Price & Quality of Health Care is an Essential Component of a Reformed Market

Submitted by hci3-usr on Friday, May 6, 2016 - 12:19

Newtown, CT – May 6, 2016

In a paper questioning the effectiveness of price transparency tools, JAMA scored media attention points, but they’re pretty cheap points. There are several researchers in the U.S. that have devoted a significant portion of their academic careers understanding how consumers react to price and quality information and the conclusions of that research is very consistent with the findings from this paper. First, absent quality information, price is seen by most consumers as a proxy for quality. In other words, for the purchase of goods and services that are not perceived as commodities, price is used as a gauge of quality, with higher prices equating to higher quality. When a good or service is viewed as a commodity, then lower prices are a signal of a good value rather than a low quality product. That’s why a prior study on a price transparency tool showed that for common commodity-like services such as lab tests and diagnostic imaging, consumers selected the lower priced services. In the current JAMA paper, most of the searches seemed to be on episodes of care with a high average price point, and it’s reasonable to hypothesize that consumers used the price transparency tool to identify providers that they assumed were of “higher quality” because they had higher prices. So none of this is surprising, but the obvious needs repeating.

What this means to you – Six years ago, Judy Hibbard and Shoshanna Sofaer published a series of three reports for AHRQ that clearly and unambiguously explained the limitations of comparative performance tools, and exposed the dangers of offering price information without quality information. Of course that research was ignored by pretty much everyone developing price transparency tools for employers and the results were predictable. Clearly, that didn’t stop JAMA from publishing a paper that restates the obvious, but then again price transparency is a lot more media sexy today than it was six years ago, so why not grab the headlines. Judy’s 2010 AHRQ reports were based on decades of her research and reconfirmed through structured focus groups. Since then, Judy has continued her research to look at how comparative provider performance should be presented to consumers of various literacy, social and ethnic backgrounds to ensure understanding and actionability. Employers should mandate that transparency tools include the best practices identified in Judy’s and other’s research, in order to avoid predictable and unfortunate bad outcomes. Because let’s be clear here, anyone using the JAMA paper as an excuse to pull back on the deployment of price and quality transparency is disingenuous at best, and most likely simply an agent of the status quo protecting a self interest. If consumers didn’t care about pricing information you wouldn’t have legislatures in a dozen states working to pass legislation mandating price transparency. There should be no question in anyone’s mind that publishing the price and quality of health care is an essential component of a reformed market. What we should all question is the stupidity of those who design tools that fail to meet the basic standards of common sense and ignore decades of research identifying best practices; and of those who buy them.


Francois Sig
Francois de Brantes
Executive Director