Transparency in Healthcare: We Have to Start Somewhere

“Uncertainty as to the quality of the product is perhaps more intense here than in any other important commodity.” – Dr. Kenneth Arrow, Uncertainty and the Welfare Economics of Medical Care

While the challenges of measuring healthcare quality may seem like a current issue, this seminal paper from way back in 1963 identified the problem and attributed much of it to“asymmetric information.” A key difference between medical care and other industries, the author claimed, is that the physician has so much more information about the “product” being sold than the patient. Transparency – easily accessible and understandable information about the cost and quality of healthcare – seeks to address this asymmetry. 

Transparency is not a new concept; in fact, it is a foundational element in healthcare consumerism strategies, which generally seek to put more economic purchasing power and decision-making abilities in the hands of consumers. Now, rapid advances in information technology are driving the hope that meaningful healthcare transparency is finally in reach. In the last decade, many companies have been established – some funded mainly by venture capital – to help consumers with this issue. Castlight, Healthcare Blue Book, mpirica and Amino are just some of the names in this rapidly growing industry. Most have been actively working on apps that can help consumers choose a quality provider and give them some idea of the cost of services.

Price transparency alone isn’t enough

Meanwhile, the government has taken on price transparency with recent regulations that require group health plans to provide a self-service price transparency tool as well as to make machine-readable pricing files publicly available. Health insurers are responsible for the fully insured plans they offer, while employer plan sponsors must ensure compliance for their self-funded plans.

The intentions behind these regulations (which have yet to be finalized) are commendable – but the problems with them are monumental. To start, most self-funded employers don’t “own” – or even have! – price information at the service level, since this data resides with the carriers they contract with that maintain medical provider networks. But beyond the practical consideration is a deeper concern – the fact that the regulations focus exclusively on price transparency, leaving quality out of the equation. In a comment letter to the agencies that issued the regulations, Mercer stated, “Providing price transparency tools to participants as the sole metric to assess healthcare options is not only misleading, but irresponsible.”

Strong words. I’m proud that Mercer was willing to put forward a clear point of view on an issue of such importance to employers. We asked the agencies to require that quality metrics be included alongside cost information. Otherwise, consumers may conflate cost with quality, leading to unintended consequences – because, again, healthcare is not like other industries. Most people would not choose lower quality healthcare even if it costs less, and because they are insulated from price by insurance, they don’t have to. 

For a view of both price and quality…

To support this point of view, we’ve been working hard on a tool that can help bring transparency to employer health plan strategy. QualPic is Mercer’s proprietary database tool that functions as a diagnostic in markets across the country, helping paint a picture of cost and quality for different categories of care, ranging from primary care to orthopedics and more. By looking at consistent metrics across markets, employers can start to understand the amount of variation in healthcare cost and quality from one location to the next. The practical application of this information is identifying and quantifying savings opportunities in shifting care from some providers to others. How knowledgeable are you about healthcare quality? Take our Qualpic Quality Quiz to find out.

For too long, we’ve accepted the excuse that measuring quality in healthcare is just too hard. It’s 2020, and with data science on our side, we’re ready to turn this conversation into action – no matter what the regulatory future holds. Let’s get started!

 

Mason Shea
by Mason Shea

Principal, Actuary, Mercer Health and Benefits

Register for Mercer US Health News to receive weekly e-mail updates.