How New Price Transparency Requirement Will Impact Care Delivery for Health Systems, Patients

To adapt to a new requirement this year for all US hospitals to publicly post the costs for treatment services under every insurance plan, health systems should be prepared to field the range of questions that consumers may ask on issues such as outcomes data and cost for prospective services, said Michael Abrams, MA, co-founder and managing partner of Numerof & Associates.

Transcript

AJMC®: Hello, I'm Matthew Gavidia. Today on the MJH Life Sciences’ Medical World News, The American Journal of Managed Care® is pleased to welcome Michael Abrams, co-founder and managing partner of Numerof & Associates.

Great to have you on, Michael, can you just introduce yourself and tell us a little bit about your work?

Abrams: Sure. So, Matt, Numerof is a management consulting firm—we focus on strategy and strategy implementation across health care. Our focus for almost 30 years has been industries in transition, and there's no question that health care is one of those industries that is changing rapidly. We work with health care delivery, with pharmaceutical manufacturers, medical device manufacturers, and payers.

While they all have unique problems, specific to their segment, the underlying issue is that the industry is changing rapidly. They need help in adapting their business model to the demands of a changing market, to the demands of many other changes that are impacting them, and that's what we work with them on from a strategy and strategy implementation point of view.

AJMC®: Building on something you just said as far as addressing a changing market, this year, all US hospitals are now required to publicly post the costs for treatment services under every insurance plan, and in a way that patients can better understand. How are health systems adjusting their operations to adhere to this new price transparency requirement? And what strategies or policies do you foresee coming as a result of this?

Abrams: Building a process for fielding those questions and having accurate information on the range of questions that consumers can and should be asking about prospective services that they would buy at a hospital is something that certainly hospitals should do, and I'm aware that some of them are taking those steps.

I think that hospitals can show their commitment to consumer orientation by going 1 step further, beyond just providing the data that they're required to provide, but by providing price calculators—that's going to make it more consumer friendly. I think too that it's going to be in the interest of payers to facilitate consumers making informed decisions, and I think many of them already have some sort of data on costs, but now that it's being made public, there are no further restraints on payers in terms of utilizing this information to help consumers understand where they can get both the best price, and quite possibly, where they're going to find the best combination of cost and quality.

So, I do expect that payers will take a lead role in building these kinds of price estimators. And I think, too, it will be in their interest to do so because they would benefit from driving down the cost of care and raising the quality of that care. At the end of the day, that costs less than the care that we're currently getting, and so it's in their interest. In fact, I do expect that some payers may actually highlight in their cost estimators where to go for the best mix of cost and quality. And by making it easier for consumers to make good choices, that benefits both consumers and payers and, ultimately, I think hospitals.

So I think this is going to drive renewed attention among hospitals to the issue of outcomes data and cost, because when you help consumers to start asking questions, that will inevitably come to the fore. What kind of outcomes can I expect from your hospital from this particular provider, in this particular procedure? How do you do on the kinds of quality metrics that apply to this situation? And so I do think that up till now, a lot of hospitals were maintaining a cost metric or quality metrics because they were required to and for many other reasons, but for the reason of being able to help consumers understand why they should come to that institution has not been at the top of the list. I think this will help to push that to the top of the list.

AJMC®: In further delving into this new requirement, what should patients expect from this move, particularly in how they receive and seek care?

Abrams: Roughly 25% of the health care services that consumers purchase fall into this category of what we call shoppable services. And so some of these might be things like knee replacements and hip replacements, where there is time to call different provider options and find out what that price is going to be. Hospitals, as a result of this rule change, are required to publish 2 different kinds of lists.

One is a comprehensive list of all the goods and services that they offer. That's going to be long and complicated, and perhaps have more interest, I think, to third-party providers and possibly insurance providers in what they will do with it, and I'll come back to that. But of more interest will be this second list of shoppable services that providers are required to provide. These are the kinds of things where the impact of this transparency is going to be greatest.

So, some hospitals already provide some data on this, and some hospitals provide actually a cost estimator, which is what most consumers are going to be most interested in. What they really want to know is: what will my out-of-pocket be? Now getting to that answer is complicated, because it not only depends on your plan and the specifics of your plan, it also may depend upon whether you have co-pays, what those co-pays are, whether you have incurred services below or not with regard to your deductible—all of that needs to be factored in.

What the hospitals are required to provide is simply the cost of the services as they would be through each of the plans that are in that marketplace, but consumers have been growing more engaged in shopping nonemergent services for some time now. I know in my contacts with health care delivery people at the level of actual delivery, it's become commonplace for them to get calls about what will the cost of this be before the patient comes in. And certainly one of the things that I think consumers certainly are entitled to is to be able not only to find this data online, but to be able to get their questions answered.

There are a lot of other questions that I think consumers can and should be asking in addition to what's the price. Things like, how many procedures do you do of this type every year? How many procedures has my physician done, because this is a big factor in the quality of the outcome? And a related question is what kind of outcomes do you get in this procedure? And what about the quality metrics that are typically associated with this procedure? How does your hospital do?

I think consumers need to ask those questions. The rule does not require that all of these questions currently get answered, but it certainly would be in the best interest of the hospital if they had those answers available and they trained people to field the kinds of questions that more astute consumers will ask so that consumers can be given both accurate and appropriate information.