Transparency Is the New Game Changer (Again)

There it was on the front page: a Chicago Tribune article titled “Hospital Poll Finds It May Pay to Shop” that basically highlighted the variation in prices health care providers charged for similar procedures. For example, a screening mammogram was $13 at Illinois Masonic Medical Center and $142 at Martha Washington Hospital. Removing a bunion would set you back $125 at Cook County Hospital but $1,686 at Ingalls Memorial Hospital. “What a game changer!” we thought. Turned out—not so much. The date, for the record, was September 29, 1989.

Now fast-forward to 2015 and the article in Forbes Magazine titled “Knee, Hip Surgery Costs Vary by $40,000 From Anchorage to Manhattan.” Same story line as above, of course. No, this is not the time warp of The Rocky Horror Picture Show many of you may remember. But the rocky road to transparency is finally paved and ready for traffic. So, more than 25 years later, are we finally going to see a game changer? Will transparency related to both quality and price lead to consumerism? Will this time be any different?

We at Sg2 do think this time is different. Let us offer 3 reasons why.

  1. Accessibility. Unlike 25 years ago, when price estimates were more difficult—if not impossible—to research, today, price information can be easily obtained via insurers, entrepreneurs and state agencies. In Colorado, for example, pricing data for certain procedures or maternity care are available through the Colorado Medical Price Compare website. In less than 5 minutes, potential patients can see the price for services by insurance type, zip code or specific facility and then easily review patient satisfaction and quality scores for those facilities. As an example, the PPO price for a “medium complexity” vaginal delivery is $5,186 at one Denver facility and $9,190 at another. We mention this specific service as, arguably, patient volumes at high-quality yet high-priced and lower-satisfaction hospitals could deteriorate given the obvious ability to plan months in advance of the service. Add to that numerous entrepreneurial, health plan direct and other mechanisms and everyone will soon have price data—and eventually meaningful quality data as well.
  2. Insurance Design. As both the public and private health insurance exchange markets take hold, tracking the number of enrollees is certainly important. But the key question to ask is, “What are they choosing?” You know the answer: high-deductible policies. The combination of accessible data and high-deductible health plans creates the perfect storm. Demonstrating high quality alone may not be enough to retain market share as patients determine their own value calculations.
  3. ACA Transparency Mandates. Two under-the-radar provisions in the Patient Protection and Affordable Care Act are likely to garner more attention in the near-term. One is the requirement that all hospitals make public typical charges for services and then update that information annually. The second requires insurers participating in public exchanges to make available to consumers tools that calculate out-of-pocket costs for services. Both programs went into effect in 2014 and, as the media further sniffs them out, you can bet we will see more publicity related to price and cost variation. Markets like Chicago have been at this for 25 years.

When all of these factors converge, the competitive landscape in your market may dramatically change. Patients may begin traveling farther for services and, in some cases, even choose to visit facilities outside of the US. At the very least, they will look outside your traditional primary and secondary service areas. Additionally, new entrants will likely emerge, pushing health systems to either up their game or even engage in new partnership discussions. Either way, transparency is here to stay and, this time, it’s a game changer.

Similar to every other consumer market, transparency will evolve over time. But organizations that bring their prices and costs into the clear light of day—standard practice in every other part of our economy—have the best chance of owning their destiny.

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As of February 11, 2016, Vizient, Inc. has completed its purchase of MedAssets Sg2 and spend and clinical resource management segments from Pamplona Capital Management, LLC. MedAssets revenue cycle business will continue to operate as a wholly-owned subsidiary of Pamplona Capital Management LLP.

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