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Price Transparency Savings

By May 21, 2014Commentary

Researchers at the Center for Studying Health System Change, sponsored by westhealth, publish a brief on approaches to health care price transparency and potential savings in health spending.   (Transparency Brief)  The theory behind price transparency is that if consumers are aware of prices, especially if they are responsible for large portions of the cost of services, they will choose lower cost providers or negotiate better rates with higher-cost ones.  The brief makes a number of important points.  One is that price awareness and availability is important to physicians as well as patients.  Physicians usually have more to say about a course of treatment and who performs it than patients do and doctors often lack knowledge about costs of services and how much of that cost a patient will bear.  Physicians tend to be conflicted about the role of cost in treatment decisions, with many feeling that it should not be a factor, but there is an increasing movement to encourage doctors to consider the effects of choices on the financial condition of the patient.  Some studies have suggested that giving physicians more real-time information on the price of diagnostic tests, for example, may help limit spending.   For patients, the issue is not as simple as understanding what the charge will be for a particular service or product.  Patients need to know the overall cost of alternative courses of treatment and they need to understand their benefit design and what they will end up paying.  Getting that information when multiple providers are typically involved in any significant disease or condition treatment is not easy.  Perhaps most discouraging, even when price transparency tools are available, very, very few consumers use them and these tend to be pretty savvy health care patients already, and are unlikely to be the highest cost ones.  So even if good information is presented to consumers, methods have to be found to engage them in the process and actively use the data for decision-making.  The reality is most patients are far more concerned about quality and reputation of providers than cost, especially if they have a serious health issue.  And quality data tends to be even more confusing to consumers than price information.  The interaction of price and quality, especially in outcomes, has been defined as “value”, but the difficulty in gathering, presenting and getting consumers to act on cost and quality information makes moving them toward high-value health care difficult.  And price transparency has its own unintended consequences–if provider pricing data becomes widely available to the public then providers can implicitly use their awareness of each other’s pricing to move the overall level higher.  The brief estimates that advancing various price transparency initiatives would save at most $10 billion a year.  While every little bit helps, this is not even 1% of US annual health spending.  One thing that would really help is creating a nationwide database of all claims submitted to all payers, including self-pay, for health care services and products.  This should include encounter data for non-fee-for-service payments.  This would facilitate an understanding of actual payments and an analysis of overall provider practice patterns.

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