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Voices on Hospitals: Cost Transparency and Keeping Cost Reasonable

HHRI 'Downstream' 2014In early 2013, I developed an infographic to help ‘mask the complexity’ of our complicated healthcare ‘system.’ The infographic portrays an overview of ‘Our Health Care River’ that illustrates how upstream activity can adversely impact what happens downstream.

We all know the health insurance premiums we pay are nothing more than a derivative of healthcare costs plus administration fees. Employers have spent enormous energy, time and money, downstream trying to ‘fix’ the symptoms of major pollutants found upstream, as depicted in ‘Our Health Care River.’ Major ‘chemicals’ found upstream include a ‘Fragmented Delivery System‘ and ‘Unhealthy Lifestyles.’

Year-after-year, employers tweak their health plans to keep them affordable. They do this by increasing deductibles, out-of-pocket maximums, office and Rx copayments, employee contributions, limiting provider networks, etc. However, we can only do so much downstream because combating just the symptoms of the core problem will only prolong the annual frustrations that we all will continue to face.

Below are the final two performance indicators on hospitals as perceived by employers: ‘Cost Transparency’ and ‘Keeping Cost Reasonable.’

Indicator #11: Cost Transparency

How can patients and payers discern the ‘value of care’ delivered when cost is not commonly known at the time the procedure is being delivered? For ‘value’ to be accurately determined, providers must measure costs at the medical condition level, which requires a true understanding of all the resources used in the patient’s care.

By having this information, the cost of providing care to a patient per episode-of-care can be compared to the outcomes achieved for that particular condition. It must begin with understanding the true cost of care. The transparency of this cost to the public is crucial.

Statewide, Iowa employers rated hospitals a score of 5.8 on a 10-point scale. In other words, employers gave hospitals an un-weighted ‘D+’ on cost transparency. When segmented into five regions using size-weighted scores, three regions ‘fail’ while the southwest region (5.1 score) was a whisker away from failing. Only the northwest region was safely graded above failing, grading in at a ‘mid-D.’

Regional - Cost Transparency Map-Master


Indicator #12: Keeping Cost Reasonable

Our 12th indicator – ‘Keeping Cost Reasonable’ – is a cousin to ‘Cost Transparency.’ This indicator is extremely frustrating to Iowa employers and earned the lowest grade when compared to the other 11 performance indicators. Increasing value requires either improving the outcomes without raising costs or lowering costs without compromising outcomes. From our past 15 years of research, Iowa employers have seen health insurance premiums increase by 171 percent for single coverage and 158 percent for family – clearly an unsustainable pace.

Statewide, Iowa hospitals received an abysmal score of 5.1, or a grade of ‘D-minus’ for their efforts on keeping costs reasonable. When segmented into five regions using size-weighted scores, four regions ‘fail’ while only the northwest region received a ‘mid-D’ grade. Polk County hospitals received an extremely low score of 3.4, based on 144 employers within that county.

Regional - Keeping Cost Reasonable Map-Master


Within their respective communities, employers must lead the discussion about healthcare ‘value’ – for one major reason: they own the problem. The path that we are all on is unsustainable AND unacceptable. Unilaterally, providers are unable to develop ‘solutions’ to the cost problem. Employers must be part of the solution by moving upstream to help find approaches to prevent the harmful ‘chemicals’ from polluting ‘Our Health Care River.’

To learn more, we invite you to download our free white paper: ‘Voices for Value: Iowa Employer Perceptions of the Iowa Healthcare Provider Community.’ This document provides a comprehensive overview on our current status and establishes a baseline in which to measure future changes made in Iowa’s healthcare system.

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