Powerful new consumer tools are shedding light on previously hidden service costs and quality outcomes in healthcare. Yet, a closer look reveals that transparency solutions may have unintended, less-than-favorable consequences for consumers. Oliver Wyman’s health services team leader Todd Van Tol joins with colleague Marcia Macphearson to explain why cost transparency could result in too much of a good thing:
Transparency has been a growing area of industry focus in recent years as an essential approach to control healthcare costs. The premise is simple and compelling: give people information about what healthcare really costs and they will make better decisions with their health—and their wallets—in mind.
Greater healthcare transparency is undoubtedly a win for consumers as it lifts the veil of secrecy about service costs and quality outcomes that have previously been hidden from them until after treatment was received. However, there are cases where this may actually work against the ultimate goal of better total cost and care outcomes.
In many cases, transparency is an essential tool to protect consumers from unintended financial consequences of their healthcare choices. This is especially true in benefit designs that greatly increase a consumer’s financial responsibility, such as reference-based benefits and high-deductible health plans—both of which are on the rise.
To achieve its aim, transparency requires a highly engaged and activated consumer that not only understands what information is available to them but also how to put it to best use when making healthcare decisions. As more cost information floods the market and consumers learn to apply the data, there is growing evidence that transparency can materially impact local healthcare costs.
While transparency can be beneficial to consumers, there may be unintended consequences if they are led to make decisions based primarily on cost without the appropriate consideration for quality and their overall plan of care. – Oliver Wyman’s Todd Van Tol & Marcia Macphearson
Two recent examples come to mind: 1) CalPERS’ foray with reference-based benefit models, coupled with transparency solutions, saved the plan $5M on hip and knee replacements; and 2) a bidding war was sparked when an Oklahoma surgery center posted publicly its prices for elective procedures.
Effective cost-reducing tactics like these are welcome, especially in a fee-for-service market. However, given the industry shift toward a fee-for-value orientation, consumers making line-item “shopping” decisions about each service they receive may not actually be the best approach in all cases.
Providers that are part of a fee-for-value model, such as Patient Centered Medical Homes and Accountable Care Organizations are often paid incentives for achieving higher quality outcomes. Transparency out of context could potentially result in high value providers being displayed with higher individual service costs as compared to lower performing providers. Consumers that choose on price alone could unintentionally steer themselves towards lower performing providers.
Many fee-for-value models depend on managing patients in a highly coordinated manner across their entire continuum of care. If transparency solutions lead consumers to choose disconnected providers for each individual service it may end up working against a coordinated plan of care that is well managed by an integrated group of providers.
While transparency can be beneficial to consumers, there may be unintended consequences if they are led to make decisions based primarily on cost without the appropriate consideration for quality and their overall plan of care. This is especially true for patients with chronic conditions requiring a highly coordinated care plan across multiple primary care and specialist providers.
Episode-of-care costs or total cost of care and health outcomes achieved by a coordinated group of providers are important aspects for consumers to consider. Few of the current transparency tools have achieved this level of sophisticated guidance during the healthcare shopping experience. In contrast, most transparency solutions today are focused on comparing doctors for individual services costs. It’s a good start, but only telling part of the story that consumers will need in the emerging fee-for-value world.