Quality Matters Archive

Quality Matters reported on emerging models and trends in health care delivery reform and interviews with leaders in the field. Please read its successor, Transforming Care.

  • April/May 2012 Issue

Q&A: The Challenges of Reporting the Prices of Health Care Services

By Sarah Klein

Francois de Brantes, M.S., M.B.A, is executive director of the Health Care Incentives Improvement Institute, a Newtown, Conn.–based nonprofit organization that seeks to improve health care quality and outcomes by promoting the use of evidence-based medicine. The Institute operates the PROMETHEUS Payment model, which facilitates the use of episode-of-care payments to encourage greater efficiency among providers. It also operates the Bridges to Excellence program, which rewards providers for, among other things, reducing avoidable complications in patients with chronic conditions. Quality Matters asked de Brantes about the challenges of using health care price information to promote value-based competition and change consumer behavior.

Quality Matters: Why do you think efforts to make consumers more sensitive to pricing information have not gained traction?

de Brantes: One of the problems with pricing transparency efforts is that they are rarely linked to financial incentives for consumers. You may be able to show that there is a significant difference between the high-, low-, and medium-cost providers, but there is no evidence that that, in and of itself, changes consumer behavior. This information has to be tied to benefit design so there's a significantly different co-pay for the high- and low-cost providers. Otherwise it's not very meaningful.

QM: So what's the best way to communicate price information to consumers?

de Brantes: One formula we've kicked around is calculating a value score based on the quality and cost of a provider for a specific procedure or condition. You can look at, if you will, pricing the value differential between two providers and indexing that to a co-pay. If you go to the value provider, you get zero co-pay. If you go to a provider who has slightly less value—maybe because it is lower quality, but it's the same price—then you start to pay more and the more isn't just $10. The more is a few hundred or a couple of thousand dollars. My sense is that you have to have at least a $300 or $400 difference in out-of-pocket expense between these providers if you are going to move market share.

QM: Which companies do a good job of communicating value to their employees and offering them meaningful incentives to choose higher-value providers?

de Brantes: I think probably the best example at this point is Delhaize Group, which runs more than 1,000 supermarkets along the Eastern Seaboard and has more than 100,000 employees. Nearly a decade ago, its predecessor Hannaford Bros. began looking at ways to pay for care based on value—in part by making the cost of care more transparent to employees and using financial incentives to steer them to primary care and specialty care physicians in the top quartile based on quality and cost. They put a lot of emphasis on educating their employees and they combine those efforts with financial incentives for both providers and patients to reward care that's efficient and high-quality. (See the In Focus for more detail.)

QM: Have you seen any novel ways of educating consumers about variation in health care costs?

de Brantes: Blue Cross and Blue Shield of North Carolina has a really interesting campaign called "Let's Talk Cost," which explains their initiatives on cost transparency. I think they're fairly unique in their attempt to engage their customers and, presumably, the public at large in a dialogue. They've got an open blog where people can post comments about the initiative. It's kind of amazing because usually when the plans—and it's not just health plans, any corporation—does this kind of initiative, there's a pretty decent scrubbing of consumer comments. The comments on this site are pretty raw. People says things like "Yeah, of course you care about cost, because that's the only thing you care about." The folks who maintain the site are responding calmly. It's very impressive.

QM: It is a very interesting site with lots of educational materials, but as you say the questions and comments from customers suggest they are pretty skeptical that the health plans and employers have their best interests in mind when encouraging them to seek out price information and choose low-cost providers. What are some ways of overcoming this distrust?

de Brantes: I don't think there's an easy way, and the type of honesty displayed on the "Let's Talk Cost" site is likely to be a powerful way to win over the skeptics. Beyond that, only actual experience and consumer testimonials of that experience will allay concerns. When plan members start posting comments on the site about the great experience they've had, in addition to lower co-payments, the silent majority will be won over, even if a vocal minority of discontents is still cynical.

QM: What do you think are the biggest impediments to increasing the use of pricing information?

de Brantes: A lot of communities are struggling with the issue of getting the right data. Even if they have aggregated claims data sets across multiple payers, it is often devoid of pricing information, so you can do analyses based on utilization but it doesn't give you the price. That alone shouldn't be used to guide consumers. You need both utilization and cost information. My favorite example is a certain well-known institution in the Midwest that doesn't use a lot of resources, but its unit price per-resource is outrageous. Without having all-payer databases that include prices and resource use, it's hard to make the information meaningful. Some health plans can do it if they have sufficient concentration of plan members and a decent market share.

QM: Are there some conditions or procedures for which identifying the price differential is difficult?

de Brantes: Yes, anything involving implants. Because there's so much pricing variation for the same implant, they can really skew hospital results. For these cases I think it's better to spend time educating the physician or surgeon, rather than the consumer. There is an interesting example of an insurer, Horizon Healthcare Innovations, a subsidiary of Horizon Blue Cross and Blue Shield of New Jersey, working directly with physicians to control episode prices. They said let's help surgeons understand the differences in bundled prices and what happens when patients go to facility A or facility B. They have really turned these doctors into smart shoppers. Some of them are now outright negotiating with the implant vendors, saying you have to give me a discount because your price is outrageously high compared to what is going on in the next hospital. They are also starting to look at the differences in post-acute care and where they should place their patients. I've also seen some hospitals create bidding wars among vendors. They're told you have X amount of time to bid on the Web site. You get to see what position you are, not the others' bids. If you are not number one you can go back in and during the two or three hours the auction is open you can change your bid and see where you are.

QM: If you could change public policy regarding the use or disclosure of pricing information, what would you do?

de Brantes: One of the problems in this area is that health plans have been loath to talk about cost and pricing, partially because pricing transparency for health plans invariably involves a disruption in their network. Whoever the hospital is that has the higher price is not going to be happy. There's also a lot of resistance from providers. I have seen contracts where high-priced providers basically prevent the health plan from using the price data to shift market share away from them. If you try to do it, it's an automatic breach of contract. In some cases they say it's voluntary agreement, but in some markets you can't have a viable network without the market leaders. You cannot allow dominant providers to exercise this type of market opacity. That is a big policy issue. Barring federal action, I think the state legislatures have an obligation to quash anticompetitive behavior and require reporting of pricing and efficiency measures through all-payer claims databases.


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