Professor Jean Abraham Division of Health Policy and Management School of Public Health

1. The Transparency Movement: Collecting and Communicating Price and Quality Information to Consumers Professor Jean Abraham Division of Health Policy and Management School of Public Health December 1, 2006

2. Presentation Outline • Motivation • Hospital Prices and Quality • Consumer Decision-Making • Factors influencing provider choice • Consumer information use and impact • Communicating price and quality information effectively

3. National Health Expenditures Per Capita, 1986-2010 Source: CMS, Office of the Actuary, National Health Statistics Group.

4. Where do the dollars come from? • Private Insurance (35%) • Medicare (17%) • Medicaid & SCHIP (16%) • Other public (12%) • Out-of-pocket (14%) Where does the health care dollar go? Levit et. al., 2003

5. Transparency Movement • Efforts by federal and state governments, associations, consumer groups, payers, and health care delivery organizations to create and disseminate price and quality information to consumers in order to support their decision-making.

6. Drivers of the Transparency Movement • Health care cost inflation • Purchasers • Recognition that quality matters and quality varies across providers • Uninsured • Almost half of personal bankruptcies tied to a medical problems • Consumer-directed health care

7. Health Toolsand Resources Health Coverage $$ Annual Deductible Nurse/ Health Coaching Web- and Phone-Based Tools Preventive Care 100% Annual Deductible Consumer-Directed Health Care Model • Health Reimbursement Arrangement (HRA) • Employer allocates HRA • Member directs HRA • Roll over at year-end • Apply toward deductible • Health Savings Account (HSA) • Employer/employee contribute • Portable • Health Coverage • Preventive care covered • Annual deductible • Expenses beyond the HRA • Nationwide provider access • No referrals required HSA/HRA • Health Tools and Resources • Care Management • Price and Quality Information tools

8. Consumer-Directed Health Care • Proliferation of HSA/HRA and HDHPs • EBRI/Commonwealth • 1% of U.S. adult population in CDHPs • Kaiser Family Foundation • 1.6 million with an HRA in 2005 • 2005 FEHBP open enrollment • 7,500/ 9 million • AHIP • 3.2 million in Health Savings Accounts in Jan 2006 • Mercer Benefits • 3.5 million • National Institute for Health Care Management Foundation • 4 million (600,000 with an HSA).

9. Hospital Prices • Charges or “list prices” • Charge Description Master • Setting of Charges • “Across the board” at a constant percentage • Selective price changes to achieve a stated overall charge increase • Transaction prices • Negotiated prices with commercial payers • Discounted charges by Diagnosis Related Group (DRG) • Per diem rates • Fee schedules • Price variation by insurer and by service • Administered pricing (Medicare & Medicaid) • Prospective • DRG based (inpatient) & APC based (outpatient) • Exception: Critical Access Hospitals • Per diem payments

10. For whom is “price” relevant? • Charges • Self-pay (uninsured) • MN exception: prices for uninsured must be equal to the rate paid by commercial insurers that generated the most revenue in the prior year. • CDHP beneficiaries who have not met their deductible and do not get negotiated rates. • Other insured individuals whose payments are tied to charges • Individuals seeking services that are “carved out” and that may be paid based on charges • Individuals who meet outlier provisions • Transaction prices • Private insurance beneficiaries with significant out-of-pocket cost-sharing

11. Relationship between Charges and Transaction Prices Slesnick and Wendling, Working Paper using 1996-2003 MEPS data, 2006

12. Variability in Charges

13. www.mnhospitalpricecheck.org, 2006

14. www.mnhospitalpricecheck.org, 2006

15. www.mnhospitalpricecheck.org, 2006

16. Facility Fee - Cesarean Delivery The estimates below are based on Medica Choice network contract rates and are for the facility fee for Cesarean Delivery. Physician fees for delivery and newborn services, fees for service from other medical professionals, and other facility fees may apply. In 2006 Medica estimated $2,261 as the average physician fees for Cesarean Delivery and $199 as the average physician fee for Newborn Services. Accessed through mymedica.com and then through http://carecostqualitytoolbox.com/default_detail.aspx?id=12

17. Factors that drive variation within and across geographic markets • Revenue • Ability of hospital to negotiate with insurers • Payer mix • Costs • Labor costs • Technology • Intensity of service provision (provider practice style) • Patient severity • Medical education • Mission (charity care provision; safety net)

18. Mrs. Jones’ Experience • 56 years old, early retiree, living in Ramsey County • Individual HSA with a $5000 deductible and 80/20 coverage once deductible is met. • Having difficulty walking and goes to her primary care physician who recommends an orthopedic surgeon for her to see. • Orthopedic surgeon recommends knee replacement surgery. • Surgeon practices at St. John’s, St. Joseph’s, and United Hospital in the East Metro (all of which are in her insurance plan’s provider network).

19. Mrs. Jones’ Shopping Experience From www.mnhospitalpricecheck.org: • Mrs. Jones may also want to do the following: • Check her insurer’s website and/or call them to ask about negotiated rates for this procedure at these three hospitals. • Or • (2) Call each hospital and try to find out what the knee replacement would cost (facility fee), given her particular type of insurance.

20. Mrs. Jones’ Shopping Experience HealthPartners’ Hospital Report Card Also, Mrs. Jones wants to check the credentials of her surgeon. She goes to the MN Board of Medical Practice website where she can access the Professional Profile search engine to learn more about her surgeon.

21. Consumer Decision-Making • Factors Influencing Hospital Choice • Type of service • Provider network • Distance • Urban vs. Rural • Physician referral • Recommendations of family, friends, colleagues • Quality • Structural, Process, and Outcome measures • Price

22. Health care information use and impact • Prevalence • Factors Associated with Use • Demographics • Higher Education • Female • Prior utilization of medical care services • Personally relevant information • Customized decision-support tools

23. Communicating Complex Concepts • Prices • Explaining that charges may/may not reflect transaction prices • Prospective patient should also check with their insurer. • Hospital services vs. physician services while in the hospital • Averages vs. Median values • Quality • General vs. specific populations • Clinical quality measures vs. patient satisfaction • Volume matters • Quality is service line-specific • Value = Price & Quality considered • Information needs to be communicated jointly when possible and specific to the individual’s needs

24. Effective Communication of Price and Quality Information • Method of communication • Who is the audience? • On-line, Hard copy, Verbally • Presentation • Layperson language • Differing levels of detail • Side-by-side comparisons • Logistical Issues • How easily will prospective hospital patients be able to comparison shop in order to make an informed choice? • How will hospitals respond to increasing demand by consumers for relevant, accurate, and comprehensive price and quality information?

25. Concluding Remarks • Transparency movement • Not likely to be a “magic bullet” to solve the fundamental problems associated with the health care system • Very important step for increasing consumer and provider awareness regarding absolute and relative performance differences across the system • May help to facilitate performance improvement

26. Resources: • Minnesota Hospital Price Check • www.mnhospitalpricecheck.org • Minnesota Board of Medical Practice • http://www.state.mn.us/portal/mn/jsp/home.do?agency=BMP • Minnesota Community Measurement (medical groups) • http://www.mnhealthcare.org/~main.cfm • Medicare • Medicare payments by county (inpatient, outpatient, physicians) • http://www.cms.hhs.gov/HealthCareConInit/02_Hospital.asp • Hospital Compare (Quality metrics for heart attack, heart failure, pneumonia, and surgical site infection prevention) • http://www.hospitalcompare.hhs.gov/

27. Thank You! Contact Information: Professor Jean Abraham Division of Health Policy and Management School of Public Health University of Minnesota Email: abrah042@umn.edu Phone: 612-625-4375