HCI3 Update from the Field: Price Warriors had the Upper Hand

Submitted by francois.debrantes@hci3.org on Friday, November 22, 2013 - 01:18

Newtown, CT – November 22, 2013

It seems that, this week, in the battle between the price fixers and the price warriors, the latter had the upper hand – Last week the infamous (for good reason) RUC announced boldly that it had started to embrace "transparency". Now before you fall off your chair and think that the rotation of the earth has shifted, understand that the RUC's concept of transparency is to post the minutes of the meetings and votes for the public AFTER all decisions are made and CMS has released the new physician fee schedules…you really can't make this stuff up. And to boost the foundation of the RUC, some are arguing seriously that RVUs are useful and should be kept, albeit modified. The price fixers honestly believe that continuing to tweak with the value of the RVUs will correct some of the current distortions. This is a little like the social engineering types who believe that tweaking a few variables will always produce better results than the market ever could on its own. Amazing that after the abject failures of the past and present, there are still some who believe that if only we turn down a few dials and turn up a few others all of the misappropriations of capital will correct themselves. As if. The only outcome of such tweaks will be different types of distortions, but distortions nonetheless. Thankfully, these jokers seem to be in the minority. The majority seems quite certain that another approach is needed, and we agree.

What this means to you – from the beginning of modern commerce price has been the mechanism to create equilibrium between supply and demand. However, in the US healthcare system, price is opaque. It is actually not used to balance supply and demand because third parties constantly interfere with the mechanisms that would otherwise naturally exert themselves for this purpose. The RUC is one example – a group of individuals who determine the value of each service irrespective of its demand and who have injected massive distortions in supply. Tweaking it serves no purpose. Many have set themselves on a path to change this state of affairs and CPR published a report this week that highlights some of the best practices in price transparency. There is clearly a way to go to get to good, but what we have today is at least a start and certainly better than the alternative. And while the CPR report points to tools that provide transparency, Mark Fendrick and colleagues explain how benefit design can be used to truly activate consumer-patients to demand and act on pricing information. Value-based insurance designs are the needed corollary to greater market transparency, and their effect can be immediate and unambiguous. So we all are faced with a choice, to support this nauseating incrementalism that has plagued the industry for so long and caused such harm to Americans, or finally allow the normal and well accepted forces of the market to exert themselves. Hmmm…..what should we do???