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The promise—and challenge—of health care 'transparency'

From the May ACP Observer, copyright © 2006 by the American College of Physicians.

By Robert B. Doherty

"In an ideal system, Americans would be able to choose their health care based on their individual needs and preferences. Information about the range, price, and quality of available health care options would be readily available and easy to use. Purchasing decisions would be made by consumers, not by employers, insurers, or the government. Competition and market forces, rather than government price controls, would be relied upon to improve the quality and efficiency of health care and to reduce the growth of health care costs."—President George W. Bush, in a letter on health care reform, Feb. 15, 2006

Earlier this year, the administration's top economic and health policy advisors asked to meet with representatives from six major physician and hospital associations, including ACP, to discuss President Bush's vision of introducing "transparency" into health care decision-making.

In economic circles, transparency means giving consumers the different cost and quality information they need to make an informed choice about what they want to buy. With such comparative data, the marketplace thinking goes, consumers will be able to select those products or services that offer them the best value.

Free markets, in fact, depend on transparency. Without it, consumers couldn't prudently choose one product over another. And without transparency, product suppliers have no incentive to compete on the basis of cost and quality.

Toward a medical Orbitz?

The push for health care transparency is part of the administration's broader agenda for "consumer-directed" health care. That agenda also includes expanding tax-favored health savings accounts (HSAs), which give patients incentives to save for their own health care and to weigh the costs of different providers and treatment options. (See "Will HSAs lead to smarter spending or sicker patients?")

But HSAs will not help consumers become more cost-conscious or create price competition among providers unless patients can in advance compare the price and quality of services and treatments offered or recommended.

During the White House meeting, the president's top economic advisor specifically asked us—representatives from ACP, the AMA, the American Academy of Family Physicians, the American Hospital Association, the Federation of American Hospitals and the Catholic Health Association—to create the health care equivalent of Orbitz. That's the popular industry-sponsored Web site that allows consumers to compare fares, connections, seating and on-time performance of competing airlines.

Following up on that request, the College reviewed its existing policies on consumer-directed health care and on disclosing price and quality data to patients.

ACP is on record as encouraging internists to disclose their fees to patients, whenever possible, before rendering services. We have also urged internists to consider participating in voluntary programs to measure and report both the quality of the care they provide and patients' satisfaction.

Last year, the Board of Regents approved a policy monograph on consumer-directed health plans, which pointed out that consumers with HSAs need information to help them decide how to allocate their limited financial resources. "[I]nformation and decision-support tools," the monograph stated, "must be accurate, accessible, and understandable to consumers." (The monograph is online.)

Information obstacles

It is clear, however, that giving patients the information and decision-support tools they need in health care is much more complex than just comparing airline fares and arrival times. The College's initial examination of the issue found that introducing transparency into the medical marketplace depends on a convoluted set of circumstances and challenges:

  • Physician fees for a specific service or procedure have little relationship to the total cost of care. Knowing how much an internist charges for a "typical" office visit, for instance, doesn't tell the patient anything about what level of office visit may be required, what tests or procedures may have to be ordered, or what other costs could be incurred for referrals to other physicians or health care facilities.

    The costs associated with an entire episode of care would be a more relevant indicator—but cost-of-care measures are still very much in their infancy. Those measures would have to encompass the services of multiple providers, rather than a single physician, to be meaningful.

  • Physicians rarely have a single retail "fee" for each service. Instead, the fee they charge—and the amount they actually collect from the patient—is a function of a specific contract signed with a particular insurer.

  • Telling patients what a physician's retail fees are for common procedures still doesn't let patients know what they will have to pay out-of-pocket—unless insurers also disclose how much they reimburse for a given service and how patients can calculate the difference in advance.

  • The fees physicians can charge and the amount they can collect from patients enrolled in Medicare, the country's single largest health care payer, are subject to strict price controls.

  • Comparing prices could be misleading unless patients also have comparative data on the quality of care provided. However, we are still very much in the early stages of developing physician-specific, evidence-based quality measures that can be reported to the public.

  • And finally, there is little evidence to date that patients are willing or able to consider the price of services when seeking medical care for themselves or family members, particularly for non-elective, urgent or potentially life-threatening illnesses. To the extent that patients would consider price, experts are concerned that patients may forgo beneficial treatments.

The College's Medical Service Committee is developing a response to the White House that acknowledges the potential benefits of health care transparency while explaining the many challenges. From a policy standpoint, introducing transparency in health care makes sense. Patients should be able to know about the quality and cost of care they will receive from a particular physician or hospital. And the College and the medical profession should be involved in designing ways to make such information accessible and transparent.

But any model for health care price transparency must take into account the special circumstances involved in patients' medical decision-making and the peculiar way that health care is financed in the U.S. Any transparency model we adopt must be created specifically for and by those who deliver and receive health care services, instead of being one grafted onto medicine from another industry.

Robert B. Doherty is ACP's Senior Vice President for Governmental Affairs and Public Policy.

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