In an age steeped in technical specifications, user reviews, and critical evaluations of products and services of all types, doesn’t it strike you as odd that the healthcare consumer—the buyer of some of the costliest of modern society’s most essential services—can’t compare prices between competitors, outcomes across providers, or reviews from fellow healthcare consumers?
Is the reason, perhaps, due to a flaw in our decision-making framework? Is it because we accept healthcare decisions based purely on a medical professional’s perception of what the evidence is, and not what the evidence actually means for that particular patient?
Who wants what?
To establish the status of transparency in healthcare, let’s first take a look at the positions of its players.
- Consumers. Deductibles and out-of-pocket premiums increase regularly, with a 31.9 percent increase between 2005 and 2010 alone, so it’s understandable that consumers want to know precisely what they’re paying for. And with an endless supply of stories of how similar medical services are routinely being “priced five or 10 times more at one facility than at another down the street, for no apparent reason,” it shouldn’t come as a surprise that healthcare consumers are becoming increasingly vigilant about this information. They are, after all, among a new breed of consumer, most of whom are survivors of a recession that showed them the importance of finding the best value, and virtually all of whom are savvy enough to make use of the resources that will help them discover it.
- Payers. Similarly, many payers want transparency because studies show that “if the healthcare market reacts to price transparency in the same way as other markets, then increasing the transparency of price information available to consumers will improve competition and drive down prices.” That leaves payers on the hook for less and reverses the trend of rising deductibles and out-of-pocket premiums.
- Providers. As a report by the Healthcare Financial Management Association points out, whether it’s due to a hospital’s concerns about the accuracy of the services information provided by the clinicians, clinicians neglecting to supply information about the services to be provided to the hospital at all, or the simple fact that clinicians are often loath to the idea of talking dollars with the folks in their care, many providers do not want transparency. (Interestingly, this flies in the face of the findings of the Health Care Cost Institute, which noted last year that the pricing gap tends to close—and average costs increase—in markets where pricing is transparent.)
Costly short-term gains
Whatever a provider’s rationale for a lack of transparency, no amount of short-term gains will be worth it in the long run.
Just as the consumerization of online merchandise began in the ‘90s with Amazon.com, the consumerization of transportation began seven years ago with Uber, and the consumerization of lodging began eight years ago with AirBNB—much to the chagrin of their respective industries—so begins the consumerization of healthcare.
Put that way, the implications are pretty obvious. If the providers who are resistant to price transparency fail to evolve—if we don’t persuade them to shun price opacity and embrace the opportunity that the consumerization of healthcare creates, where the prices charged are backed by data that gives reasonable assurances about a specific outcome—then they will be permanently disrupted by a new wave of competitors who do embrace consumerization as a strategy, recognize the business advantages of rationalizing their numbers, and capitalize on the modern consumer’s appetite for finding the best value, if not the lowest price.
A busted incentive model
I did business with a forward-thinking cancer-treatment company years ago that focused on evidence-based medicine. They aimed to show consumers and providers the estimated cost, effectiveness, and toxicity of their drug, and how much a provider could expect to be paid for prescribing it. It was a simple, transparent process that incentivized appropriately while keeping everyone’s best interest front and center.
But today, most drug companies ignore those effectiveness and toxicity checkboxes, and the payment to the provider is based on the cost of the drug itself.
For example, if an oncologist is paid a six percent commission on a $100,000 drug he prescribed, he’ll make $6,000.
But if the oncologist prescribes a less toxic, just-as-effective $10,000 drug, he’ll make just $600. Yes, this drug is in the consumer’s best interest, but with the consumer none the wiser either way, what’s the oncologist’s incentive to prescribe it?
There’s no nice way to spin it. There is no incentive.
How this happened and what must happen next
We focused on digitizing records, EMR, and meaningful use rather than the patient. We focused on billing systems, not engagement systems. We waited for the external force of new, high-deductible plans to create pressure for change, which only aggravated the patient.
If we had focused on engaging the patient, the patient would’ve forced the establishment of the value-based system I’m describing here.
We’ve got to end the model as it exists today. We’ve got to forge new models that appropriately incentivize providers without betraying the consumer.
To do that, we must leverage the technology that embraces the transparency that consumers today expect from all of their buying experiences. When they ask “Is this the right treatment for me? What are its toxicities? What are the out-of-pocket costs? Can I make sure my provider is incented to do the right thing?”, we must give them clear answers.
For the providers discomforted by this sort of talk, my message is this: The world you started practicing medicine in is changing, just as the worlds of practitioners in other industries have already changed. New competitors are preparing to embrace the consumerization of healthcare, and if they manage to give their new brands a reputation for transparency before you do, then rest assured, your discomfort with this talk will soon come to a decisive end, but probably not in a way you’ll like.
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