Forum Examines Price Transparency

Experts discussed the thorny issue of price transparency in health care — including the possibility of seeking legislation to align hospital prices in California — at a forum yesterday in Sacramento.

“Price transparency is leading to more cost containment,” said moderator Maribeth Shannon, director of California HealthCare Foundation’s  Market and Policy Monitor program. CHCF, which sponsored the event, “Inside the Black Box: The Future of Price Transparency in California,” publishes California Healthline.

“I do think price transparency is leading to lower costs at hospitals,” Shannon said at yesterday’s forum. “And it’s also leading to providers becoming more efficient, and this is the first time we’re seeing this.”

In 2011, the California Public Employees’ Retirement System, the second largest buyer of health care in the country after the federal government, started a reference-pricing program that set standard prices for medical procedures, such as knee replacements, as well as some medications and services. According to a report last week from the Center for Studying Health System Change, CalPERS saved about $3 million over the past two years.

“There have been lots and lots of analogies to describe this problem,” Shannon said. “Like if you drove up to a gas station and you didn’t know if it was $3 a gallon or $300 a gallon.”

But not knowing the price of an expensive medical procedure, and having that price vary from region to region — knee replacements, for instance, costing more in Sacramento County and less in the San Diego area — makes deciding on a procedure much more difficult, Shannon said.

It’s not just buying something expensive without knowing the price, as in the gas-station analogy, she said. “I think it’s actually worse than that,” she said. “It’s also not knowing how many gallons you needed or if the octane was right.”

Health care consumers need procedures to have similar costs from region to region, she said, and they also need to be able to compare outcomes and quality data related to that procedure.

According to Jill Yegian, vice president of policy and research at the Integrated Healthcare Association, consumers primarily care about three things in health care — cost, quality and integration of care.

For consumers, she said, “Low cost equates with low quality,” and that doesn’t bear out, when you overlay the cost numbers with quality numbers across the state. “When you look at the cost and quality composites you can see the correlation is pretty weak between quality and cost,” she said.

One suggestion is to establish one central location for all claims data, said Adams Dudley, professor of medicine and health policy at the Philip R. Lee Institute for Health Policy Studies at UC-San Francisco.

“An all-payer claims database takes data from all commercial insurance companies and adds in government-generated insurance and adds up all the claims,” Dudley said.

The tricky part is deciding who would control that data, he said.

“There isn’t a legal structure yet for managing it,” Dudley said. “Where would the database reside? And who would oversee the database and [set up its] restrictions?”

The answer in some other states, he said, is either through a government department or a not-for-profit organization.

“The majority of models have been to use the government as a custodian of the data,” Dudley said.

That didn’t go over too well with audience member Anne McLeod, senior vice president of health policy at the California Hospital Association.

“We identified many cost drivers that are not in your presentation,” McLeod said. “Hospitals are affected by geographic cost, by workforce availability, it depends on the discount and charity care, all of those things impact cost. If there’s going to be this concerted focus on price, there also must be a concerted effort to focus on the cost of the system. Otherwise, I think there could be unintended consequences to well-meaning legislation.”

“I think having price transparency would really help us,” Shannon said in reply. “If we had better information about all of those drivers, that would be helpful.”

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