Two years ago, Massachusetts passed legislation that took effect on Oct. 1 mandating insurers post healthcare pricing information online. Anyone with private health insurance can go to an insurer’s Website to find the cost of services ranging from an office visit to a C-section.
This is a big step in healthcare transparency, and one that began without much fanfare. But many other states have already blazed a similar path. And examining their experiences can give us some idea of what this new, more transparent era of healthcare may look like.
A national movement
Massachusetts isn't the first state to delve into healthcare transparency. To the contrary, many have some kind of voluntary or mandated price listings—but they come in various formats.
For instance, Arizona passed a law last year requiring large medical facilities to post patient costs for the 50 most common medical procedures. Smaller hospitals have to provide pricing for the 35 top procedures.
At around the same time, Rhode Island’s insurance commissioner required insurance companies to remove privacy clauses with hospitals so pricing information can be made public, notifying insurers that they had to submit plans by April outlining how they would be posting cost information on their sites.
A similar bill failed in Washington earlier this year. It was challenged by Premera Blue Cross, the state’s largest private health insurer. According to the Washington Post, the insurer had a specific business interest in keeping the information under wraps: if providers could get online and compare pricing, they would know pretty quickly who was – and wasn’t – getting the best reimbursement deals.
Progress in price transparency is, much like healthcare itself, contingent on which part of the country you're talking about. The nonprofit Catalyst for Payment Reform, which grades healthcare pricing transparency laws, stated in its most recent report that only five states did not receive failing grades for their efforts. Maine and Massachusetts received Bs, and Colorado, Vermont, and Virginia managed Cs.
Colorado is one state that has made progress in this arena with a law in 2010 that required public reporting on pricing for utilization, spending, costs, quality, and safety. Some of this reporting began in 2012; but, this past July, the Center for Improving Value in Healthcare also began publishing comparative pricing for four procedures: total knee replacement, total hip replacement, uncomplicated vaginal birth, and cesarean birth.
Jonathan Mathieu, director of data and research at CIVHC, said the group will be adding information on outpatient procedures, emergency room visits, imaging, and physician office visits over the next year or so. It only makes sense, he said, to have health information made public.
“Anything you buy, especially big-ticket items, information on cost and quality is readily available,” Mathieu said. “And you wouldn’t buy a car or washing machine without doing some pretty good research on cost and quality.”
Mathieu said early visitors to the pricing site were policymakers, and others were interested in the information for research. It is likely more consumers have visited since this summer, but that's hard to tell since the organization doesn't track visitor demographics.
Mathieu did speak with officials from New Hampshire, one of the earliest states to post pricing information, who said there is equal utilization of its state’s site from consumers, providers, and payers.
“Providers and payers are spying on each other,” he said.
Market impact
New Hampshire began posting its all-payer claims database in 2007 with the median bundled prices for provider- and insurer-specific costs. The California Healthcare Foundation and Robert Wood Johnson Foundation compiled a report on the market impacts of New Hampshire’s pricing transparency, finding that it didn’t serve to stimulate consumer shopping. Rather, it worked to change market dynamics.
One way it changed things was by creating a shift in health plan and provider relationships. For instance, Anthem Blue Cross Blue Shield and Exeter Hospital waged an epic battle over the newly-displayed information. In 2010, Anthem threatened to cancel its contract with the provider after seeing its rates were approximately 50% higher than some of its competitors. Exeter attempted to ask for small rate increases, of just 3% annually, but Anthem stood firm. Eventually, Exeter—a high-cost outlier in the region—was forced to agree to a contract that cut reimbursement rates.
New Hampshire also began shifting towards a system that, much more so than other regions, rewarded healthcare consumers for being price-conscious. These changes included high-deductible plans and site-of-service plans, which are particularly popular in the state. Such plans charge consumers no fees for receiving services at less expensive providers like independent labs, small co-pays for medium-cost providers, and full deductibles for services at high-cost providers like hospital labs.
Hospitals have responded to the market movement by creating non-hospital based laboratories and urgent care centers that cost substantially less than their traditional services. Lower-cost providers have used their numbers to become preferred providers of insurers and as a marketing tool, posting price comparisons on their own sites, the study authors noted.
“The result in New Hampshire was a narrowing in the range of amounts paid for common procedures,” Mathieu said. “You used to see three- to four-fold variations in the range of payments... Now the high-cost providers have come down and you see a smaller range.”
These sites' goal is to help consumers make value-based healthcare choices—which makes sense considering the large variance in pricing. According to Colorado Medical Price Compare, prices for an adult hip joint replacement in the Denver area range from $47,668 at Denver Health to $89,736 at Exempla Saint Joseph. The WBUR article reported that prices for an MRI range from $614 at New England Baptist to $1,800 at Boston Children’s Hospital.
But studies are finding the biggest impact will likely be on larger purchasers like employers.
West Health Policy Center released a study last spring finding that mandating private health insurers to provide information on out-of-pocket expenses to enrollees could save $15 billion to $20 billion over the next 10 years. The authors noted that the impact would be somewhat small because of the meager use of similar tools already available to consumers.
Creating an all-payer database across a state that reported hospital prices, however, could save up to $55 billion over the same time period. This would have greater impact because of its potential ability to put pressure on hospitals to lower prices and by encouraging employers that are aware of pricing realities to use their leverage to change benefit options and narrow networks.
“That’s where we are going to see real movement is employers with self-funded plans; they are going to have to take the bull by the horns and demand information and act on it,” Mathieu said. “The system is extracting a lot of money from them and they are coming up with ways to lower costs.”