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Our healthcare system is notoriously opaque when it comes to how our healthcare dollars are spents.
Consumers can rarely find out the complete cost of their medical care ahead of time. What’s more, they may even be unable to determine whether all the providers treating them are in their plan’s network prior to receiving services.1
Similarly, providers are often in the dark as to prevailing prices being paid by health insurers or even what a bundle of care at their own organization might cost.2 Confidentiality clauses and so-called “gag clauses” in provider-insurer contracts can ensure that knowledge of negotiated prices stay between the parties in the contract. Insurers may also seek to protect the confidentiality of their prices as a “trade secret.”3 Medical device manufacturers often require hospitals to sign confidentiality agreements, making those prices opaque.
There is considerable debate over whether and how much increased transparency in the health system could improve value, even in the absence of any other intervention.
While often thought of as an exercise in putting price data in front of consumers, in reality the transparency question is much broader, having these dimensions:
|Audience for Information||What is transparent?|
|Policymakers/Regulators||Comparative Effectiveness of Treatment Options|
|Insurers||Provider conflict-of-interest data|
There is little evidence to date that putting prices in front of consumers has a very modest impact on healthcare spending flows. For example:4
There is an intriguing body of evidence that seems to point to the fact that revealing the wide variation in pricing to providers may move the market quite a bit more than relying on consumers to vote with their dollars. In addition to the University of Chicago study above, a study of CalPERs Reference Pricing experiment found that the major savings from setting a reference price for hip and knee replacements was that the highest price providers lowered their prices. In theory, price transparency placed in front of providers could cause the lowest price providers to raise prices--not a widely observed phenomenon but a possibility which must be monitored.
Similarly, quality transparency may help motivate provider actions. Hospital executives report that quality reports and hospital comparisons help them focus their quality efforts.5 The evidence suggested that individual clinicians and organizations respond to public reporting in positive ways, including adding services, changing policy, and increasing focus on clinical care.6 Few studies have tried to demonstrate that quality reporting saves money, however.
Limited evidence further suggests that achieving a reduction in prices by making prices transparent is high dependent on market conditions.
But even if provider market conditions are not ideal (not competitive), providing complete pricing transparency for providers, treatments, drugs and devices may still help researchers, policymakers and regulators target their interventions to the spending hot spots found in their state. It may also help reveal where patients face unacceptable disparities in the prices they face.
Another important form of transparency surrounds conflicts of interest. Physicians can have certain financial relationships with industry can create conflicts of interest such as:
Disclosure policies are commonly used to regulate conflicts-of-interest and there is limited evidence that while it may not go far enough, disclosure policies to curtail referrals and treatment decisions that represent a conflict.8
1. See http://consumersunion.org/surprise-medical-bills/
2. Jaime A. Rosenthal; Xin Lu, MS; Peter Cram, MD, MBA. Availability of Consumer Prices From US Hospitals for a Common Surgical Procedure, JAMA Intern Med, Vol. 173, No. 6 (2013).
4. See also: Rosenthal, M., and A. Sinaiko, “Increased Price Transparency in Healthcare—Challenges and Potential Effects,” New England Journal of Medicine, Vol. 364, No. 10; and Lauer, J and Ha Tu. 2009.
5. Mary Laschober, Myles Maxfield, Suzanne Felt-Lisk, and David J. Miranda, "Hospital Response to Public Reporting of Quality Indicators," Healthcare Financing Review, Spring 2007, Volume 28.
6. AHRQ, Public Reporting as a Quality Improvement Strategy Closing the Quality Gap: Revisiting the State of the Science.
7. There is a large volume research indicating that self-referral has a major effect on increasing medical costs. Levin, David C.; Rao, Vijay M., "Turf Wars in Radiology: Updated Evidence on the Relationship Between Self-Referral and the Overutilization of Imaging," Journal of the American College of Radiology 5 (7): 806–810
8. Matthew Chao, Regulating Conflicts of Interest through Public Disclosure: Evidence from a Physician Payments Sunshine Law, California Institute of Technology (February 2015).