Greater Healthcare Price Transparency Could Save $100 Billion Over 10 Years

WASHINGTON, May 15, 2014 /PRNewswire-USNewswire/ -- Providing patients, physicians, employers and policymakers more information on healthcare prices could reduce U.S. healthcare spending by an estimated $100 billion over the next decade, according to a new analysis from the Gary and Mary West Health Policy Center.

Most healthcare transparency initiatives focus solely on providing patients with information on out-of-pocket costs. "While healthcare transparency is typically viewed through the lens of patient-facing transparency tools to drive comparison shopping, our analysis suggests even greater impact could be achieved by expanding the audience for such information," said Dr. Joseph Smith, chairman of the West Health Policy Center Board of Directors. "We've found that providing price information to three key stakeholders—physicians, employers and policymakers—may have a far greater impact. And we have identified a range of new policy proposals, including three that, if implemented, could save $100 billion over 10 years."

Conducted by researchers at the former Center for Studying Health System Change (HSC), the analysis, Healthcare Price Transparency: Policy Approaches and Estimated Impacts on Spending, quantifies the potential savings from three policy initiatives:

1.  Use state all-payer health claims databases (APCDs) to report hospital prices
This initiative could save up to $55 billion in several ways: by using claims data to make employers more aware of price differences and realize savings from narrower provider networks and tiered benefits; by increasing pressure on high-price hospitals to reduce or justify their prices; and by informing the discussion of policy options for controlling costs.

2.  Require electronic health record systems to provide prices to physicians when ordering diagnostic tests
Physicians play a key role in recommending which tests and treatments are necessary, but they are often unaware of the cost of the services they are ordering. Providing cost information to physicians would enable informed, shared decision making about the relative value of discrete tests or treatments when developing patient-specific treatment plans. This is estimated to produce up to $25 billion in savings over 10 years.

3.  Require all private health plans to provide personalized out-of-pocket expense information to enrollees
Estimated to reduce health spending by $15-20 billion over the next decade, this initiative would have a relatively modest impact because most private plans already offer a personalized price tool but few consumers actually use them. More effective patient-facing transparency tools and/or steeper incentives for their use could increase the impact of this initiative.

"Price transparency alone isn't going to change the structural factors that support excessive spending in our healthcare system, but in concert with the transition to newer health plan designs, and newer ways of paying providers, it plays an essential role," said Chapin White, Ph.D., lead author of the analysis and a former HSC senior researcher now at the RAND Corp.

Along with specific policy examples, the analysis identified three overarching themes:

• Price transparency is not a silver bullet that alone can tame excessive health spending. Rather, price transparency is likely to be most effective in supporting other reforms, such as shifts to health plan benefit designs that steer patients to higher-value providers, and changes in payment policy that put medical providers at greater financial risk for the total costs of care.
• Patients are just one audience for price information, and one with a limited ability to respond. Employers, physicians, and health plans can have a significant influence on spending if they make decisions based on what care costs.
• Price data can help healthcare stakeholders better fulfill their expected roles. Physicians, for example, are increasingly being held responsible for the total costs of care their patients receive.

As a result of the analysis, the West Health Policy Center announced today that it is in the process of contracting with the University of New Hampshire to create a "Manual for APCD Development." The University of New Hampshire and the National Association of Health Data Organizations supports and staffs the APCD Council, which, since its inception in 2007, has worked with many states to facilitate the planning and implementation of state-based APCDs. Over the years, states have requested guidance in several common areas, and the Council has developed a number of white papers and presentations to address these issues.  Packaging these materials and lessons learned into a manual will formally collate the collective learnings from states, and promote uniformity in a structured document to guide all facets of APCD planning for states.  

This project and the healthcare price transparency analysis will be the focus of a West Health IDEA series panel discussion moderated by Scott Hensley, host of National Public Radio's "Shots" on Thursday, May 15, at 8:30 a.m. EST in the Knight Studio at the Newseum in Washington, D.C. It will also be available via live webcast. Panelists will include David Lansky, PhD, Chief Executive Officer, Pacific Business Group on Health; Josephine Porter, MPH, Deputy Director, Institute for Health Policy and Practice at the University of New Hampshire; and Dr. Joseph Smith.

About the Gary and Mary West Health Policy Center

The Gary and Mary West Health Policy Center is a nonprofit, non-partisan resource in Washington, D.C. providing education, expertise and policy proposals to transform the American healthcare experience. We're wholly funded by philanthropists Gary and Mary West as part of West Health, four organizations with a common mission—pioneering new and smarter technologies, policies and practices, to make high-quality healthcare more accessible at a lower cost to all Americans.

Along with the Policy Center, West Health includes the Gary and Mary West Health Institute, a nonprofit medical research organization working to create new, more effective ways of delivering care; and the for-profit Gary and Mary West Health Investment Fund and West Health Incubator, providing investments and expertise to businesses that share our mission. For more information, find us at www.westhealth.org and follow us @westhealth.

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