Health care costs: up front and online

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By Sam Bonacci

Ten years ago, the idea of using the internet to compare restaurants or services based on price and consumer ratings was in its infancy. Through the use of applications such as Yelp and sites like Angie's List, consumers now have a direct pipeline to the detailed reviews and pricing information that help steer them to new options while holding retailers accountable for service and pricing.

In October, health care in Massachusetts took a similar step when the state began requiring insurance companies to provide health care costs online to their members.

“We're moving into an age of the consumer in health care. We are starting as an industry to adopt tools that the rest of the retail world has used for years,” David Przesiek, chief sales officer at Worcester-based Fallon Health, said.

“These are important decisions people have to make, so the more information we can provide them on the cost of the procedure and what it provides is absolutely critical.”

One goal of the state's health care “cost containment” law, passed in 2012, was to raise consumer awareness of what procedures actually cost while helping drive down providers' costs by publicizing those prices.

“It is certainly not a magic bullet in terms of grappling with health care costs, but unless we know what they are, we are never going to get there,” said Barbara Anthony, the state's undersecretary of consumer affairs and business regulation. “Consumers should be in that conversation.”

Pricing things online is something that has become second nature for many, said Przesiek, and now people can know beforehand the cost of an expensive procedure such as an MRI of the spine, which can cost between $300 and $2,000 depending on the provider. The online shopping tools vary from carrier to carrier, but they're required to give information about what the average cost of a procedure will be at various providers, and indicate how much of the cost a patient would have to bear.

Costs for a procedure vary because of several factors, but can be partially explained by basic influences such as overhead and how frequently a provider does a procedure. Sometimes, the only tradeoff to the consumer for picking a lower-priced provider is saving money.

“We are wasting thousands of dollars … for the convenience of sending (patients) down two flights of stairs for an MRI,” Anthony said. “Studies have shown, right here in Massachusetts, that there is no correlation between high price and high quality and low price and low quality.”

This process is most useful with high-deductible policies. The number of such health plans in the United States has grown 15 percent annually to 17.4 million enrollees, up from just 1 million in 2005, according to the annual census by America's Health Insurance Plans. Przesiek said Fallon now sells mostly higher deductible plans. Meanwhile, Bill Gerlach, senior director of consumer engagement solutions at Blue Cross Blue Shield (BCBS) of Massachusetts, said high-deductible policies represent the highest-growing market and is an irreversible trend.

“When you are dealing with x-rays and dealing with an MRI, a difference between $600 and $1,000 is a difference of $400 in your pocket at the end of the year,” said Joel Coffin, senior program manager for consumer engagement solutions at BCBS.

With some policies having deductibles of up to $6,000 before insurance coverage kicks in, Anthony said it's more important for consumers to shop around.

There are also potential savings for insurers and employers, who could see lower premium increases as more consumers take their business to more efficient providers. When the cost-contaiinment law took effect, the Patrick administration estimated the law could result in savings of nearly $200 billion across the industry by 2027 “that will be passed along to government, businesses and families.”

Meanwhile, providers have begun to reach out to insurers when they find out they're charging the most, Przesiek said, which could lead them to negotiate lower prices for policyholders.

As an example, Przesiek said pricing data has already helped drive down the costs of an MRI in Central Massachusetts.

“By putting relevant and actionable information in the hands of our members that drive(s) them to higher quality and lower cost in care, over time there is a gain to be had in driving down overall medical spending,” Gerlach said.

Price transparency is just part of the increasing emphasis on lower-cost alternatives to the traditional academic medical center. Retail-style clinics such as CVS' MinuteClinics and Shields Health Care Group, which provides lower-cost MRIs, have picked up on that. So, in this environment, large hospitals that inherently have higher overhead must reinvent themselves to compete with these newer providers, said Dr. John Halamka, a physician and chief information officer at Beth Israel Deaconess Medical Center in Boston during Worcester Business Journal's Worcester2025 Health Care forum in September.

Quality of care counts, too

Yet, transparency is not just about savings, said Gerlach, who points to web-based information on the quality of care BCBS has also included. Those quality ratings rely on clinical outcome data, but the insurer is moving toward including customer reviews. The goal, said Gerlach, is to adopt features people have grown accustomed to in other online purchases.

“We want to be able to show the member cost and quality at the same time. It is two sides of the coin,” Gerlach said.

Providers, however, don't see this as being the same as shopping for a new microwave oven. The movement toward transparency has caused them to appreciate the need to demonstrate their value, said Catherine Rossi, vice president of managed care contracting at UMass Memorial Health Care. However, the numbers are not telling the whole story of the quality of care: A lower-cost institution may have a higher rate of infection and complication rates, causing a higher ratio of discharges to extended care facilities and higher readmission rates, Rossi said.

Teresa Prego, chief marketing executive at Saint Vincent Hospital and MetroWest Medical Center, said that while pricing transparency is raising cost awareness, a shift from the traditional fee-for-service model to that of an accountable care organization would have a greater impact on expenses.

Anthony agrees that more must be done to analyze and communicate each provider's quality of care, but says the movement toward public information is just beginning.

“Quality is one of the last frontiers in terms of the development of standardized measurements people can understand,” Anthony said.

To expand the reach of the pricing information, Fallon has rolled out incentives, or rebates, that range from $50 to $500 for consumers who choose lower-cost providers. For example, in the case of a colonoscopy, to which a deductible does not apply, Fallon members can receive $150 for having the procedure done at a certain location. These incentives are intended to boost the awareness of the pricing sites and keep people invested even after they have hit their deductibles, according to Gerlach.

“As more and more people get on high- deductible plans where real dollars are at stake and there is a strong impetus to manage your health care dollars wisely … use of these tools to manage your dollars will increase,” he said.