Newtown, CT – April 6, 2012
What does it take to activate a consumer? Impact on the wallet and information on cost and quality – it's a super simple formula, and one that every employer in the US has understood for decades. In the 1990s, the formula was very effectively applied to HMOs (lower co-pays and heavy premium subsidies + NCQA accreditation), but as the market moved away from that simple product approach, the formula was put on a shelf. Pricing information on specific procedures or even units of service was close to impossible to pry out of health plans or claims data – too much variation, small sample sizes, lack of severity adjustment. So employers focused on providing employees with information on the quality of care, with patient safety measures coming from the Leapfrog Group and ambulatory care measures from programs such as Bridges To Excellence. Employers separately focused on the wallet by instituting consumer directed health plan designs. That has been successful at activating consumers about the price of care, and now they want to know the price before they access services. A story in today's USA Today illustrates how challenging it will be for employers to use average prices given their variability. And that's why many employers have started to use reference prices for certain procedures, engaging employees in newer forms of value-based purchasing. At the same time, they're also encouraging them to improve their health habits by, again, hitting their wallets. And this activation can work, as reported by Judy Hibbard and Shoshanna Sofaer a few weeks ago.
What this means to you – Market dynamics in health care will not work without the active participation of consumer-patients. Employers have long understood this and used the simple formula of information and incentives to drive behaviors in the right direction. New sources of information on quality are now widely available and user-friendly. Good sources of information on price are still emerging and need considerable refinement to avoid providing simple – and often misleading – averages. Price varies by provider, not just because of differences in negotiating power, but also due to the competence of the provider and the mix of services they use. Ultimately, there are only two ways to turn consumer-patients into active health care shoppers: go back to the HMO model, having them shop for organizations from whom they get all their care, or go to negotiated episode costs, having them shop for specific provider teams from who they get care for a specific medical event. The formula is simple, it simply needs to be applied.
Francois de Brantes
Health Care Incentives Improvement Institute, Inc.