The Growing Clout of the Healthcare Consumer

consumer engagement imageThere are many new terms being bandied about in healthcare - consumerism and patient engagement are just two of them.  Those two terms are often used interchangeably - they both involve the patient, right?  They are related but actually speak to two different trends. Patient engagement is more about using tools and techniques to improve compliance with treatment plans, behavior modification and clinical recommendations - once someone is already a patient.  Healthcare consumerism is about how a person chooses if, where, when and from whom to get care. It is about consumers using the tools consumers always use - price, quality and convenience - to make purchasing decisions.  Healthcare consumerism - while a rockbed concept in a capitalist society - is a relatively new force in healthcare.

Why is that?  Because for many years another entity (commercial payors, government agencies, employers) paid directly for the services provided by healthcare providers.  Because consumers were one-step removed from the financial transactions in healthcare, they didn't apply the same sort of criteria in making purchasing decisions that they employ in every other market.  That, of course, is changing rapidly as consumers assume more of the cost and risk of care.  In fact, consumerism is a force likely to hit the healthcare industry like a monsoon.  When the 200 million adults in the United States begin applying the same sort of sophisticated approaches to purchasing healthcare that they use in every other market, how healthcare providers interact with their patients is going to have to change dramatically.


Catalyst for Payment Reform, an independent, non-profit group working on behalf of large employers and a recognized thought leader Catalyst For Payment Reform Logoin the industry, defines price transparency as "the availability of provider-specific information on the price for a specific healthcare service or set of services to consumers and other interested parties."  Sounds simple, right.  That is certainly how most markets in our country operate.  And the benefits are certainly clear - exposing price gouging and unfair practices, helping consumers make more informed decisions, and informing benefit design and payment reform.

So why is it so hard when it comes to healthcare? Because pricing is anything but straight forward in healthcare.  Anyone who has ever looked at a hospital chargemaster file or reviewed a physician's fee schedule would know that.  The insertion of intermediaries (insurers and employers) into the market has skewed the market tremendously. Hospitals and doctors have highly inflated price lists that bear very little resemblance to the rates ultimately negotiated by insurance companies.  This price list is not generally set based on costs and target profit margins as it is in most markets - it is set to try and gain some leverage in the annual contract negotiations between providers and payors.  Add to that that no one in this chain has had much, if any, incentive to disclose true costs, price lists and negotiated rates and you have the completely opaque system we have today.  So, like so much else in healthcare, the government is stepping in to force the issue.  In May 2013, CMS released hospital chargemaster data to the public for the 100 most common inpatient DRGs and 30 most common outpatient procedures.  The data covered 3,200 hospitals and uncovered  significant variation for the same services.   At the state level, Massachusetts passed a law effective October 2013 requiring insurers to provide consumers with cost estimates for their complete out-of-pocket costs for specific tests, procedures and visit types.  In all, 34 states now require some sort of cost reporting on the part of healthcare providers. The bottom line is that for the first time, providers are going to have to provide clear, concise, complete data to consumers about the costs associated with the services they provide.  Once true pricing data is easily accessible and comparable across facilities, consumers will use this data to inform their decisions about how best to achieve the health outcomes they want at the lowest possible cost.  Certainly the health insurance market is already far along this curve.  The shift by employers to defined contribution plans and the introduction of insurance exchanges (public and private) is driving a rapid transition to a true retail marketplace for insurance products.  And "retail" means that the power will increasingly shift to consumers and providers will need to begin competing on cost, quality and convenience. Healthcare services will never be a true commodity - there are too many other considerations that consumers must take into account when making such an important purchase decision - but the concept of value will be an increasingly important force in our industry. Quality

Data on quality of care can be even more difficult (and controversial) to come by than data on cost.  Overall, we are not doing a good job as an industry at holding ourselves accountable.  In December 2013, the Healthcare Incentives Improvement Institute (HCI3) released its first report card on transparency of physician quality information in each state.  Its grades were based on the number of physicians and other providers for whom quality information is provided to the public.  Data provided by insurance companies was not included as HCI3 cited widespread consumer distrust of this data.  HCI3 developed detailed scoring criteria for its report card, including accessibility of information (the ability to find, understand and use the data) and scope of measures (outcomes, process and patient experience).  Only three states (CA, WA and MN) received a passing grade of "C" or better on their report cards.   Forty states received an "F."

While the challenges of standardizing measures and applying sophisticated risk adjustments are real, the healthcare industry is one of the most sophisticated industries in the world at leveraging  data to improve care in areas such as clinical research.  Providing meaningful data on outcomes is a problem whose solution is within our reach. What sort of data will a consumer find meaningful in evaluating providers?  They will want something visual and easy to understand.Consumer Reports logo Think Consumer Reports.  Consumer Reports is now getting in the business of scoring healthcare providers.  In July 2013, for the first time,  the leading quality rating authority for consumer products published ratings on 2,500 hospitals. They evaluated 27 different types of surgeries/procedures and computed an overall rating plus specific ratings for the top procedure categories including angioplasty and back surgery.  They used data on patient experience and outcomes from publically-available sources such as Hospital Compare.  The ratings incorporate a score on safety, patient outcomes, patient experience (HCAPHS) and hospital practices.  As is the case with any industry being evaluated by Consumer Reports, there was significant criticism about the methodology and approach - including the fact that the ratings were based on claims data and not data from patient records.  The publication acknowledged that their ratings were just one indication of a hospital's performance - but one thing is for sure, they aren't going away now that they have dipped their toe in the water of healthcare.  They know that consumers will increasingly be looking for data on the quality of the healthcare services they are purchasing. While quality of patient care should always be the first priority when choosing a healthcare provider, it alone is not enough in today’s ‘consumer-focused’ model to keep a patient engaged with a specific provider or group.  The information consumers have access to allows them to compare costs, quality of services, convenience and overall patient satisfaction ratings.  Consumerism is penetrating into the healthcare industry in ways never seen before in this market and providers need to adjust their thinking as the concepts of value and convenience become increasingly important forces in our industry.

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