Life Science Compliance Update

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March 28, 2017

Whatever the Question, Transparency Isn’t the Answer

Transparency

Many in political (and non-political) circles have blamed a lack of pricing transparency for increasing healthcare costs. However, as recognized in a study published in The Journal of the American Medical Association, improving transparency is not the answer. More than half of the states in the United States have passed laws that either establish websites with health care prices or require plans, doctors, and hospitals to disclose them to patients. Some employers and other organizations even provide health care prices to employees and the public.

However, according to the study, such transparency doesn’t always help patients spend less. The AMA article investigated the effect of transparency of the Truven Treatment Cost Calculator, a website that is available to more than twenty-one million workers and their family members. The website provides users with the costs (both the total price and the portion the user would be responsible for) from over three hundred services, including various sorts of imaging, outpatient operations and physician visits.

The researchers compared outpatient health care spending of 150,000 employees who had access to the website with that of about 300,000 comparable employees who did not. However, despite its features, the cost calculator wasn’t popular. Even though sixty percent of employees with access to it had a deductible of at least $500, only ten percent used it in the first year of availability and twenty percent after two years of availability. The study found that price transparency did not reduce outpatient spending, even among patients with higher deductibles or those who faced higher health care costs because of illness.

This Study is Not an Outlier

Many other studies show the same thing. Health plans report that use of their price transparency tools is limited, with many enrollees entirely unaware that they even exist. The majority of plans now provide pricing information to enrollees, but roughly two percent actually look at it. Aetna, for example, offers a price transparency tool to 94 percent of its commercial market enrollees, but only 3.5 percent of the enrollees use it.   

A study of New Hampshire residents found that only one percent used the state’s health care price comparison website over a three-year period. Another study found that the use of the price transparency platform Castlight Health was associated with lower payment for lab tests, advanced imaging and office visits; however, the study did not examine outpatient spending overall.

Why Is This?

Dennis Scanlon, a Penn State health economist, is not surprised by this result. “Health care choices are different than most product and services. Most decisions are driven by physician referrals, and insured patients usually face little variation in costs across options”

Another possible reason that people don’t cost-shop for health care is that they find the process to be too complex. As we have said time and time again, providing more information to consumers doesn’t always improve their decision making, in fact, many times, it can overwhelm a consumer and lead to poorer choices. It is easier to go somewhere based on a recommendation, even if it costs more.

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Health services are mostly based on recommendation, as most patients don't want to gamble with their life. Cheap might also be misconstrued to be poor quality services

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