Does Anyone Know What Price it Is?

I’ve written before about the almost comical lack of transparency in health care pricing, such as the inability of hospitals to quote their own prices for hip replacements or ECGs.  Yet the fodder for illustrating this problem just keeps on coming.  

A recent survey by Okike, et. alia in Health Affairs focused on orthopedic surgeons at seven U.S. academic medical centers.  The 503 respondents were asked to estimate the cost of thirteen commonly used orthopedic devices.  Only 21% of attending physicians (and 17% of residents) could guess within 20% of the actual cost of the devices…although I’m left wondering where the authors were able to get the “actual” costs from!  What is even more startling is that their guesses ranged from 2% of the actual price to 25 times the price.  Eighty percent of respondents felt that cost should be moderately, very, or extremely important in device selection, but obviously they lack the necessary information to make such evaluations. 

I’d be curious how close the costs ranged between the seven institutions that participated; in both the hip replacement and ECG studies cited above, the prices ranged about tenfold for the few institutions that could provide them.  It makes one wonder if lack of transparency on prices is often as much due to embarrassment as any desire for secrecy.

Patients aren’t much better about costs.  A recent survey by the Altarum Institution found that only 32% of patients had asked for cost information prior to obtaining health care services in the past twelve months, and 35% had tried to find quality information.  Frankly, I’m surprised the numbers are that high.  Eighty-one percent claimed they were comfortable asking for cost information from their doctor, yet only 46% had ever done so.  And, really, what are the odds they’d be able to get an accurate answer if they were bold enough to ask?

Only about a third of patients had any confidence in their ability to reduce their costs by trying to shop for lower costs, while slightly over half thought they could use quality information to pick better doctors.  The vast majority – 88% -- felt costs are too high, but were fairly split about whether there is anything they could do to impact them.  Patients still blame the usual suspects – insurance companies, pharmaceutical companies and the government – for high costs while largely absolving themselves, their doctors, even hospitals and lawyers.

The “good” news from the Altarum survey is that patients strongly say they want to be very involved in their health care decisions – 16% want to be completely in charge, 43% want the final decision with input from their physician, and 33% want joint decisions with their doctor.

It seems patients want responsibility but usually still don’t take it.  Everyone wants them to assume more responsibility – as illustrated by “consumer-directed” products from the payor side and “patient-centered” care models from the provider side – but we’re a long way off to making that a reality.  ONC has just released its vision for “Person @ Center,” with goals for increased self-management and prevention, seamless interaction with the health system, and shared management of health care, all supported by technology.   It hopes the new paradigm is in place by 2020.  That seems like a long way off for something all parties say they want, but I’m still not holding my breath.

Forbes calls transparency the health care story of 2013, which had no shortage of other big health care news; USA Today lists it as one of the key trends to watch in 2014.  Whether or not it starts to have a noticeable impact remains to be seen, but in the meantime it certainly is becoming a nice business: some $400 million has been invested since 2010.  For example:

• Castlight Health has raised almost $200 million and is reportedly considering an IPO;
• Change Healthcare took in some $15 million in Series D funding last year; 
• Healthcare Bluebook just secured a $7 million investment   
• Healthsparq just bought ClarusHealth in a move to triple its access to health plans, while also claiming it can demonstrate that its online transparency tools do lower costs;

I certainly am a big supporter in transparency, but continue to view it as a necessary but not sufficient requirement for change.  When I get medical services, I’m not really much more knowledgeable buyer than when I get services from, say, a car mechanic or a plumber.  When I get those kinds of services, though, I do expect to get a reasonably accurate estimate, and – more importantly – I know I’ll be paying them with my own money, which makes me more careful about spending it.  If a car repair or plumbing job is going to cost me thousands of dollars, I’d get multiple estimates from reputable vendors before proceeding.  People still don’t think about health care services in that same light, and providers typically would balk at requests to bid on expensive services.   

The awful truth, though, is that the bulk of health care spending is not from most services done on most patients, but from high-end services done to chronically ill patients.  AHQR recently reminded us of the super-concentration of spending: the top 1% accounted for 21% of all spending, the top 5% accounted for 50%, the top 10% accounted for 66%, and the bottom 50% only spent 2.8% of the total.  It’s not even clear that diverting care for costly patients out of hospitals to lower cost settings can make much difference, according to a study from Brigham and Women’s Hospital. 

Transparency might impact spending from that bottom 50%, but that spending is so small that it won’t matter much.  And it may not have not all that much impact for the top 1%, or maybe even the top 10%, as these patients may not be in much position to “shop.”  So who exactly are we targeting with it?

The Massachusetts Health Policy Commission recently released its 2013 cost trends report, one of the key findings of which was that 21% to 39% of health care spending in Massachusetts was wasteful – some $14.7b to $26.9b.  Those percentages are in line with previous national estimates.  I did notice, though, that adding up their specific examples don’t even reach $2b, indicating how hard it is to pinpoint where the “waste” actually is.  There’s no shortage of evidence (see, for example, Brill or Rosenthal) that what makes our health system so expensive is not the use of services as much as the inflated prices for those services.  This is where greater transparency can help – but only if we start demanding that providers compete on price and on value.