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Price Transparency Tools Focused on Unit Cost are not a Panacea for Rising Health Care Spending

Author: Schuyler File

Category: Employee Benefits

Most of today’s health care price transparency tools are unable to limit health care spending as promised by the companies touting the technology. This is concerning because more employers are considering or utilizing price transparency tools to help employees become better health care consumers. Price transparency is a good thing, but price transparency based on unit cost misses the mark. Unfortunately, most price transparency tools available today focus on unit cost. To be valuable, a more comprehensive approach to price transparency is needed that focuses on the cost of treating a condition over a period of time (the “episode cost”). Episode cost is a much better measure of health care cost because:

 

  • Episode cost can be used as a metric to boost highly efficient providers who are able to achieve quality outcomes (“value providers”). Value providers may not provide each unit of service at the lowest cost. However, value providers provide care at a lower total cost that results in better outcomes across patient populations (e.g., less hospital re-admits, less burden of infection, etc.). Unit cost transparency encourages low cost care without regard for quality outcomes. It is important to have transparency tools that drive care to value providers, especially as the payment for health care services shifts from a fee for service/unit cost model to episode/outcomes based approach (e.g., accountable care networks, bundled payments, and other risk based payment arrangements).

 

  • A disproportionate share of employer health care spending is for the treatment of chronic conditions. Treating chronic conditions requires complex treatment plans. A patient seeing a low unit cost provider to “save a few bucks” may see false savings from one particular transaction that actually causes the total cost of care to increase. This is particularly true when a low unit cost provider does not use the same medical records system or is not incentivized in the same way that a risk taking provider that manages a chronic condition is incentivized. When incentives, processes, or systems are not aligned in treating chronic conditions, there is higher likelihood of failing to treat a condition or of providing redundant care that may drive up the total cost of care.

 

  • Episode cost transparency provides insight into whether a procedure is necessary prior to determining which provider offers the lowest unit cost. If you are utilizing a price transparency tool that is determining the lowest unit cost between two providers that are providing unnecessary care, you are using a price transparency tool that is not delivering the kind of value that should be expected. Episode cost transparency tools are utilized by consultants with a deep understanding of high value health care. Many consultants are willing to put some compensation at risk based on the value the price transparency tool provides to the employer.

 

To learn more about episode price transparency or if your company has questions about an existing price transparency tool, contact Schuyler File at [email protected], or your regular benefits contact.

About the Author

Schuyler File

Posted in: Employee Benefits

Posted by Schuyler File

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