From The Editor | March 20, 2013

A Perfect Storm For Price Transparency

Source: Health IT Outcomes
Ken Congdon, Editor In Chief of Health IT Outcomes

Last month, my three-year old daughter required outpatient surgery to have tubes put in her ears. My wife and I were both astounded by how quick (and relatively painless) the process was. We arrived at the surgery center at 8 AM, where we spent the first 30 minutes answering questions, filling out paperwork, and outfitting my daughter with her patient wristband (which she referred to as her new bracelet). We were then escorted to a patient prep area where we changed my daughter into a surgical gown, and the nurses administered a drug they called “silly juice” to calm her before they carted her off to the operating room and placed her under anesthesia. The surgery itself only took about 10 minutes from start to finish. My wife and I were shocked with how quickly the doctor came out to the waiting room to tell us how the procedure went, and to show us to the recovery room where our daughter was already awake and eating a Popsicle. About 15-minutes later, we loaded my little girl into the car and drove home.

As pleasantly surprised as my wife and I were with how streamlined this surgical experience was, we were equally as horrified when we received the medical bills for this procedure a few weeks later. We received one bill from the surgery center for $8,952.77. We received another bill from the ENT physician for $1,456.00. Finally, we received another bill from the anesthesiologist for $391.80. So, this 10-minute procedure cost a grand total of $10,800.57. You’ve got to be kidding me. I felt like one of those unfortunate souls featured in Steven Brill’s recent TIME Magazine article Bitter Pill: Why Medical Bills Are Killing Us. (If you haven’t read this article yet, I encourage you to do so.)

Lucky for me, unlike the patients featured in Bitter Pill, I have a family health insurance plan with a relatively low deductible, so my out-of-pocket expenses for the surgery were a fraction of the $10,800.57. That being said, through this experience, a troubling fact I was clearly aware of finally hit home — there is no price transparency in healthcare. Historically, health providers haven’t been motivated to provide detailed cost information upfront because most insured patients don’t care. I’ve been one of these patients.

My family members and I have had health insurance my entire adult life. We’ve been very fortunate in this regard. However, the comfort in being “covered” often blinds us to much of the waste and outrageous markups that occur in healthcare. Let’s ignore for a moment the $10,800.57 price tag on my daughter’s tube surgery. I think we can all agree that there’s no good reason why this 10-minute routine procedure should cost this much. Besides, Brill already explained this painful phenomenon brilliantly in Bitter Pill. Perhaps more troubling than the charge itself is the fact I didn’t even think to ask how much the surgery would cost before we scheduled it. Even if I had, there’s a high likelihood that the healthcare provider wouldn’t have been able to give me an accurate estimate because of the different players involved.

This is a problem. In what other industry are costs clouded in such mystery? Where else would you make such a significant investment without evaluating your options? I can’t think of another. Competition breeds not only innovation, but price performance. Unfortunately, too few patients shop around when it comes to health services. What would the healthcare industry be like if more did?

A Prototype Of The Empowered Patient

A glimpse into this dream world was recently provided by Dave deBronkart (aka. e-Patient Dave), renowned blogger and patient activist. A little more than a year ago, e-Patient Dave discovered he had a slow-growing form of skin cancer called basal cell carcinoma. Being self-employed, e-Patient Dave carries a health insurance plan with a high ($10,000) deductible. Considering most (if not all) of the cost to treat his skin cancer would come out of his own pocket, e-Patient Dave decided to fully evaluate his treatment options and the associated costs before selecting a care path. He started by asking local hospitals and physicians about their suggestions for treatment. All immediately suggested Mohs surgery — an effective microscopic procedure where one layer of tissue is removed at a time to ensure all the cancer is eliminated while preserving as much healthy tissue as possible.

When e-Patient Dave asked providers for cost estimates for this procedure, he couldn’t get a straight answer. He also had difficulty getting these providers to propose alternate treatment options. Frustrated, e-Patient Dave took action and submitted a detailed RFP to several local, regional, and national health providers to provide him with all viable treatment options and the associated costs for removal of his basal cell carcinoma. This RFP is a stroke of genius. However, as one might expect, it took months for him to get a response from any of the providers he contacted. However, in the end, the results were telling.

The Mohs surgery every provider suggested was the most effective treatment option. However, it was also the most expensive. Research shows that after Mohs, the cancer recurs in only 1% of cases. However, estimates for the procedure were between $3,000 and $7,000 (depending on how many stages were necessary). Excision (simply cutting the cancer off) was another option. It was less effective (cancer recurs in 10% of cases), but much less expensive (approximately $750 to $2,000, depending on the level of complexity). Finally, a third option, ED&C (electrodessication and curettage), was slightly more effective than (cancer recurs in 7.7% of cases) and price comparable to simple excision. When presented with all of the data, e-Patient Dave made the decision to go with the ED&C, and his cancer removal only cost him $616 (all in). Through his efforts, e-Patient Dave was able to treat his cancer for thousands of dollars less than if he had blindly followed his provider down the Mohs surgery path. This is an amazing story. You can follow e-Patient Dave’s entire cancer treatment journey by reading his blog.

Are You Ready For The Price Transparency Engaged Patients Will Demand?

So what does all of this have to do with healthcare providers and IT? I guess my message to you is this — the time for price transparency in healthcare is on the horizon. This shift won’t occur overnight. In fact, it may take a generation to become the norm, but it’s coming and you need to start preparing for it.

Say what you will about healthcare reform. There are definitely arguments for and against the impact ACA will have on the economics of healthcare. In the end, it really doesn’t matter because the demand for price transparency in healthcare ultimately won’t be driven by a piece of legislation. It will be driven by the patients themselves.

In this regard, ACA may be the first domino to set this patient uprising in motion. For example, as a result of healthcare reform, we are likely to see more individuals and employers opt for insurance plans with higher deductibles. As more patients bear the brunt of paying a greater percentage of healthcare expenses out of pocket, they will undoubtedly become more informed and cost-conscious consumers. They will start demanding to have their options clearly outlined, complete with cost estimates. If they can’t get this information from one provider, then they will partner with one that can. Healthcare providers should seek to leverage IT tools like EHR software, revenue cycle management solutions, and data analytics to get a clear idea of what their actual costs are, and start putting plans in place to communicate price estimates to patient populations.

After my daughter’s recent tube surgery and reading about e-Patient Dave’s cancer RFP, I feel obligated to take a more active role in deciding the treatment my family and I receive and the expenses incurred as a result. I’m not saying I’m ready to give up the low-deductible insurance my employer provides. However, I’m through sitting idly by without thinking about medical costs simply because I’m “covered.” I need to prepare myself for the very real possibility that my employer may soon be forced to provide me with a higher-deductible insurance plan in an effort to control costs. I’m sure I’m not the only patient who is finally being motivated to change their behavior as a result of our broken healthcare system. I’m likely part of a decided minority, but more will follow. You can count on it.