Unlocking the Secrets of Health Care Price and Quality

If it were easy to see which doctors and hospitals provide the highest-quality care at the most reasonable cost, would that information spark competition? Would consumers facing high deductibles and out-of-pocket costs choose the more cost-effective providers?

The open-data movement has fueled development of many apps and analytics to assess hospital and doctor performance, but surveys consistently show consumers aren’t embracing the information. The problem isn’t with how the data are displayed, but with which data are available. We don’t have the data needed to identify providers of the most cost-effective care, making it nearly impossible to differentiate the best from the rest.

Publicly available financial information about hospitals is often inadequate. While average charges for many common hospital procedures are public information in California, they are no substitute for actual prices paid by real-world consumers and health plans. Worse, no public information exists on volume or quality of care, much less price, for most services provided by physicians, pharmacies, outpatient surgery centers, and other health care players. There are proprietary databases with information supplied voluntarily by health plans (such as the California Healthcare Performance Information System, Truven Health, and FAIR Health), but either the data are available only to the health plans that provided it or the data come with heavy restrictions on use. New public tools, such as the Health Care Cost Institute’s Guroo product, are hampered by spotty health plan participation and concerns over the confidentiality of negotiated prices.

With many people enrolling in high-deductible plans, Californians need a resource that helps them understand the costs of the networks they will be bound to — before they enroll. Consumers need help answering the question, How do costs of specific services for this provider network compare with other networks? Access to timely data — including actual amounts paid — through a broad, sustainable, publicly available solution is essential.

Transparency isn’t merely a philosophical ideal — it can intensify real-world competition. While it’s difficult to prove a link between public price data and measurable reductions in health care costs, the lack of such data contributes to an opaque and poorly functioning market.

New Hampshire, which has perhaps the most experience with price transparency, is one of only a few states with detailed and public price information. The California Health Care Foundation and the Robert Wood Johnson Foundation worked with the Center for Studying Health System Change last year to publish a report on how the use of such data has changed the market there. The New Hampshire study found that price transparency and heightened awareness of price variation changed the negotiating leverage in plan-provider contract negotiations and new benefit designs, which encouraged consumers to choose the most cost-effective doctors and hospitals.

Other states have also made progress. Colorado has released a showcase demonstrating ways stakeholders are using the state’s all-payer claims database (APCD) to better understand health care practices and cost drivers there. Massachusetts used all-payer data to report on total medical costs by physician group (PDF).

Based on the valuable lessons from these other states, a successful California APCD should include:

  • Mandatory participation. All major public and private payers must submit data.
  • Stable funding. This is necessary to cover ongoing operating expenses.
  • Independence. The APCD entity should be broadly accountable and flexible. California could adopt a hybrid model in which legislation defines rules of participation and financing, yet day-to-day operations, including data use approvals, would be delegated to a nonprofit contractor selected through a request for proposals.
  • Adaptability. The APCD governance body should have responsibility to develop comprehensive data release rules with the flexibility to modify them as needs change.

The Takeaway

The absence of publicly available payer data leaves consumers and policymakers in the dark, and the time has come to develop solutions that engage key participants. Patients, families, doctors, health care institutions, employers, and other purchasers of health care need greater and easier access to this crucial cost and quality information. California can build on the experiences of other states to unlock the data to advance a transformation in health care.

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