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Health Care 'Transparency': Advances Noted; Work Remains

By Stephen Miller  10/1/2007

Notable advances are being made in capturing and communicating data on the price and quality of health care services—a goal known as "transparency"—but far more needs to be done, and employers can act as a spur, according to health care experts. 


 SHRM Video:
Transparent Health Information

Sandy Lutz, director of the Health Research Institute, PricewaterhouseCoopers, discusses strategies for price and quality transparency in health care, and how employers can spur these initiatives.
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Consumer-directed health care approaches such as health savings accounts (HSAs) and health reimbursement arrangements (HRAs), which allow employees to save and accumulate unspent health care dollars, can foster smarter spending decisions only if employees have access to consumer-friendly data that reveals what physicians, hospitals and other providers charge for comparable services, and the quality of those services.

Responding to market demands, in recent years insurance providers, federal and state governments, and private research firms have created online access to "a whole menu of tools to help you make smart decisions about your health care," says Sandy Lutz, director of PricewaterhouseCoopers' Healthcare Research Institute.

Soon, if not now, Lutz notes, "You’ll be able to see quality and price data on hospitals, just as users can now compare prescription prices between retail pharmacies." It's increasingly common, she elaborates, for insurance providers' web sites to include at least rudimentary cost comparison tools, quality comparison tools and pharmacy tools to help consumers find quality care at a reasonable price.

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Insurers' web sites often include at least rudimentary
comparison tools to help consumers find quality care
at a reasonable price.
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But high hurdles remain, given that "even the most basic health care language and concepts are unfamiliar and intimidating for many consumers," says MaryAnn Stump, senior vice president and chief innovation officer at Blue Cross and Blue Shield of Minnesota, and president of Consumer Aware, which is developing a suit of consumer-friendly information tools. For example, when focus groups tested consumers' interest in complementary and alternative medicines, many thought "complementary" meant "free" (rather than nonconventional therapies that may augment traditional medications).

"The way information is positioned from the health care industry's standpoint is considerably different than what consumers want to see," Stump observes. "Consumers' ideas of what is useful differs from providers'." For instance, quality metrics in a hospital report might include terminology such as:

  • Volume indicators.
  • Risk-adjusted mortality for procedures.
  • Risk-adjusted mortality for conditions.
  • Utilization Indicators.

    All of this might sound like a foreign language to consumers looking for a hospital's medical error rate and number of unnecessary deaths. In addition, cultural differences regarding how information is accessed and used present challenges, Stump says.

    Stump and Lutz agree on key Ingredients of a successful transparency program, such as:

    • Information that is trusted by stakeholders, including providers, employers, consumers and regulators. "We need to talk to hospitals about pricing initiatives," Lutz says. "A lot of them frankly don't know what their costs are."

    • Incentives to use and share information. "We need to push the self-interest buttons early on," Stump notes. For example, consumer-directed health plans can give employees "skin in the game." Industry incentives are also needed.

      "You can publish information all day, but unless there are incentives to use it, then it goes by the wayside," adds Lutz. "But when you combine information with incentives to use high-quality providers, for example telling employees that if they choose go to a hospital that has lower quality, then they'll have to pay extra, that's when you really see movement."

    • A user-friendly information architecture that allows for comparisons. The information must be comprehensive, dynamic and multidimensional, Stump says. "The design that we currently have that's provider-based doesn't lend itself easily to translating relevant information to consumers."

      "IT needs need to be able to bring in the information around a patient's experience," adds Lutz. (See the box below for one innovative approach toward this goal.)

    Cost and Quality Details a Click Away
    Alegent Health is a not-for-profit health care system with nine acute care hospitals and more than 100 sites in Nebraska and southwestern Iowa. In 2007, the firm unveiled
    My Cost, an online tool that provides consumers with information on projected costs they will incur for nearly 500 common treatments and procedures, along with their out-of-pocket responsibility. Estimates are tailored to the consumer’s individual health plan or financial situation. The tool also provides a link to the most recent quality scores for the firm's hospitals.

    "Over the past 40 years, the health care industry has managed to create a system in which there are virtually hundreds of prices for the same procedure," says Alegent Health CEO Wayne A. Sensor. By linking quality scores with personally relevant cost data, his company hopes to provide patients with the information they need to understand the value of their health care and to make more informed health care choices.

    "Health care is one of our fastest-rising expenses," comments Barb Schaefer, senior vice president-HR at Union Pacific, one of the business partners that helped Alegent Health create its My Cost tool. "By putting both cost and quality information in the hands of our employees, their families and our community, we all will have a stake in—and control over—our health care outcomes. And, when more of the control is ours, my hope is that everyone will come to understand the true value of our health care options and benefits."

    As My Cost went live, personalized cost information could be accessed by Alegent Health’s consumers insured through Medicare Parts A and B, United Healthcare, Coventry Healthcare of Nebraska, Aetna or CIGNA, the company said, with plans to add Blue Cross Blue Shield of Nebraska customers, and efforts to bring in those insured by Mutual of Omaha and other insurers. Alegent Health also hopes to add professional fees—such as anesthesiology, radiology and physician fees—in the near term (at launch, the costs provided reflected only facility fees).

      Meaningful Measures

      "We need to measure meaningful things, such as nurse-patient ratios, as part of how we do business," Stump emphasizes, while Lutz adds that certain services, in particular, lend themselves to commodity pricing, including normal O/B delivery, knee replacements, cataracts and the like. "We could work with that; we should start thinking of how we package those types of services, and at what can be useful from a consumer perspective," she says.

      "In our conversations around contracting with hospitals," Stump adds, "we've actually found higher prices and lower nurse-patient ratios"—clearly a red flag for that particular hospital in terms of costs and quality.

      Benefiting Consumers and Employers

      Transparency creates pricing pressures that benefit consumers—and employers—by driving costs down, Lutz says, adding, "We know this from other industries. And in health care, greater transparency for prescription drug pricing, especially comparing brand-name drugs with generics, has led to dramatic slowdown in cost trends for prescription medications."

      She points out that because of co-pays, prescription drug pricing information has become more readily available. "And what have we seen happen?" Lutz asks. "Two thirds of all prescriptions now are generics. Drug costs had been increasing at 18 percent a year; now drug spending is actually increasing at a slower rate than overall health care spending. Transparency is a big reason why we've moved to generics and to lower prices. With greater transparency, the rest of the health care industry may see the same progress."

      According to the 2008 Segal Health Plan Cost Trend Survey, prescription drug projected cost trend rates have declined by nearly 9 percentage points since their high of 19.5 percent in 2003. For 2008, they are projected to decelerate to levels similar to trends for medical coverage for the second consecutive year.

      Information Online

      As a sign of that progress, individual states and the federal government have launched initiatives to collect and make available more information, Stump and Lutz note, but with mixed results.

      For example, the Texas Healthcare Information Council provides access to quality and patient safety information, including data on mortality rates and volume for different procedures by hospitals, and links to quality reporting by third parties. Still, "it's difficult for consumers to use," Lutz says. "But it is an effort toward transparency. Is there an incentive for hospitals to do that? By state law they have to do it in Texas to comply."

      Similarly, in January 2007 the state of Minnesota put in place a mandate requiring health plans and hospitals to make better information on cost and quality available, with online access for consumers, although navigating through the site can be daunting.

      The same can be said about the federal government's Centers for Medicare & Medicaid Services (CMS) online information on price transparency. "You have to plow through a lot of extraneous material," Lutz remarks.

      Stump's own Consumer Aware's Healthcare Facts web site, with a more user-friendly interface, has had 20,000 visits from January through September 2007, she said. "In accessing the utility, the proof is in the pudding. Are people actually using it, and are they having their questions answered," she notes.

      "Consumers want information about health care to work just as in other dimensions of their lives; they want it in context," Stump adds. "Not just data, but the stories behind the data," and consumer reviews, which are now ubiquitous on sites such as eBay and Amazon.com. "We need to be thinking about new and different ways in which we 'count what counts' relative to consumers, and that's a challenge as well as an opportunity for our industry." 

      As an example of how information can be "multidimensional," Stump points out that hospitals, in addition to providing information on the price and volumes of procedures performed, or even on the nurse-to-patient ratio, could disclose whether there are formal pain management programs available, and what their infection rates are.

      Stories, Not Just Data

      "But it's not just about the data, it's about the stories," Stump reiterates. "When focus groups asked consumers if they used patient satisfaction reports, consumers said they didn't find them useful. "A percentage satisfaction level doesn't tell me anything," was a common response. Instead, "they wanted to see patient references. If facing gall bladder surgery, they wanted to talk to three people whose gall bladders the hospital had taken out. It was a trust issue, and they wanted to hear from other consumers."

      Stump recommends that providers "start thinking about how we package information in multiple ways, from the standpoint of figuring out what might be of interest relative to the whole experience of care as opposed to the data alone." To which Lutz adds, "Anecdotes and personal stories often outweigh statistics. We need to figure out how to marry the two."

      Will They Use It?

      But will employees, as health care consumers, make use of information if it's made truly user friendly? "Actually, I'm optimistic that as soon as we do that, people will come to it," Stump says. "We've seen that in other areas." For instance, the nutrition label on packaged food products "has evolved and become more user-friendly, and consumers have learned how to use it to make decisions," Stump reflects. This information "has now become a point of departure to help manage high cholesterol and for diabetes management. The key is to answer questions in an actionable and accessible way."

      Transparency also benefits the health care industry. When states began to require nursing home benchmarks to be put online, "Initially, consumers weren't looking at it, but nursing home administrators were, and they were improving themselves based on those benchmarks," Lutz notes.

      Employers' Role

      Employers can help advance the process of transparency, and help their employees to better understand and take advantage of transparency, "not only by making it easier for employees to find information, but by paring their benefit design around using transparency tools and providing incentives for employees to use them when they make their decisions about care," Lutz advises. Also, analyzing claims data can show the degree to which these tools are being used, and how that use has improved employees' health.

      Keep Up the Pressure

      Currently, hospitals "have no office of transparency," Stump adds. "In primary care and specialty clinics, there is no transparency infrastructure whatsoever. Health plans do it through their customer service, creating a whole new role."

      The upshot: Employers and other stakeholders need to keep up the pressure on providers "to create organizations that lend themselves to getting information to consumers that's relevant and timely," Stump says. "There's a lot to be done."

      "I think we'll get there," Lutz concludes. "We are a long way from where we were a few years ago."

      Stephen Miller is manager of SHRM Online’s Compensation & Benefits Focus Area.

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      Sandy Lutz, director of the Health Research Institute, PricewaterhouseCoopers, discusses strategies for price and quality transparency in health care, and how employers can spur these initiatives.
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