A New Wave of Accelerated Transformation

Submitted by francois.debrantes@hci3.org on Friday, March 20, 2015 - 05:47

Newtown, CT – March 20, 2015

This week, another myth was proven false and opens up a new wave of accelerated transformation – Many in the industry, in particular the hand-wringing crowd and the false proponents of transparency, had claimed that barring actionable information on the quality of healthcare, consumers would equate higher prices with better quality and, therefore, price transparency could backfire. That argument was debunked and laid to rest with the release of a thoughtful and well-researched report by Public Agenda. There are many important findings in the report, but probably none greater than consumers don't equate higher prices with better quality and, in parallel, don't equate lower prices with lower quality. Less surprising, but also of note, the report shows that the demand for information on the price of healthcare increases with the size of the deductible and out-of-pocket costs; that consumer-patients want a full estimate of the costs of an office visit before they leave the doctor's office; that those with incomes lower than $100k a year are more eager to get price information; and that most don't realize that the prices negotiated by their insurer vary from provider to provider.

What this means to you – Despite the decades-old research that clearly identified consumer price-sensitivity to health care services, the myth that consumers would auto-flock to the most expensive providers, using price as a proxy for quality, was difficult to slay. In public hearings held by legislators across the country, some health insurance executives warned of dire consequences if prices became transparent. Prices will soar, went the argument. Well we knew then it was a bunch of hooey, and even more so now. And it's simple common sense. The folks who want price information are now in the majority because the majority of Americans make far less than $100K a year, have high deductible health plans, and have pretty much come to understand that they don't get more reliable care at the marquis name facility than they do at their community hospital or physician's office. Perhaps the combination of billboard fatigue, experience with other complex goods and services, and the unending streams of reports on unwarranted variation in quality, have all finally contributed to putting all providers on an equal footing of general mediocrity. And those that might bemoan that state – and they should – have only themselves to blame. As we've reported in the past, quality measures have been designed on purpose to fail to differentiate performance, and until that's fixed, everyone measures up to the same level. And so price becomes important. High prices are recognized as simply being that, and lower prices convey a market advantage. Those that have spent time re-engineering their care processes to become more efficient will, in fact, be rewarded by the market. The others will be punished. That's no longer a myth or a hypothesis, it's a reality. A welcomed reality that is about to usher in a great new wave of market transformation.