Cost transparency and consumerism has yielded important insights on healthcare purchaser behavior. The American healthcare system continues to undergo staggering changes.

Escalating costs across the entire healthcare spectrum are driving a host of evolutionary developments that are transforming patients into healthcare consumers. As a result,a new healthcare consumerism is emerging in the marketplace that could further alter the American healthcare landscape for the better, regardless what happens with Congress’ 2010 health reform efforts.

As a cost transparency leader, change:healthcare (C:H) has found itself on the front-lines of helping healthcare “users” become healthcare “buyers.” With four years of expertise from working with 100+ U.S. self-insured employers, not only has C:H gained insightful data about healthcare purchases across the country, but also an understanding of the purchase behaviors of these budding consumers.  

Rising Costs are Driving Numerous Changes

Healthcare costs continue their upward climb, with no sign of leveling off. The Federal Centers for Medicare and Medicaid Services has reported that healthcare spending grew in 2009 to a record 17.3 percent of the U.S. economy, the largest one-year jump in its share of the economy since the government stared keeping tabs more than fifty years ago.

By the year 2018, the Centers predict, health spending will be 20.3 percent, one-fifth of GDP. 

Who are the biggest victims of these soaring increases? American businesses, which pay the largest share of healthcare coverage for a majority of the nation’s workers. According to the Kaiser Family Foundation, employer-sponsored insurance is the leading source of health insurance in the country, covering about 157 million Americans.

Not surprising is the latest annual survey conducted by the National Business Group on Health which revealed that companies across the nation expect the cost of their healthcare plans to increase an average of 8.9 percent in 2011, versus the 7 percent jump seen in 2010. 

In response, businesses are absorbing what costs they can and passing on to their employees what costs they can’t. This was confirmed in a recent Aon Consulting survey, where nearly two-thirds of employers said they intended to make healthcare plan design changes in 2011, shifting more costs to employees. More specifically, 57 percent of surveyed employers have said they expect to increase healthcare plan premiums paid by employees in 2011.

Consumer-Driven Healthcare Emerging as the Best Way to Engage Consumers

Until now, most employees have paid little attention to the cost of their healthcare because employers have shouldered a large portion of the cost burden. But with their premiums, co-pays and out-of-pocket expenses growing, employees have found they suddenly have more “skin in the game,” and with it, a new found interest in what care costs. 

One of the more popular ways companies have begun involving employees deeper in their healthcare, while better controlling costs, has been by adding high-deductible, 

consumer-driven health plans (CDHPs). In fact, in 2011, it is expected that 61 percent of all businesses will be offering a high deductible health plan as a way for employees to share the burden of rising costs. In some cases, companies like GE, Kraft, John Deere and others are going further, making CDHPs the only option for their employees, driving a greater amount of consumerism into the marketplace. 

By typically involving a health savings account, CDHPs provide employees a reason to be engaged in the purchase of care and be concerned with what things cost. Paul Keckley, executive director of the Deloitte Center for Health Solutions, affirms that this CDHC/consumerism focus is not a fad, but rather, a sustainable trend. He also believes that CDHPs are an important ingredient in the transition from a patient-centric to a consumer-centric health care delivery system. 

R. Lawrence Van Horn, associate professor of Healthcare Management and faculty director of Healthcare Programs at Vanderbilt University’s Owen Graduate School of Management, agrees. He states that consumer-driven healthcare, best exhibited by CDHPs, might be the smartest solution to help businesses address out-of-control healthcare costs.

“As an economist, I believe CDHPs are the only version of health insurance that make economic sense because in this model, individuals actually care about the price of services when they’re making decisions about what to consume,” he said. “The main challenge that employers have with moving to CDHPs is educating employees and changing their mentality around the accountability – employees have to actually care about the healthcare costs they’re generating and make sound and wise purchases.” 

Indiana Governor Mitch Daniels echoes this with real world experience.  Writing in the March 1, 2010 Wall Street Journal, he states: “State employees enrolled in the state’s consumer-driven healthcare plan will save more than $8 million in 2010 compared to their coworkers in the preferred provider organization alternative,” helping workers add “thousands of dollars to their take-home pay.” The state is saving as well, he affirmed. “In a time of severe budgetary stress, Indiana will save at least $20 million in 2010 because of our high HSA enrollment. Mercer calculates the state’s total costs are being reduced by 11% solely due to the HSA option.”

So, what are the drawbacks of CDHPs?  As more employees with CDHPs become accountable for “shopping” and paying for their own healthcare, change:healthcare is finding that few employees have the tools needed to shop effectively for healthcare.

Prices are Anything but Transparent

Healthcare costs are, for the most part, hidden from consumer view. The government tells consumers what Medicare and Medicaid will reimburse, and insurance companies reveal what was paid for care, but only after the fact.  No one seems to know the true cost of healthcare – what prescriptions, procedures, office visits and the like – actually costs before care is rendered. Healthcare is the only marketplace where its customers – patients and employees – must shop without the benefit of price tags.

Few employers and employees, for instance, are aware that pricing for all types of healthcare products, care and services varies tremendously between providers for the 

same services, despite the negotiated network fee schedule. A prescription for Simvastatin can cost anywhere from $7 to $40; a mammogram from $100 to $300; a lonoscopy from $1,000 to $2,000; and a dental filling from $90 to $160.

And to complicate this further, the tools and pricing visibility needed for consumers to adequately shop for healthcare savings aren’t readily available. The critical, missing ingredient in healthcare, and what is proving to help make consumerdriven health plans truly work, is healthcare cost transparency. Without price information, it is hard for an employee to be an effective healthcare shopper. Employees need to know what pricing options exist for their market, their plan and their network for common, recurring healthcare expenditures.

Cost Transparency and change:healthcare

Since 2007, change:healthcare has been helping consumers navigate the U.S. healthcare system and address the upward trend of healthcare costs. As an organization, the company believes that transforming healthcare users into healthcare buyers is the best opportunity the United States has to slow the inflationary cost spiral and match care with need. This healthcare consumerism requires consumers to know the costs of what they are buying today and in the future, so that they can make sound, actionable cost decisions relevant to their health plans.

What change:healthcare provides to support consumerdriven health plans involves combing through a company’s employee medical claims – which show exactly what all 

employees on the same medical plan are spending for care – and providing actionable information about what services, treatments and prescriptions REALLY cost. Backed by a database of more than 1.98 million medical claims, totaling $240 million, from 109,000 individuals across all 50 states, our portal has become the only solution that enables employees to shop and compare real prices for personalized medical products and services – such as prescriptions, primary care, dental, physical therapy, psychiatric and chiropractic office visits, as a few examples.  

change:healthcare believes that the key element to facilitating informed healthcare purchases by consumers is “cost transparency” – actionable information that gives buyers a way to see what healthcare products or services will cost BEFORE they’re purchased. Healthcare cost transparency should encompass five key characteristics:

1.  Pushing relevant information to employees based on their healthcare purchases, their local market and their specific healthcare plan

2.  Trackable ROI allowing employers to view the impact of the solution in real-time (rather than through a complicated end-of-year analysis) to validate impact 

3.  A resource to support employees in planning for future healthcare expenses by looking at market options 

4.  Real choices, based on real information for common, recurring healthcare services

5.  Actual market pricing on what was paid, not negotiated   

After launching actionable cost transparency with several self-insured employers, change:healthcare is able to gauge the impact of a more educated healthcare consumer.

The Healthcare Transparency Index (HCTI)– A MACRO Look at Healthcare Consumers

In November 2010, change:healthcare performed an intensive analysis of the HIPAA-compliant client data collected via the C:H Cost Transparency Solution. The result was a research study revealing several key healthcare pricing trends. The inaugural Healthcare Transparency Index (www.changehealthcare.com/hcti/) focused on the costs and purchasing behaviors of pharmaceuticals and looked at: where consumers might save the most money in their healthcare purchases; prescriptions with the highest savings potential; and cost variances for certain prescriptions at various retailers. 

Some key observations:

• Prescription drugs offer the highest opportunity for cost savings, followed by dental, routine primary care/physician office visits, psychotherapy, physical therapy and chiropractic. 

• Costs for commonly prescribed drugs can vary greatly. Five generic prescription drugs were identified as offering the greatest opportunities for cost savings, which could be realized simply by switching pharmacies. 

• Hydrocodone (generic pain reliever), Simvastatin (generic high cholesterol) and Lisinopril (generic high blood pressure) were first, second and third, respectively, in the list of top 15 most dispensed drugs.

The HCTI report for the first quarter of 2011 primarily focused on medical services, such as routine primary care office visits and specialty visits, such as chiropractic care, podiatry, gastroenterology, psychiatry, etc., to highlight the cost variances.

Key findings include:

• As people age, their health issues and doctor visits tend to increase. But in addition to increased frequency, 40-64 year-old patients pay more than their younger counterparts – even for OB/GYN appointments. Patients age 40-64 pay up to 25% more per visit than 18-39 yearold patients.

• Psychological services show the greatest cost variances among common specialty office visits.

• Based on analysis of national pricing for the most common office visit type (15 minutes - existing patient), the average cost for a base “sick” visit is $76, a $10 increase compared to a retail clinic environment.

• Patients can actually pay up to five times more for children’s activity-related physicals at a traditional physician’s office vs. a retail clinic.

These studies underscore that there is much that a consumer can do to positively impact what they are paying for healthcare, which is a much needed first step. Now that the data is finally being uncovered, the next obstacle to overcome is to get the information into the hands of the consumer.

Future Healthcare Transparency Index reports will profile other aspects of the healthcare purchase system, such as dental care trends and durable medical goods. 

User Impact

A number of clients have deployed C:H’s Cost Transparency Solution to decrease their healthcare spending and provide more specific insight into the healthcare purchase behavior of employees.

Some of the lessons learned include:  

• The female remains the family member who predominantly manages the benefits process at home. Whether the employee or the spouse of an employee, the female is the most consistent decision-maker about her family’s health.

• X-rays appear to be a product/service that consumers are willing to shop. There doesn’t appear to be extensive allegiance to a particular provider on this service.

• Percentage-off coupons (15-20%) may be a purchase motivator if applied towards the patient’s bill.  

• Convenience/location/distance of the savings appears to be a major driver to action. A more convenient location near a patient appears to influence his choice of 

• a service.

• In the CDHP environment, more employees appear willing to delay going to the doctor until they’re “really ill.” If a greater share of the cost of a service or care must come from their pocket, employees seem more likely to be judicious and self-ration care.

• Most employees today appear to know they can ask for sample prescriptions from their physicians, yet, few appear willing to ask.

Conclusion

Healthcare costs continue to rise; and that doesn’t appear to be changing anytime soon. As a result, a greater share of the cost of an employee’s healthcare is being heaped onto the shoulders of employees.

But healthcare consumers can now take greater control of their healthcare and better limit the impact of these escalating costs on their pocketbook through a combination of CDHPs and cost transparency. Armed with these tools, employees can also more clearly see the real cost of healthcare and make far more insightful purchase decisions for themselves and their families. In turn, that is helping reduce the cost of healthcare to everyone – employers, employees, health plans and general consumers.  

Cost transparency is a critical driver that, we believe, will successfully turn healthcare “users” into healthcare “buyers.”

To view the full PDF, visit: www.changehealthcare.com/downloads/wp/Lessons%20Learned.pdf