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The Healthcare Price-Quality Conundrum

Price and Quality

As Americans, one thing is certain – we continue to pay a larger share of our medical bills through higher deductibles and out-of-pocket maximums. Proponents of ‘having more skin in the game’ suggest that we will eventually become better ‘consumers’ to drive down healthcare costs. The debate about whether this will happen continues.

When shopping for colonoscopies, mammograms or childbirth procedures, people are more likely to conduct cost information searches before seeking care. But will higher-priced doctors and hospitals result in higher quality of care?

Two recent reports approached this question differently. The first report, “The Price-Quality Paradox in Health Care,” generated by the Health Care Cost Institute (HCCI), looked at actual claims data to determine whether higher prices are indicative of receiving higher ‘quality of care.’ For this report, quality measures were based on whether ‘recommended’ services were provided.

As we know, quality can be evaluated many different ways. For example, even if treatment delivered is recommended care, was this care delivered appropriately, safely and to the patient’s satisfaction? There are a host of other qualitative measures that help define the quality of care we hope to consistently receive. The HCCI report did not use other methods because such information is difficult (or impossible) to cull from mere claims data.

HCCI’s conclusion is that “price alone may not be sufficient for identifying quality.” In some cases, higher prices are associated with lower quality, meaning that high-prices are not indicative of high-quality of care. HCCI concludes with an obvious statement:

If policy makers and health care industry leaders expect transparency efforts to have real impacts on the health care system, making quality information more accessible and useable by stakeholders is also necessary.

The second report comes from an April article in Health Affairs, “Most Americans Do Not Believe That There Is An Association Between Health Care Prices and Quality Of Care,” that analyzes how Americans perceive the healthcare price-quality conundrum based on behavioral economics. The findings indicate that a majority of consumers (58-71 percent) don’t believe that price and quality are associated with one another, meaning that paying higher prices does not guarantee higher quality of care. A hefty minority of respondents (21-24 percent) indicated there was an association between price and quality, while an additional 8-16 percent did not know if there was a correlation between price and quality.

Respondents who said they had compared prices before receiving care were more likely to think that higher prices are related to higher quality of care, compared to people who did not price shop before seeking care (37 percent vs 12 percent). Avoiding low-price care because it is perceived to be low-quality, is a detriment to having an efficient delivery system that beckons consumer decision making.

Due to the intricacies of behavioral economics, it appears that how price-quality information is communicated to the patient/consumer may very well determine whether healthcare prices are indicative of care quality.

The findings in this second report relating to our purchasing behaviors, are a good complement to HCCI’s findings. This emerging subject will generate a great deal of interest from many stakeholders in the future.

For now, the price and quality metrics are still being hotly debated to determine whether we can become informed consumers who make rational healthcare decisions.

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The ‘Entitlement’ of Binge Consumption

Emma and Maria - CancunMy family recently returned from a fantastic spring break at an all-inclusive resort in the tropics. By having all amenities included in the upfront cost – meals, drinks and other services – we easily dismissed the usual impediments of assessing cost and quantity when consuming both food and various beverages.

This indulgent behavior was a direct result of paying an upfront premium charge to help justify the subsequent ‘generous’ consumption that soon followed.

It was on the second of our seven-day stay that I began to mentally balance the risks and rewards of undermining my dietary success of having lost ten percent of my weight during the prior three months. Interestingly, gaining access to perceived ‘free’ food and beverages is similar to having unlimited access to ‘free’ health services AFTER the out-of-pocket maximum (OPM) has been satisfied under our health insurance plan. In both scenarios, there is only a brief period of time to take advantage of this special ‘manna’ falling from heaven before time eventually runs out – whether it’s a seven-day vacation resort or January 1 for health insurance.

In a strange, but often exhilarating way, this entitlement-to-binge mentality transcends beyond the all-inclusive vacation resort to healthcare services. Once we’ve paid the introductory costs, our doctor visits, elective surgical procedures, prescription drugs and a host of other services that are covered under our medical plan no longer require cost-sharing obligations. We now have few restraints to binge on desired care.

From a personal standpoint, after reaching the OPM limits under our health plan, usually before the fourth quarter, the urgency to pursue other recommended elective procedures (such as the five-year colonoscopy), becomes more palatable because the associated cost intuitively feels to be borne by another party (e.g. insurance company, self-insured employer or government plan). Refilling prescriptions before the end of the year is less painful, in addition to scheduling office visits for minor aches and pains that we might otherwise avoid when the OPM has not yet been met earlier in the year.

In the end, however, none of this is really ‘free.’ Vacation resorts will increase their rates when vacationers take advantage of this ‘entitlement’ behavior. As for healthcare, we will continue to pay higher premiums for many different reasons, one of which is due to the indiscretions we make as described above.

As for me, it’s time to resume my dietary goals that were briefly interrupted in March. But, quite honestly, it was well worth it!

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Employers Role in Patient Safety

Uncomfortable-ShoesHealth premiums paid by employers and their employees are profoundly impacted by health costs, especially when the care was inappropriately delivered.

Since the release of Heartland Health Research Institute’s Silently Harmed white papers, a number of employers have inquired about how they can influence patient safety practices in the hospitals that serve their communities.

To be clear, there are no easy answers. Employers are deservedly frustrated with the perceived leverage they have to influence necessary progress on this issue that dually impacts costs, and most importantly, lives. When it comes to patient safety, there appears to be just enough self-interest group regulation that precludes the public from igniting a patient revolution.

It has been said that revolutions never happen in comfortable shoes – and so it goes with healthcare.

Healthy organizations require healthy employees. From the employer perspective, ‘patient safety’ should be equally balanced with two other initiatives: affordability and high-quality outcomes. This ‘holy trinity’ of value – cost, quality and safety – serve as the cohesive bond for all payers – government, carriers and employers. Armed with the right information, employers can play a proactive role in changing the healthcare delivery landscape that is currently going through a seismic evolution (if not a revolution). In fact, now is the time for employers to inject their influence to a mammoth industry that requires major disruption.

Employers, assisted by carriers, can begin to craft health plans that reward safety practices and discourage (or penalize) non-compliance, urging hospital boards to make patient safety a priority. This can be done by insisting that providers implement safety measures that demonstrate adherence to patient safety cultures. By leveraging this new role, employers can educate their employees on how they can engage more effectively with their healthcare partners to receive better care. Distributing patient safety literature to employees and family members can serve as important reminders for patients to proactively seek care from providers who have proven to give the right care at the right time. Visiting the National Patient Safety Foundation website can be a great first step to increase awareness about patient safety issues. There are many other organizations promoting quality and safety measures, such as The Leapfrog Group, which cleverly includes a ‘hidden surcharge calculator‘ for Leapfrog members to calculate their average annual hidden hospital surcharge resulting from medical errors.

Iowa is served by very capable and well-intentioned providers. But the question is not as much about the people who care for us, rather, the ‘systems’ in which they operate. Due largely to self-interest concerns, medicine is unable to regulate itself voluntarily – it needs a push from those who have much at stake – employers and other purchasers.

Employers can and must promote patient safety measures when purchasing health coverage. There is no better time than now for this to happen.

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