New Marketplace

Survey Snapshot: Is Transparency the Answer to Rising Health Care Costs?

Insights Report · March 20, 2019

Rising health care costs remain one of the top challenges facing the industry, with patient behavior often placed under the microscope in the search for solutions. While there are a number of different patient strategies for driving improvement, increasing cost transparency often tops the list.

In a survey of NEJM Catalyst Insights Council members in November 2018, for example, 71% say that the top change needed to support patients/consumers in lowering total health care costs is to provide more transparency about the true costs and quality of services. Not surprisingly, the majority of respondents (61%) also say patients lack enough information to affect the cost of their own health care–related decisions.

Patients Lack Sufficient Cost Information About Many Aspects of Health Care

From the New Marketplace Insights Report: Patients Lack Information to Reduce the Cost of Care. Click To Enlarge.

While many in the industry believe that increasing transparency is a necessary first step, there is also widespread recognition that this would only scratch the surface of what is a complex problem.

“I think it is the out-of-pocket costs that drive decisions for patients, so I don’t know that transparency alone would change things,” says Thérèse Franco, MD, SFHM, hospitalist and research fellow at the Center for Health Care Improvement Science at the Virginia Mason Medical Center in Seattle.

“There needs to be at least some change to the cost structure. This likely involves changes in provider, payer, and patient behavior. Therefore, while transparency might drive some change, and is likely necessary, it is not sufficient to affect significant change in the provision or cost of care.”

A number of structural constraints act as headwinds for controlling costs. For example, most patients are only concerned about their out-of-pocket costs, and believe there is little incentive for them to worry about the total cost of care because often someone else is paying. For providers and payers, the fee-for-service model often leads to cost inefficiencies, which is why so many in health care are looking to value-based care as a solution.

“I do not believe that more information is the answer,” says William Mayer, MD, CPE, Chief Clinical, Medical, and Quality Officer at St. Mary’s Healthcare, a member of Ascension Health in Amsterdam, New York. He says that, while increasing transparency is certainly necessary, improving health care delivery is where the industry needs to focus its cost containment efforts.

“The answer is more about changing the way health care is delivered. When the care becomes more value-based, and less defensive, the costs will take care of themselves. There is too much incentive to do more testing and care. Providers are incentivized to operate, catheterize, dialyze, and give chemo to patients. Testing and consults are ordered to protect themselves, as well. Addressing these two issues would result in significant cost savings.”

Charles Thayer, MD, Chief Medical Officer at Morton Hospital, a Steward Family hospital in Taunton, Massachusetts, agrees that structural issues beyond patient control play a role in the industry’s cost inefficiencies and also raise philosophical considerations such as whether health care is a patient’s natural right.

“The best way to control cost in any industry is to link cost directly to the purchaser,” says Thayer. “Will we do that? Unthinkable. Society has developed a concept that health care is a right. All of us will pay for health care. The cost is inescapable.”

“The more insulation there is between cost and consumer, the more inefficient the pricing is. In our system, the cost is nearly entirely insulated from the consumer. We rely on intermediaries to manage and insulate cost.”

While the industry’s structural challenges will take some time to resolve, increasing patient transparency is a relatively simple solution that, when used strategically, can offer incremental improvements to costs.

“One of the big issues for patients is the complexity involved,” says Franco. “A little bit of simplicity would go a long way.” She says that patients need more transparency around the financial implications of seeking care in the wrong settings and stresses the necessity of getting screenings such as colonoscopies and mammograms.

Perhaps the most important target for transparency initiatives is educating patients to the reality that, ultimately, they are not just responsible for out-of-pocket costs, but they are also responsible for the total cost of care that is reflected through higher insurance premiums and deductibles.

Franco says, “I don’t think the general population understands the way that delaying care and receiving more urgent care later drives up the total cost of care, ultimately increasing out-of-pocket deductibles and insurance costs. Maybe this is where transparency can play a bigger role.”

Health Care Costs - Cost Transparency Is the Main Change Needed to Support Patients in Lowering the Cost of Care

From the New Marketplace Insights Report: Patients Lack Information to Reduce the Cost of Care. Click To Enlarge.

While survey respondents say that transparency about the true cost and quality of services (71%) is the top change needed to support patients/consumers in lowering total health care costs, it’s worth noting that the second-tier responses focus on the use of incentives. These include: designing coverage models that incentivize utilization of lower-cost settings (36%), incentivizing patients to adopt health-related interventions outside of health care facilities and at home (33%), and rewarding patients who complete all recommended preventative care (27%).

Thayer says that a combination of transparency initiatives and incentives will likely work best. “Increasing transparency for patients is good and necessary, but they also need to be incentivized to choose the right behaviors.”

According to Mayer, getting rising health care costs under control will require all industry participants — patients, providers, and payers — to do their part. Not just patients.

“What it’s going to take is everybody working together and rowing in the same direction. The problem is, even if you can get health professionals engaged, how do you get the patients when many don’t have much skin in the game? There is a wide disparity in how patients pay for their care; some pay a great deal, while others pay next to nothing. This can dictate behavior.”

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