June 20, 2016

NYT: Why price transparency tools have fallen short of expectations

Daily Briefing

    Online tools that aim to reduce costs by helping consumers become savvy health care shoppers may not be as effective as many stakeholders hoped, Reed Abelson writes for the New York Times.

    Transparency tools

    Several companies have launched web-based tools that use data drawn from medical claims and other sources to highlight in-network doctors and rank them by projected costs. Many tools also integrate physician reviews and information from consumers' health plans, such as whether they've met their plan's deductible.

    Some experts estimated that the increased transparency would result in billions of dollars in savings annually.

    Limitations

    But the tools have not lived up to expectations, and "the limits of this data are becoming increasingly clear," Abelson reports.

    'Price transparency' is misunderstood. Here's how to get it right.

    Consumers aren't necessarily using the available data—and when they do, the insights they receive may not be reliable, Abelson writes.

    "It is impossible to know, for example, whether a dermatologist who costs twice as much as another can more successfully diagnose skin cancer," Abelson says.

    Similarly, Kevin Volpp, director of the Center for Health Incentives and Behavioral Economics at the Leonard Davis Institute, says, "Price transparency tools are not likely the panacea that many have hoped for with respect to controlling health care costs."

    NYT: Tech company's struggles highlight limitations of data

    Castlight Health—a technology company and early supporter of price transparency—is a case that "exemplifie[s]" these tools' limits, Abelson writes.

    Castlight launched in 2008, offering a platform to make public the prices negotiated by insurers, hospitals, and physicians. Castlight promised employers that the price data would help workers make better medical decisions.

    When it went public in 2014, Castlight was valued at $3 billion.

    But since then, its stock has fallen 90 percent. That's because it's been more difficult than expected to change consumers' behavior, Abelson reports. The company also has had difficulty obtaining the data its services run on.

    In addition, some consumers are not price-shopping, which Abelson says could be the result of several factors:

    • Consumers facing a medical emergency may not have enough time to comparison shop;
    • Some markets may not have enough provider options or variation in prices to warrant shopping around; and
    • Price-shopping may not make sense in cases where insurers want policyholders to obtain care from a specific pool of providers in order to better coordinate care.

    Citing these and other reasons, a Health Care Cost Institute study this year said "the potential gains from the consumer price shopping aspect of price transparency efforts are modest."

    Opportunities remain

    Despite its initial struggles, Castlight says there is still significant unmet demand.

    John Doyle, COO at Castlight, says, "We are many years from the ideal, but the reality is if you're a patient today and going to be prescribed an MRI, the default is a situation where you roll the dice."

    In the meantime, Castlight and similar companies are shifting their focus to helping employers sort through data to control costs, explain benefits to workers, and identify sources of rising costs.

    Castlight says it can use such information to identify people who are prime candidates for provider recommendations.
    Still, Doyle says that while employers represent "an important fuel for our business," the company still aims to help consumers make medical decisions.

    "If we can't do that," he says, "at the end of the day, all of the complexity is for naught" (Abelson, New York Times, 6/16).

    How providers can develop the right price transparency strategy

    While some price transparency tools may be falling short of expectations, it's still imperative that providers have price transparency strategy to stand out in the health care marketplace, says Ed Hock, who leads Advisory Board's price transparency strategy team. "Providers who can share information quickly and clearly can steer patients away from their competitors," he explains.

    Beyond simply offering price information, Hock says organizations need a comprehensive strategy to realize returns on their transparency efforts, including understanding consumer and referral behavior and benchmarking key prices.

    To get ahead of the curve on price transparency, download our executive update, "National trends, local impact," to learn how price transparency legislation could affect your organization.

    Download now

    Then, download our recent study, "A patient-centric approach to price transparency," to learn how to develop a pricing strategy that satisfies the demands of your price-activated patients.

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