Beyond Price Transparency: How Employers Can Help Employees Make the Best Healthcare Choices

Liz, a 59-year-old Dallas resident, is about to have knee replacement surgery—a procedure that will cost her and her health plan a significant chunk of money. What Liz doesn’t know is that how much the surgery costs depends entirely on where she gets it done. And what she really doesn’t know is that the cost of knee replacement surgery varies in Dallas by an astonishing amount: from $17,000 to $61,000.


Fortunately, Liz’s health plan offers an online tool where she can look up the cost of a knee replacement at different Dallas locations and find the best price. Unfortunately, she is one of the 90 percent of employees who simply don’t use transparency tools.

A study published this month in JAMA revealed that only 10 percent of employees at two major U.S. companies used the price transparency tools their employers offered. The study also revealed that making the tools available didn’t result in lower healthcare spending.


The idea behind transparency tools in healthcare is that consumers will use them to shop for the lowest price, saving themselves, their employers and their health plans money. In an industry where costs are hugely variable, making prices transparent is a positive step. But clearly it isn’t sufficient.


Eliminating Low-Quality, High-Cost Options


The question remains: If price transparency tools don’t help consumers choose the wiser, low-cost option, what will?

In a recent article, Craig Garthwaite of the Kellogg School of Management at Northwestern, submits that the right financial incentives could solve the problem. He suggests that if insurers limited what they’re willing to pay for procedures, consumers would start shopping for better prices.


Certainly, putting the right carrots and sticks in place to incentivize consumers could change the way they shop for healthcare … eventually. But why waste time tweaking incentives and then hoping consumers change their behavior? The weakness of this approach is that it still puts the onus of lowering the cost of healthcare on consumers. A further weakness is that transparency tools may end up sending consumers to providers who are indeed low cost—but also low quality. While saving money in the short term, this approach would likely be detrimental to consumers’ health and could lead to future, expensive complications.

Wouldn’t the two large employers featured in the JAMA study have been better off simply eliminating high-cost and low-quality options from their health plan altogether? Wouldn’t they be better off just removing waste and harm from the system? By eliminating poorer options from their plans—and by specifically focusing on quality—employers put consumers in a position to make good choices.


Fortunately, employers don’t have to comb through their plans procedure by procedure to eliminate the high-cost, low-quality choices. Health plan solutions exist that contract exclusively with the highest-quality providers, ensuring a superior care experience for employees while bending the cost curve for employers. 


At its core, such an approach by employers isn’t about saving money—though it does have that effect. It’s really about protecting employees’ health and safety. Consider the fact that it is the norm, not the exception, to see complication rates that are 30 percent higher in a hospital that is less than five miles away from another hospital in the same network.  It is also common when comparing two hospitals within five miles of each other to discover that one of those hospitals has twice the severity- and risk-adjusted mortality rate of the other hospital.


Most employees are unaware of these quality differences. Rather than directing employees to the highest-quality providers, most health plans leave them to rely on advertising, reputation or friends’ recommendations when selecting a provider. By demanding only the highest-quality providers for their network, employers can improve safety for their employees— reducing the likelihood of complications and other adverse events. They also take the responsibility of finding the highest-quality, lowest-cost providers off of their employees’ shoulders.


Let's reward providers who deliver high-quality care, and cut off access to those who don't.  It's simple.

Rick AbbottComment