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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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