The healthcare industry convention of price opacity came under fire just before Thanksgiving, when the business-and-labor-backed Catalyst for Payment Reform issued what a "call to action" aimed at health plans and providers, asking them to "make healthcare price information more readily available to their employees and consumers."
That's right: a coalition of healthcare purchasers from both business and labor is calling for reform, starting with price transparency. Here's betting they'll get it—eventually. When these historically antagonistic groups unite in a cause, you know you've got a tough fight on your hands.
Several large employers, such as Boeing, Dow Chemical, and Wal-Mart, have joined the AFL-CIO, AARP, and other groups to trumpet this unified message. Last I checked, unions were picketing Wal-Mart on Black Friday, so even though these groups differ on big issues, this is one under which they can unite.
Many healthcare providers prevent health plans from sharing information (and health plans are complicit in this too) about the prices the health plan pays that organization for certain services. At one time, that might have made actual sense.
Providers traditionally have funded money-losing programs, and even Medicare and Medicaid access, through margin on their commercial contracts. CPR Executive Director Suzanne Delbanco, PhD, says that as provider consolidation has continued, they have amassed more market power, and thus, there's less competition for their services to health plans and employers. As a result, prices may have increased exponentially to fund these money-losing services.
But that's only one scenario. Certainly, some providers out there charge prices that bear no relation to market reality. Whether the extra dollars are necessary to fund money-losing services that would otherwise be absent is a matter of how much and to what degree they do so. Determining how that equation is resolved is impossible without transparency.
Also, Delbanco says, in the past providers may have been afraid to show price information without also showing quality information, implying that higher cost begets better quality. With numerous quality rating systems now coming on line, providers may have an additional weapon to show that their prices are indeed based on higher quality. And if they're not, you, as a leader in your organization, may have some adjusting to do.
Catalyst for Payment Reform seems to have modeled itself in some ways on the strategy of the Leapfrog Group, which has a somewhat controversial record as a proponent—and arbitrator of—quality scoring for hospitals. It's also Delbanco's previous employer.
"Everyone's initial focus was on quality, because we were learning more and more about how quality varies so much," she says. "When I was at Leapfrog, that was a big focus, but I don't think there was that much awareness of the different prices we paid to providers for the same service."
If Delbanco has anything to do with it, that will soon change.
As consumers are being asked to foot more of the bill for their own healthcare, calls for this type of price transparency will only get louder until they reach the point of deafening.
"The writing is on the wall," she says. "When you imagine a future healthcare system, it's virtually impossible to envision one without price transparency. We're putting more on consumers to share in the cost, and they cannot make good decisions if they don't have this information."
She makes an excellent point. The price murkiness that has long overshadowed the business of healthcare is part of the reason that healthcare consumes ever more of our annual GDP. It's part of why wages have stagnated. It's a big reason why waste and harm in healthcare has historically been a backseat concern. It's why the notion of value for healthcare services has been impossible to measure for ages.
But CPR doesn't just ask for transparency, it is ready to help those who are interested in pursuing it. CPR has model contract provisions that would allow for transparency, for example, and it's currently holding quarterly meetings with the four largest national health plans on progress toward price transparency.
"Every quarter we check in with them on their progress on in-house tools and what proportion of providers are suppressing price information," Delbanco says.
After a year of such discussions, she says significant progress has been made on transparency tools.
"We have seen some of the health plans becoming more flexible, but there are some holdouts," she says. "We're hoping this attention to what employers and consumers need will convince those remaining holdouts."
If not, pressure will also come from elsewhere. Though Delbanco says CPR has not modeled the shift, the creation of state-level insurance exchanges under the Patient Protection and Affordable Care Act should create a more structured marketplace for consumers to shop for health plans. She contends that health plans that support strong tools to help consumers be good stewards of their own dollars will have a competitive advantage.
CPR has released a set of specifications that employers can look at when comparing consumer transparency tools among health plans. The specifications represent the best of the best.
Meanwhile, the price secrecy clauses need to be eliminated. "The truth is that it's only a small proportion of providers who have these clauses, but tends to be the ones that matter a lot," Delbanco says. That means the biggest systems with the biggest market power in their community are often those who are standing in the way.
Given how rapidly consumers are being asked to pick up the cost of healthcare and given benefit design in how those dollars are spent, there will be increasing pressure to be price-transparent.
Providers "can be a player or not," she warns. "But as consumers get wiser about the connection between cost and quality, and as we reveal the facts that price has no bearing on quality, we'll work toward a marketplace where providers compete on value in terms of quality and cost, not just one or the other."
Philip Betbeze is the senior leadership editor at HealthLeaders.