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A Panel Contemplates The Long Road to Achieving Both

Underscoring the crucial nature of the topic in the current round of health care reform, the National Health Policy Conference session on price transparency drew a standing-room-only crowd that overflowed into the corridor. As expected, the "Price Transparency: What It Is and What It Isn't" panel started on the issue of transparency but questions from audience members emphasized the importance and challenge of defining and communicating value.
The event offered four national health policy experts with experience relating to price
Brandon Maughan
Brandon Maughan, MD, MHS, is a Robert Wood Johnson Foundation Scholar at the University of Pennsylvania's Perelman School of Medicine, and a Fellow at Penn's Leonard Davis Institute of Health Economics (LDI).
transparency: Paul Ginsburg from the National Center for Studying Health System Change; Bill Kramer from the Pacific Business Group on Health; John Santa from the Consumer Reports Health Rating Center, and Dolores Mitchell from the Group Insurance Commission of Massachusetts.

The panel was moderated by Leah Binder, CEO of the Leapfrog Group, who herself is a national expert in health care quality and transparency.

High deductibles
Ms. Binder began the session with an overview of recent changes in health spending and health insurance design. The growth of high-deductible health plans has been a major shift within the health insurance industry, she noted. The growth of these plans has motivated a small but growing proportion of the insured population to take a new look at their health care spending -- and to seek information on the prices they will be paying.

Dr. Ginsburg began the panel discussion. "Making transparency effective for consumers starts with benefit designs that reward the choice of a lower-cost provider," he said. "High deductible plans are the most obvious [example]." He reviewed insurance benefit models that have incorporated various aspects of price transparency: tiered networks, reference pricing and narrow networks.

In tiered networks individuals are subject to different levels of cost sharing based on which pricing tier their provider is in. Patients are encouraged to utilize higher-quality and lower-cost providers through the offer of lower out-of-pocket costs, and Dr. Ginsburg feels this type of information is far more useful to consumers than prices alone. Examples of tiered hospital networks are less common, he notes, because prominent hospitals generally either insisted on being in the preferred network or they refused to contract for services.

"Reference pricing is a simpler, but more powerful version of tiered networks," said Dr. Ginsburg. In this model,
Photo: Hoag Levins
Paul Ginsburg from the National Center for Studying Health System Change said, 'If you get too transparent, it can get very complicated for consumers.'
insurers will pay a pre-specified cost for a given procedure; patients may choose any hospital or providers but will be required to pay any costs above the reference price.

'Too transparent'
Pausing for a moment, he asked the group, "Do we call this transparency? This is not a very transparent tool, but I think it is a very powerful tool in terms of influencing the choice of providers. If you get too transparent, it can get very complicated for consumers, so I hope that people who are talking about price transparency also have a role for benefit designs that are less transparent and less detailed but potentially more effective."

He noted that reference pricing would probably be most useful for controlling outpatient and prescription drug costs, rather than inpatient costs.

Narrow networks are health insurance models that limit the hospitals and providers that their subscribers may use. Nearly one-quarter of health insurance plans offered by employers use narrow networks. However, Dr. Ginsburg noted a recent study by McKinsey estimated that 70% of plans on state health insurance exchanges utilized narrow networks, so their prevalence will likely grow. "This is a very powerful tool, but it's not very transparent. Do we consider it part of price transparency or not?"

Very large price variations
The second panel speaker, Dr. John Santa discussed the fact that few patients or providers are aware of the significant variation in health care prices. He highlighted the Health Care Blue Book, an online database of negotiated prices for health care services, as an excellent reference on this topic. "In every market for almost every procedure, there is a 5- to 10-times difference in the negotiated
Photo: Hoag Levins
John Santa from the Consumer Reports Health Rating Center emphasized the wide variations in prices for the same procedure.
price. Look at the complete blood count: it can cost you $10 or $105. That's relevant. That's going toward your deductible, your copays, your out-of-pocket. And none of us know this."

Dr. Santa insisted that high quality, data-driven reports on quality will require multiple markers, even within a single institution. He gave a Consumer Reports example using data on adverse events during elective surgeries at a single Massachusetts hospital: "It will not be enough to say that this hospital has good overall mortality rates, or good overall anything -- look at the variation. They have excellent results in hip and knee [surgery], but not very good [data] around heart surgeries, not very good around laparoscopic cholecystectomy. The rest? Average. [W]e're going to have to get really granular at something like this, in order to tell consumers how to evaluate this from a price point of view."

Transparency in Action
Bill Kramer provided helpful examples on how the practices described by the other speakers could have real-world impacts. He described an example from California in which transparency of price variations helped change health care purchasing practices. The California Public Employee Retirement System (CalPERS) noted that its members were spending highly variable amounts on hip and knee replacement surgery: prices ranged from $15,000 to $110,000. CalPERS worked with Anthem Blue Cross to define a reference price for these procedures and to publicize this reference price among plan members. As a result, procedure volume at lower-cost hospitals increased by seven percent and average surgical spending among plan members decreased by 26 percent.

In another example, Bill described how Safeway Corporation identified an eight-fold variation in the price of colonoscopy among providers who had no measurable difference in quality.
Photo: Hoag Levins
Bill Kramer from the Pacific Business Group on Health provided examples of how reference pricing drove costs down.
This information helped Safeway encourage patients to use more cost-effective providers.

Price Transparency: What It Isn't
Dr. Ginsburg emphasized that cost transparency is not just the release of hospital and physician charges; these data have been released in the past but have not been helpful because they do not reflect negotiated prices or out-of-pocket costs. "A lot of information that has been disseminated under price transparency initiatives has not been very useful for consumers," he noted. "Many of the government releases of price data are often too complex to be used, the prices aren't relevant to people who are insured -- and even to people who are uninsured, who often aren't paying those prices."

The panel agreed that price transparency is not a panacea -- but each speaker agreed that it is a key component of changing the behaviors of patients, providers, and payers alike.

Connecting Price and Quality Transparency
Several emphasized the necessary link between price transparency and quality transparency. Dr. Ginsburg specifically noted, "Price transparency will be more effective with greater quality transparency. Consumers need to have confidence that they will not regret choosing a lower-cost provider." He identified federal reporting requirements and the activities of the National Quality Forum as being particularly important to this goal.

Our speakers identified several major barriers between the present state and achieving true price transparency. Mr. Kramer said several steps will be necessary to improve data collection. First, he proposed a prohibition
Photo: Hoag Levins
Dolores Mitchell from the Group Insurance Commission of Massachusetts said consumers still equate high price with high quality.
on gag clauses, language in insurer-provider contracts that prohibit providers from making their prices publicly available. Second, he suggested that providers be required to participate in all-payer claims databases as a means of improving the quality and completeness of information available for researchers and policymakers to use. He noted this proposal would not be easy to accomplish, as it typically requires passage of state-level legislation. Finally, he emphasized that standardized measures of cost and quality were critical -- but that they were a long way off.

Advertising distortions
Hospital and provider advertising were identified as a major obstacle to communicating effectively with health care consumers, Ms. Mitchell noted. "Patients simply do not yet believe that higher price is not a reasonably reliable indicator of higher quality. You've had institutional advertising and branding going on for a hundred years in some parts of the country, so turning this [perception] is not going to occur overnight." Dr. Santa agreed. He commented, "Six years ago, when we decided to do health [reporting], Consumer Reports decided that there was no industry in which advertising and promotion had made it more unfair to consumers than health."

He acknowledged that most messaging on health care quality comes not from researchers or patient advocacy groups but instead from decidedly non-scientific sources, such as advertising in airline magazines. Data-driven quality metrics, he argued, will help reverse this trend.

Action by public officials
Action by public officials was highlighted as a key step in advancing price transparency. "The releases by the Massachusetts attorney general on hospital prices negotiated with insurers I think have been very influential on policymaking in Massachusetts," Dr. Ginsburg noted. "It's my perception that the state legislation on tiered benefit offerings, hospital contracting, and provision by plans of real-time pricing information was probably very inspired by those releases from the attorney general." He described another example in which several large employers made substantial changes to their health insurance benefit designs after the New Hampshire Department of Insurance began posting the prices that had been negotiated with insurers.

The panel's overall conclusions were that patients, payers, employers, and other constituents in the health care arena will continue to push for price and quality transparency in the coming years. High-deductible health plans will likely continue to grow as employers reduce health plan offerings, and narrow networks will likely become more visible as millions of Americans find insurance through state health insurance exchanges. Despite increasing volumes of price and quality data, it will likely take many years for the quality of these data (and the systems by which they are reported) to reach the ideal that we strive for.

Until we reach that goal, however, we must start somewhere. As one audience member reminded us at the end of the session, the perfect is the enemy of the good. Price transparency is a difficult but necessary step if we are to empower patients, purchasers, and others to make cost-effective decisions based on value.

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