Transparency evolves

February 1, 2009

Payer initiatives will encourage consumers to make educated choices, especially since prices can vary so dramatically.

WHEN IT COMES TO PRICE transparency in healthcare, the bandwagon is getting crowded. As transparency gains traction among health plans, employers and public plans, it's also relying almost exclusively on the Internet to reach consumers.

Colin Drozdowski, vice president of healthcare management for WellPoint Inc. says even though stakeholders have made progress, there's still much work to do.

Transparency has evolved to include the disclosure of more itemized costs-not just the price of a major surgical procedure or hospital stay, as in early efforts, but the costs of related lab tests, drugs and other services. But as Drozdowski says, such information still remains difficult for consumers to decipher.

WellPoint announced plans in December to partner with four other Blue Cross Blue Shield plans to provide online, consumer-friendly cost information from various providers. The portal will include cost ranges for specific procedures, as well as for specific hospitals, so members can compare the differences in costs. The move is an extension of an existing program that includes 18 separate Blue plans.

WellPoint's newest partners are Blue Cross and Blue Shield of Minnesota, Blue Cross and Blue Shield of Michigan, Premera Blue Cross of Washington, and Highmark Inc. in Pennsylvania. The Blue plans provide the estimated cost ranges of 39 medical procedures performed in various locations.

In 2006, WellPoint and employer General Motors Corp. in Ohio initially began the transparency effort for GM employees. They eventually extended the reach to Atlanta, Detroit, Los Angeles, Minneapolis and Pittsburgh. Such large-scale transparency efforts drive the industry as a whole.

Many believe informed consumers will be more discriminating in their healthcare purchases, thus reducing waste and increasing value. Some insurers even offer price comparisons based on actual fee schedule amounts. Drozdowski says those fee schedules can vary dramatically.

"Historically, hospital systems and large physician groups have leveraged their size or market position to negotiate prices that are in some cases, higher than average," he says.

The Congressional Budget Office examined pricing transparency in a brief published in June 2008. It found pricing "is not uniform among providers or payers," which is no surprise. As competing providers negotiate among payers, prominent urban hospitals often net better rates than smaller community hospitals.

Such disparity in healthcare pricing-revealed more frequently by Internet-based data sources-is proof of the need for industrywide cost disclosure, according to some transparency advocates.

"With progression of price transparency, the payment system will become more simplified and more rational," says Kate Banks, president of customer revenue strategy and improvement for MedAssets Inc., a technology firm.

The healthcare payment system has been cited as irrational quite often by former HHS Secretary Mike Leavitt. Patients find themselves at a loss for understanding their own out-of-pocket costs much less the actual cost of services.

A July 2007 study, "Women's Health: OB/GYN Trends Report," by healthcare comparison shopping site http://vimo.com/ reviewed various diagnosis-related groups (DRGs) and compared costs for OB/GYN procedures across the country, based on ZIP codes. It found, for example, a hysterectomy in Sacramento cost $2,912, while the same procedure in Modesto, Calif., cost $75,752-a difference of 2,500%.

A growing number of states in the past year have created sites where consumers can access pricing information, including Arkansas, Florida, Maryland, Massachusetts, Minnesota, New Jersey, Ohio and Utah.

Todd Nelson, a member of Healthcare Financial Management Assn.'s national advisory council, says cost transparency initiatives should do two things: help consumers understand costs and choose lower-cost care; and encourage providers to contain costs.

David Bennett is a senior editor in Advanstar Communication's Centralized Content Group.