Light in the Darkness: How Information Will Create Transparency in Healthcare
Presentation Transcript
Miriam Paramore
SVP Strategy and Government Affairs at Emdeon
August 26, 2010

Presented at “The Naked Hospital – A Provocative Look at Healthcare” a Nashville Technology Council super roundtable event., Miriam Paramore of Emdeon, mentions change:healthcare in reference to cost transparency in the healthcare industry.

http://www.slideshare.net/nashtechcouncil/light-in-the-darkness-how-information-will-create-transparency-in-healthcare

I always appreciate words of wisdom from someone who has “been there, done that” and Christopher Parks recent guest post on Catalyst Healthcare Research blog – For the Record exemplifies his experience with and passion for healthcare.

In Healthcare Costs, Transparency and Feeling Vindicated Parks says, “… the lessons we’ve learned about transparency and healthcare are really quite simple.  When you incentivize people to make value-driven healthcare choices and provide unfettered access to information about those choices, invariably consumers make far more insightful decisions about their care, its cost and its quality.  It’s simple common sense.  I have no doubt that with greater transparency placing more information and control into consumer hands, Americans could realize millions in healthcare cost savings.”

To learn more about change:healthcare, our cost transparency solution and the need to educat healthare consumers check out the Christopher’s entire post here and visit www.changehealthcare.com.

Christopher Parks was the guest blogger on “For the Record” by Dan Prince, President of Catalyst Healthcare Research. Read his entry “Healthcare Costs, Transparency and Feeling Vindicated.“

http://www.catalysthealthcareresearch.com/learning-center/for-the-record/2010/08/17/healthcare-costs-transparency-and-feeling-vindicated/

As premiums go up, it may be easy to blame the insurance carrier, but it’s important to consider the ways in which patients can influence price hikes. When policy-holders begin to draw more money from the carrier, the carrier must find a source of funding to pay for this increase in consumption, which often takes on the form of, you guessed it – higher premiums.

America’s Health Insurance Plans (AHIP) recently commissioned PricewaterhouseCooper to conduct a study on healthcare spending. Despite the fact that the research was not done independently, healthcare consumers should still pay attention to the findings. According to the report, “increased utilization” of services composed 25% of the increase in health insurance premiums in 2007, and provider price increases made up another one-third of premium growth.

You can do your part to keep spending at a reasonable level in the following ways:

Take note when a provider increases the price for a service or medication. Shop around to see if there are cheaper options in your area.

Talk to your doctor about switching from brand name medications to the generic version. Again, be sure to shop around because prices of generics can vary significantly based on the vendor and region.

If you have a chronic condition, opt for more frequent outpatient check-ups, rather than a much more costly stay in the hospital when something goes wrong.

To read more about the AHIP-commissioned report, visit: http://www.americanhealthsolution.org/costs/.

Bringing Comparison Shopping to the Doctor’s Office
New York Times: Claire Cain Miller
Published: June 10, 2010

Even if a patient does want to comparison-shop, there is no easy way to obtain complete and useful information. It is a hole in the market that some companies see as an opportunity, especially because many Americans will soon have to pay more attention to what they are paying for, rather than count on insurance to cover everything.

But there has been no easy way for consumers to shop for the best deal on a colonoscopy or blood test. A start-up financed by prominent venture capitalists and theCleveland Clinic, Castlight Health, aims to change that by building a search engine for health care prices. Patients using Castlight could search for doctors that offer a service nearby and find out how much they will charge, depending on their insurance coverage.

A few others are starting to publish health care prices, including Thomson Reuters, a Tennessee start-up calledChange:healthcare, the New Hampshire government, which created a comparison shopping tool for residents, and health insurers. Aetna, for instance, has built tools to help patients estimate prices and may build more advanced tools, said Lonny Reisman, Aetna’s chief medical officer.

Price transparency could significantly change the way health care is bought in the United States. The notion “seems ridiculously simple and obvious, and in any other industry, you would say, ‘Duh, we already have that.’ But in health care, it’s revolutionary,” said Alan M. Garber, a professor of medicine and the director of the center for health policy at Stanford, as well as an investor in Castlight.

The lack of price information in health care has been a big driver of ballooning health care costs, analysts say, because costs are opaque to patients and heavily subsidized by employers. The patient has no incentive or responsibility to keep costs down. But many employers are switching to health plans that require patients to pay more out of their own pockets.

“Since Americans started having employer-sponsored health care, people are paying with someone else’s credit card, so we created a very inefficient market,” said Giovanni Colella, chief executive and a founder of Castlight. “Creating the right incentives changes the way people behave, and that’s where our company comes in.”

Dr. Colella started RelayHealth, which connects patients and doctors over the Web and was bought by McKesson in 2006. He founded Castlight with Todd Park, a founder of Athenahealth and chief technology officer of the federal Department of Health and Human Services.

On Thursday, Castlight announced that it raised $60 million from investors, in addition to the $21 million it previously raised. Safeway, the grocery chain, with 200,000 employees, has signed on as its first customer.

Castlight has received money from investment firms including Venrock, Maverick Capital, Oak Investment Partners and from an unlikely source, the Cleveland Clinic. Hospitals’ business models could be turned upside-down by price transparency.

Several studies and pilot projects suggest that the more patients know about prices, the more money they save. A study published last month by Mercer, a human resources consulting firm, found that people on high-deductible health plans, with more exposure to the prices of doctor visits, spent less. Indiana adopted high-deductible health plans, and the average expense in 2009 for patients on one of these plans was $6,393, compared with $8,570 for patients on a more traditional health maintenance organization plan.

“A lot of it is to understand the driver of costs and how they can start to control that, and encouraging that debate to happen while in the physician’s office,” Dr. Colella said. Castlight is working on a mobile version of the service to introduce next year so people can access the information from the exam table.

Health care pricing became part of the national conversation during the debate overhealth care reform. Prices will be important for the 30 million to 40 million people expected to join exchanges, which will encourage comparison shopping.

But so far, prices have been very difficult to find because health insurance providers and doctors negotiate rates and often agree not to reveal those numbers for competitive reasons. The Cleveland Clinic, for example, has about a hundred different contracts with insurance carriers, each with a different rate for a given procedure.

Ideally, transparency in health care pricing could lead to higher-quality, lower-cost health care, and more patient involvement in buying health care, said Delos Cosgrove, chief executive of the Cleveland Clinic. “Because they begin to realize that a trip to the doctor is not free, they might stay home and take the aspirin instead of getting the neurologic work-up.”

Castlight sells its service to employers and charges by employee per month. (It plans to eventually introduce a Web site for anyone to use.) Employees log on to a search portal, where they enter something like “colonoscopy” to find a list of doctors nearby and how much they charge.

Some insurers have shared pricing with Castlight, but the company gleans most of the information from the explanation-of-benefits forms that patients receive after a doctor visit. Castlight developed a way to pull the information from the millions of forms provided to it by employers.

Anyone who has read an explanation of benefits knows that it often raises more questions than answers, and Castlight says it wants to provide health education in addition to price information. The site explains why a patient has to pay a certain amount and the standard number of tests that a doctor would order for a particular problem.

Safeway has been experimenting with ways to cut health costs, including by using Castlight. “I’m a big believer in trying to create market forces wherever you can and then let personal accountability really drive the result,” said Steven A. Burd, the chief executive of Safeway.

For instance, Safeway pays up to $1,200 for its employees’ colonoscopies, a preventative procedure to detect cancer. If employees wish to go to a doctor who charges more, they must pay the difference. According to Castlight, colonoscopies in the Bay Area, where Safeway is based, range from $500 to $3,000, and sometimes a doctor charges different rates at different hospitals.

Castlight plans to add quality measurements to its price information. There are already several providers of that information, though there is no standard set of quality measurements in medicine. But even with quality ratings, there are many procedures for which Castlight’s service is not applicable. Someone suffering a heart attack is not going to check the Web before calling the ambulance, and a patient who discovers he needs emergency brain surgery is likely to prioritize quality above all else.

Even for more basic services, pricing is not always cut-and-dried. The delivery of a baby, for example, includes the hospital stay and the obstetrician’s fees, but could also include fees for a pediatrician, an anesthesiologist and specialists if there are complications.

At this stage, Castlight works best for big companies that are self-insured and for outpatient doctor visits for which quality does not vary greatly.

http://www.nytimes.com/2010/06/11/technology/11cost.html?emc=eta1

Great article from Jane Sorenson-Kahn pointing out that employers see “cost-sharing among employees as a top #1 cost-control strategy.” and that employers are “less satisfied [with] online comparison tools.” That’s a bad mix. No information on price AND you’re going to have to pay for it. Sounds like going to the auto-repair mechanic who just grins when he sees you walk in the door.

Let’s see if we can wipe that grin off of his face.

First, the Facts: Healthcare costs are out of control trending toward 16% of the GDP today and projected to be 20% by 2017 (that’s just around the corner, folks). So cost-shifting to the employee should come as no surprise. And with an economy like we’ve had and jobs as scarce as they are, employers have their choice of job candidates, so if you don’t like the health plan, there’s the door. So we are going to be paying the bills now. Time to put on the big boy pants and get serious. That damned mechanic’s grin just widened a bit.

Second, the Solutions: Most current online pricing solutions are relative scales where $ is inexpensive and $$$$ is expensive. When the treatment is $55-85 that MIGHT suffice, but when it’s $600-1,300 (like the MRI my daughter had on Friday), the difference between $ and $$$$ is significant. People WANT and NEED specific pricing information. Usually when you DO get pricing info, it’s an average negotiated rate, not the exact price (since doctors do NOT all get paid the same for the same service).  So even the “precise” number lack s precision. And I’m really getting sick of that mechanic’s smirk.

This is where change:healthcare steps in. We provide the tools that employers are telling us they have been looking for. We look at the services and prescription people receive, and then we proactively reach out to employees when they are paying too much for a service or a prescription and tell them exactly where they can go to get it for less. They don’t have to go where we tell them. It’s their money, and they can spend it how they want. But at least they know now. The mechanic has a bit of a surprised look on his face.

Oh, and then we monitor your employees’ spending for them. If prices change, we let them know that there are more cost effective options. Prices for doctors vary by 100% for many specialties. Prescriptions vary 40% between chains. We’ve seen diabetes maintenance medications that are $750/month at one pharmacy and $450/month across the street for the EXACT SAME THING.

We tell your employees.

We provide the online pricing tools employers have been looking for.

And we wipe that damn smile off of the mechanic’s face.

Employers, we hear you. We’re here to help.

Jane’s post is based on a PWC report that you can find here: “What employers want from health insurers in 2010.” Photo from user Neubie on Flickr.

Medicare for Age 55

In an article published by the Wall Street Journal, Janet Adamy writes about a proposed medicare bill saying, “Under the new Medicare plan, consumers ages 55 to 64 would for the first time be allowed to buy into the federal program for the elderly, starting as soon as 2011. Congressional aides estimate that two million to three million people would participate.”

The element of this bill that is most interesting is not the creation of the NFP private insurance company overseen by the federal Office of Personnel Management.

It is the idea of letting folks over 55 years old “buy in” to the Medicare program.

1. It “creates” a public option for the highest healthcare utilizers outside of current Medicare/Medicaid enrollees.
2. It seriously curtails the “high risk” pool for private health insurers today allowing them to keep rates down for the under 55 population.
3. It cuts reimbursements to doctors, hospitals and other providers by giving the 55-65 crowd Medicare rates (typically recognized as the low cost payor in the market).
4. It allows the government to underwrite the failing Medicare program projected to bankrupt in 20XX.

By opening Medicare up to the 55 and up group, the government is essentially extending it’s current “public option” in the form of Medicare down to the 55 and up age bracket. It’s not a full public option, but it is kind of like letting your neighbor move his fenceline onto 20% of your property. Some folks are going to be happy. Some folks are not. So let’s look at all of the players and see how it might shake out.

Insurers should be somewhat happy. But it’s a double edged sword. Gone are some of their high dollar utilizers who are subsidized by younger healthier folks buying into the plan. That’s lower expense, but it’s also less income which may not help the balance sheets of those insurers. And it’s also less buying power and therefore potentially higher rates for the younger healthier folks left on their rolls – but those higher rates could help bring the revenue numbers back up. Obviously, there will be an equilibrium to be achieved.

Providers (docs, hospitals, pharmacies, etc.) will be generally annoyed. A sizable portion of their “best” recurring patients could move to the over 55 plan and suddenly start paying reimbursements that are in line with the low cost payor in the market – Medicare. However, they may find that a suitable tradeoff in exchange for more predictable payment. At any rate, they won’t lose any revenue, since they will likely raise rates on the under 55 crowd and the private insurers who lost volume buying power with the exit of the over-55s. Like insurers, providers will be searching for an equilibrium.

Patients 55-65 may be relieved because they have an option for catastrophic incidents. They may be less than thrilled when they discover that it is harder to find a physician willing to see them since they are part of the Medicare payment group now. The devil is in the details, but I’m willing to bet, if you have children still eligible for healthcare, you won’t be taking the 55 year old buy in option. And it will be interesting to see how we take into account the over 55’s still throwing off offspring. It would seem that the 55 buy in option is going to be less widely adopted than one might think.

Patients under 55 may be relived because the older and generally healthcare-needier folks they’ve been underwriting will be out of the mix. That means lower premiums. But remember, there will be some cost shifting to the under 55 crowd as a result of a lack of buying power on their insurer AND because the providers will want to make up the lost income somewhere and it will not be through government controlled Medicare rate.

Patients over 65 – oh you forgot about them didn’t you? They are going to be pissed when they realize the impact. Sure AARP will support it. It will drive more members for them. In fact with increased buying power, Medicare rates could even go down more. But the over 65 crowd is going to find it even more difficult to get in to see a physician because all these 55-65 year olds just got dumped in and want to see the handful of docs that were willing to take the low cost Medicare reimbursement. And people over 65 generally are not real wild about change in any form, so expect them to be pretty angry.

Government should be relived to get this monkey off of their back. But it does mean that the gorilla on their back in the form of a Medicare program projected to bankrupt in 20XX just went from 800 pounds to 1,000 pounds because they just will not get the budgeting right.

Taxpayers should be wary. Very wary. Sure, we’ll breath a sigh of relief if the whole healthcare debate is finally coming to a conclusion and we are getting reforms that disallow pre-existing conditions and provide other basic consumer rights. But be prepared to get the wind knocked out of you, since no one with any historical perspective on the government’s abilities in terms of controlling costs will entertain the notion that this will be budgeted properly – think, more taxes to cover this coming soon.

May you live in interesting times.

In an article today on BusinessInsurance.com states that IBM plans to cover 100% of primary care visits in 2010, going against current trends of pushing a great portion of the health care cost burden onto employees shoulders.

With 80% of their 115,000 employees currently on one of the company’s self-insured health care plans, the cost of covering 100% of primary care visits could be steep.  However, IBM believes (via their director of health benefits Marianne Defazio) “very strongly that employees should have a primary care physician who’s sort of the quarterback to help coordinate all of their care.”

It will be interesting to see what the initial results of this benefit design change look like next year as they begin to track and compare utilization and prevention metrics.  I would imagine in some way or another this new coverage is going to impact employee behavior.  Bottom line – it’s always good to see large employers taking risks and trying new things.  A small part of me still believes companies like IBM and others are really going to pave the way for change in health care, driving and creating sustainable ways to improve the current health care crisis and our approach to wellness.

Co-Founder and COO Robert Hendrick spent a few minutes with the local TV crew to share tips on how to save money on your prescriptions. Easy steps that can add up to huge savings. You’ll be surprised!

Thanks for all of the support, and for trusting us to help you make smarter healthcare decisions and save money in the process.