physician leaders.

One way to encourage leadership, Krevans explained, is not to be afraid of bringing in strong leaders through growth or mergers. If a strong leader exists outside the organization, it is okay to keep that leader engaged and interested in serving the Sutter mission when they come into the organization. As part of its commitment to developing leaders, one particularly innovative approach Sutter uses is to evaluate for leadership potential as part of the recruitment process. “We invest in team development,” Krevans said. Sutter seeks to ensure that it is growing and recruiting the right leaders; for Sutter, a leader needs to be thinking about how to better integrate the health care services the organization provides in service to the needs of the patient.

Trust takes time
Dr. Wreden further explained saying, “We facilitated this evolution by giving true responsibility to physician leaders. We ensured they were focused on partnership, collaboration, shared accountability” and they were serving patients the culture that supports a trusting, cooperative organization. However, both leaders acknowledged such an approach “is fragile, and takes time—it can’t be done in a year.”

These Sutter executives recognized that in today’s turbulent health care market, organizations needing to innovate will probably have to move faster than Sutter had to when they embarked upon this journey several years ago.

Acknowledge innovative ideas can come from anywhere
Finally, and uniquely in the case studies M2 wrote, the Sutter leaders advised health care organizations seeking to innovate their service model would do well to recognize innovation can come from people from a variety of backgrounds, including those with non-clinical training or experience.

For example, in 2015, Sutter hired Chris Waugh to be its first Chief Innovation Officer. Waugh had previously held leadership roles at IDEO, a global design firm that creates human-centered design. Sutter also relies on ethnographers, technologists, and other types of experts, to name a few, to ensure the organization is always improving at serving patients.

One of the key lessons from Sutter Health’s innovation experience is: “Don’t just value a particular kind of leader. Respect every member of the team,” according to Krevans. It is important to appreciate the skills and background of all different kinds of staff within the organization.

“Innovation in the service model and true breakthroughs will come from this range of expertise,” said Krevans.