Healthcare Price Transparency Comes to America (Part 2)

In our previous blog, Healthcare Price Transparency Comes to America (Part 1), we started a conversation on price transparency.  Today, we will discuss the findings of a recent report from Health Affairs.  The report, by the researchers from Harvard and UCLA, noted that they cannot find a previous report or research on this subject, making it potentially the first in the space.  I can confirm I have seen nothing like it.  I will add that I am sure this will not be the last time this subject is published.

The published abstract read:

“The growing awareness of the wide variation in health care prices, increased availability of price data, and increased patient cost sharing are expected to drive patients to shop for lower-cost medical services. We conducted a nationally representative survey of 2,996 nonelderly US adults who had received medical care in the previous twelve months to assess how frequently patients are price shopping for care and the barriers they face in doing so. Only 13 percent of respondents who had some out-of-pocket spending in their last healthcare encounter had sought information about their expected spending before receiving care, and just 3 percent had compared costs across providers before receiving care. The low rates of price shopping do not appear to be driven by opposition to the idea: The majority of respondents believed that price shopping for care is important and did not believe that higher-cost providers were of higher quality. Common barriers to shopping included difficulty obtaining price information and a desire not to disrupt existing provider relationships.”

Some of the important findings are as follows;

Healthcare out-of-pocket spending has increased 41% from 2010 to 2014.

The average market place deductible is $5,000 (USD).

Half of the United States seek more price transparency in healthcare.

There is a great skepticism generated by the fact that nothing has worked yet.  It has been assumed that if price can be more transparent, market forces will drive down costs by creating competition.  I am reminded of the seminal book “The Wealth of Nations” by Adam Smith (1776).  There has yet to be an Adam Smith influence in healthcare as it relates to consumers.  Let’s explore.

We know that healthcare is a $3.5 trillion (USD) industry in the United States and growing.  That number represents well over 45 million Americans who are either underinsured or uninsured.

We also know that 85% of Medicare beneficiaries have supplemental insurance, so there is no real incentive to shop for prices.  While 150 million Americans probably pay too much for healthcare, even though that care is paid through their employer-sponsored health plan, they only notice the deductibles and co-payments.  That prescription patients pay $5 (USD) for, is likely but a fraction of the actual cost to buy and dispense.

The big problem is that consumers (patients) usually do not feel qualified or experienced enough to shop and compare cost and quality in healthcare.  As the study noted, 13% of Americans search for pricing for their healthcare needs; however, only 3% actually compared the pricing.

Where does that happen in any other industry?

Of the 13% of consumers searching, 63% called their caregiver/provider to get the information on cost, 25% use websites provided by their health plan, and 9% collected information on their own.  The study noted the great barriers to price shopping for healthcare services; and 72% of those surveyed strongly agreed that having more patients compare their healthcare pricing and quality or both was good for the United States.

Seventy-five percent of total respondents said they did not know of a resource that would allow them to compare cost amongst providers.  While 53% of the respondents reported that they would “likely” or “very likely” use the website to shop for price comparison, if one was made available.

The conclusions of the research paper are concentrated into three key points:

First, they found strong support among Americans for the idea of price shopping for healthcare.  The key barrier was the lack of availably of such a platform.  There was also clear indication that price information should be more available to patients.  The conclusion we would make is that it finally appears that the U.S. healthcare consumer is ready to price shop for their growing healthcare needs.

Our solution has been 20 years in incubation.  With the creation and explosion of the World Wide Web – we began seeing the innovation of price and quality available benefiting consumers going online.  The first to jump that got our attention were travel sites and hotels, and then full-blown e-commerce for anything and everything a consumer could want.  Some of us could even be diagnosed with an addiction to Amazon Prime.  However, healthcare has, until now, been treated differently.

We filed the first patent on the idea in 2008, expecting a market to eventually develop.  It took more years than we expected, however it seems the market is now ready and the technology is here.

It looks like in the next few weeks, starting in South Florida, consumers will have the option to both shop for prices in a competitive platform, and compare quality measures with consumer feedback.

What has been available for the last 20 years for nearly every consumer that chose to use the web is now coming to healthcare.  We want to bring transparency to all Americans, and join what we believe has just begun, a healthcare cost transparency revolution.

Are you ready America?

We are resolute that healthcare desperately needs the technology solutions that have impacted every other industry in the U.S.  After decades of waiting, that time is finally here.  The next couple of years are going to be transformational!

More on our expectation for 2018 in future blogs.

– Noel J. Guillama, President