When making a big purchase, most of us shop around. It just makes good financial sense when you can save hundreds or thousands of dollars. Yet, the lack of accessible cost data in health care makes it nearly impossible for consumers to be knowledgeable health care shoppers when it comes to medical treatment and procedures.
There’s reason for concern. Medical bills are the number one reason people go bankrupt. Even for people with insurance. The growth of high deductible health plans put more and more cost burden on consumers.
Not only are prices unknown to consumers, they also vary widely. A 2012 study from the University of California San Francisco found that an appendectomy in that state could cost anywhere from $1,529 to $182,955. Patients can literally save tens of thousands of dollars just by driving down the street.
Of course, cost isn’t the only factor that’s important when choosing medical care. Quality information is equally critical when deciding whom to trust. Many health plans have been deploying cost tools to members, but they’ve largely gone unused since they don’t provide the whole picture.
Indeed, without quality data, cost becomes a proxy for quality. Patients assume, as they do in shopping for cars or houses, that the more expensive hospital will provide superior care, even when it doesn’t. Understanding the intersection of cost and quality not only allows consumers to make informed decisions, but to also make tradeoffs. A new parent could choose to pay more because a pediatrician offers extended office hours or an adult may choose their primary care doctor because of the convenience of the office location.
When cost and quality are clear, the savings can be impressive. The California Public Employees Retirement System (CalPERS) established a reference price of $30,000 for hip and knee replacements as part of a pilot program in 2011. They provided members with lists of providers who met or beat the reference price. They saved their members more than $300,000 – and the system more than $2.8 million. Since that original test, CalPERS has added reference pricing for other procedures, like cataract surgery, colonoscopies and arthroscopy.
Another more recent success is happening at the Surgery Center of Oklahoma. Founded in 1997 by Dr. Kevin Smith and Dr. Steve Lantier, the center lists a guaranteed price for procedures, inclusive of doctor fees, initial consults and uncomplicated follow-up care. A company in Dallas-metro designated the center as a partner for employee health care. Savings from procedures performed at the center yielded lower corporate health costs, even with flights, travel and lodging covered by the employer. More recently, Oklahoma County made a deal that lets employees, retirees and eligible dependents use the center with no out-of-pocket costs. By late March, more than 10 surgeries had been scheduled at a price of $58,565. Had those surgeries been performed anywhere else, the bill would have topped $200,000.
Clearly, cost and quality transparency offers the promise of greater value to consumers. It can also reward providers who deliver higher-quality care at lower prices and help health plans manage overall member costs, improve outcomes and achieve competitive advantages.
Quality data is at Vitals’ core and we’ve been working with health plans to provide the best data and tools to can help members understand the intersection of cost, quality and access. Already, we’re helping more than 100 million members make informed decisions. But there’s more to do. Every American needs to be able to shop smart for their health care. After all, it is your hard-earned cash.
Want to read more about how transparency tools can help health care consumers? Read “Cost Burden of Medical Care on Consumers in the US” at Vitals.