August 2011

  • A big obstacle to controlling healthcare costs

    Controlling healthcare costs requires more transparency in cost comparison that we see today.  There is skepticism in transparency and the notion that anyone would use better cost information is confusing and misplaced.

    There are some episodes of care for which you will not have a hard and fast cost associated with a medical procedure or test but that is only a small share of healthcare services.  Most services in healthcare are elective.  There is time for the consumer to compare and shop cost differences between providers.

    When I sit down with an employer or insurer, and explain how much the variability in cost that exists in the same market place for the same services, they eventually come around to my perspective.

    Skeptics of consumerism in healthcare will start by saying that comparing costs of providers to treat patients in an emergency is impractical.  Soon in the conversation they will end by agreeing that dozens of common medical services can and should be presented to consumers with information about their costs.

    I can assure you that the list of cost comparisons is not comprehensive and is constantly evolving.  For instance, cardiac bypass surgery is a type of procedure that employers and insurers may not demand cost transparency because they don’t see consumers engaged in selecting a provider on the basis of comparable cost information.  This does not alleviate the fact that comparisons among providers this procedure and others are possible.  In New Hampshire, there is a $60,000 difference in bypass surgery among different providers today.

    Consumers will respond constructively to cost comparisons when they have a financial state in making and acting on those comparisons.

    0 comment August 26, 2011

  • Forecast of medical costs in 2012: 8.5% increase

    PriceWaterhouseCoopers predicts that medical costs for employers will rise by 8.5% in 2012, above its prediction of 8% in 2011.  Benefit plan design will keep the net increase in 2012 to 7%, according to the firm

    It says three factors are driving costs higher: more provider consolidation; more cost shifting from Medicare and Medicaid, and higher utilization in part driven by recession-induced stress on enrollees.

    On the other hand, containing medical costs see several trends: blockbuster drugs going off patent, higher deductibles and other plan design changes. Typically, plan design changes have shaved 1 – 2% off the annual rise in medical costs. Also, the Great Recession, like past recessions, has tended to dampen utilization growth.

    Medical costs over the decades have moved upward in waves.  The country is coming out of a moderate wave. The trend going forward appears steeper (but is not being uniformly reported as such by all analysts).

    On deductibles, the PwC report says “From 2010 to 2011, employers increased their deductibles, out-of-pocket maximums, and co-pays, according to the PwC survey. In addition, high-deductible plans showed the greatest growth rate of all plan designs. The percentage of employers whose most-enrolled plan was high deductible went from 13% in 2010 to 17% in 2011.” That was up from 6% in 2008.

    “Health plans are making it more costly for consumers when choosing an out-of-network provider. In 2010, according to the PwC Touchstone Survey, 29% of plans with an out-of-network feature had a deductible of $1,000 or more for out-of-network care. In 2011, this had jumped to 44% of plans. By comparison, only 22%, or half as many, of enrollees in these plans faced deductibles of $1,000 or more.”

    The PwC report has an interesting note about improvements in cost transparency by providers. “Increased cost sharing can be frustrating to patients when providers don’t provide transparency in pricing and billing practices. Many hospitals have moved toward patient-friendly billing practices to ensure better patient relations and collections. Unpleasant surprises are reduced by careful explanation of out-of-pocket costs before the hospital stay or visit.”

    1 comment August 17, 2011

  • Comparing hospitals by consumers: a long way to go.

    It appears to becoming increasingly easy for consumers to figure out which hospitals do the better job in quality, if not in cost. Many web sites try to help the consumer to find out how hospitals perform.  But are the sites really of any use?

    The Robert Wood Johnson Foundation created recently an online directory of many hospital comparison sites, organized by state. Forty six states are included. In RWJ’s press release it boasted that it has produced the “nation’s most comprehensive online directory for patients to find reliable information on the quality of health care provided by physicians and hospitals in their communities.”

    Let’s look at what is available in three states: California, New York, and Florida. The results are very mixed and overall disappointing.

    California has eight different comparative resources in the RWJ directory. The most comprehensive is compiled by Blue Shield for hospitals it contracts with.  (Blue Shield appears to provide the same comparative website in other states.) Information is categorized by easy to access tabs, each tab expanded by level of detail.   You can compare hospitals for a very large set of treatments within your specified number of miles showing treatment frequency, mortality rate, complication rate, length of stay, patient experience, and cost.   The non-financial comparisons were useful; the cost comparison reports relative cost among the hospitals. This is useless, even misleading information for the consumer trying to figure out her or his financial exposure net of insurance payments.

    Comparing costs between hospital providers and other healthcare providers can be extremely complicated.  In making comparisons between providers, you must compare “apples to apples”.  You must be aware of all the elements in any episode of care.  For example, if one was shopping for knee surgery costs, one would have various fees such as the facility fee, surgeon fee, anesthesia fee, implant fee if needed and all other potential costs.

    This is not impossible but it is essential when a patient or consumer has to make an informed decision so that they do not have a greater expense or financial surprise.

    Because as I see it, it is a complicated process.  The key to allowing for informed choices is to simplify the decision making by establishing global fees.  A global fee would include all fees and costs related to the care rendered.  Healthcare today encourages providers to maximize revenues when services are rendered.  This creates an environment where inefficiencies are awarded.  Simply put, there is no incentive to be an efficient or low cost provider.  Global fees would encourage efficiencies and simplicity when consumers are making choices.

    For New York, the best comparison website is that of the state government. It is slow and awkward to use, and provides comparisons for heart conditions and pneumonia only.  There is no comparative cost data.  In sum, this is a very primitive system.

    For Florida, the RWJ directory has only one website. While maybe not as awkward to use as the New York site chosen, it provides no really useful information. Cost data are high and low charges, which is useless for the consumer. This site is the worst of the three reviewed here.

    So we have one state, California, deserving some praise and two states which essentially flunked. A lot of work needs to be done to bring this type of service up to an acceptable level of usefulness and ease of use.

    The RWJ directory does not, by the way, include the federal Health and Human Services website for hospital comparison.  The site reports the consumer experience in much greater depth than do the state-based sites.


    0 comment August 8, 2011