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Although more midsize employers are encouraging their employees to become more conscientious health care consumers, very little information about the price of medical services was publicly available until recently.
But thanks to entrepreneurial endeavors involving large employers, online tools that provide price information about medical services ranging from simple blood tests to complex elective surgical procedures are now available to employees of middle-market companies with the click of a mouse.
While most of these new tools are accessible online, Lexington, Ky.-based IF Technologies Inc. in January introduced an iPhone application that enables users to compare prices of medical procedures while they are sitting in their doctors' offices.
The lack of price information in health care has been a major driver of ballooning health care costs in this country, medical cost containment experts say. Managed care had made pricing of individual medical services unknown to health care consumers. Providers participating in health maintenance organizations had historically been paid on a “capitated”—or per-head-per-month—basis, while insurers' negotiated discounts off fees charged by doctors participating in their preferred provider networks were rarely disclosed to insureds. Moreover, because health insurance has been heavily subsidized by employers, employees have had little incentive to shop around for medical care.
But as many employers switch to health plans that require patients to pay more out of their own pockets, demand for medical pricing information is increasing. In response, a new crop of entrepreneurial companies is sprouting up to provide price transparency tools to self-insured employers.
“The consumerism movement is finally getting wired,” said Cyndy Nayer, president, CEO and founder of the Center for Health Value Innovation in St. Louis, who believes pricing transparency in health care will lower costs by fostering competition. “This is one of the best disruptive technologies.”
Castlight Health Inc., a San Francisco start-up launched in 2008, offers Internet-based tools that enable comparison shopping for health care in much the same way consumers can shop for airline tickets on travel websites.
Since its successful trial run with Oakland, Calif.-based Safeway Inc., whose 200,000 employees served as a test sample, Castlight is now marketing its medical price transparency tools to self-funded employers of all sizes, most recently initiating a push into the middle market, according to Dr. Dena Bravata, chief medical officer.
“We see enormous price variation across geographic (areas), across health plans and by procedure,” she said. For example, a standard colonoscopy in the San Francisco Bay area ranges from $400 to $4,700, while a lipid panel can range from $10 to $140, she said.
In addition to pricing information, Castlight and IF Technologies provide external links to nationally recognized, industry-accepted sources of quality information, such as the Medicare Hospital Compare site for hospitals and state medical licensure boards for physicians.
“In the absence of quality information, there is a notion that price is a proxy for quality,” Dr. Bravata said. “But when both cost and quality information are provided, patients see that there is no correlation between high- and low-cost providers and their perceived quality.” After patients see the price and quality variants, they often opt for lower-lost providers, yielding savings for themselves and for their employers, she said.
“We're seeing a 3% to 7% decrease in overall medical spending,” she said.
Unlike Castlight, which initially focused on the large-employer market, IF Technologies introduced HealtheReports specifically as a solution for midsize employers, according to Jim Freedman, IF Technologies co-founder and CEO. HealtheReports is available to self-funded employers with 1,000 or fewer employees via their preferred provider organizations and health insurers, which provide the claims data that IF Technologies uses to obtain pricing information on common procedures.
“There's not that many employers in the United States with 200,000 employees like Safeway. So our customer is the PPO network or the insurance carrier,” Mr. Freedman said.
While most employees will choose in-network providers for which their out-of-pocket costs are lower, many employees don't know there is still “a 300% to 400% price discrepancy for the same procedure among in-network providers,” Mr. Freedman said. “This is relevant information to the plan member. When an employee acts on that information and selects a lower-cost provider, they save and their employer saves.”
In addition to pricing and quality information, HealtheReports also offers users the opportunity to provide feedback. Among other things, plan members can grade providers based on wait times, facility cleanliness and effectiveness of care, using a five-star rating system.
“Health care costs are going up, and employers can't absorb it, so they're shifting it to employees through higher coinsurance and higher deductibles,” he said. HealtheReports enables plan members to “reduce their out-of-pocket costs as well as lower the claims costs of their health plan,” he said. “And with our mobile app, the information is accessible anywhere, including in the physician's office.”
While HealtheReports' pricing information is provided on an “episode-of-care” basis to give users an idea of how much it will cost to treat a specific condition, Castlight provides pricing on an individual procedure or on a bundled basis, according to Dr. Bravata.
“We support all the major outpatient and, increasingly, elective inpatient procedures including everything from office visits to 500 lab tests, hundreds of imaging tests including MRIs, X-rays, CT scans, endoscopy, lung function test, chiropractor (and) acupuncture,” she said.
In addition, “we calculate episode costs for things like pregnancy, where common bundled payments include prenatal visits, delivery and a post-natal visit,” Dr. Bravata said. Similarly, if an individual were to use the tool to compare the cost of treating a urinary tract infection, the tool would bundle the cost of the office visit and lab test together, she said.
While IF Technologies and Castlight are selling their transparency tools to self-funded employers, New York-based PriceCare.com L.L.C. is directing its marketing efforts at individuals, providing pricing information on 45 procedures at six hospitals in four states free of charge, according to CEO Andrew Simon. He said employers can simply direct their employees to use the website or, for a fee, PriceCare.com will develop a customized Web portal to serve as the initial point of access.
PriceCare.com was founded in 2008 by Dr. George Neuman, a New York anesthesiologist, to assist patients in locating affordable health care providers and help hospitals to compete for business, Mr. Simon said.