By: David Ostrowsky
When you’re shopping for a new car, you expect that shelling out more money will correlate with a more high-powered, fancier, and durable vehicle. The same logic – that price and quality run parallel to one another – would seemingly apply to flat screen TVs, smartphones, stereo systems, laptops, vacuum cleaners, snowblowers, and every other item that Americans race to the stores to purchase on Black Friday. It is human nature to assume that a higher price equates to higher quality . . . unless information is provided to the contrary. As savvy shoppers are well aware, there are user reviews online that could potentially reveal that the higher cost vacuum or TV is no better than (and is sometimes worse than) a lower cost alternative. As such, price transparency on its own may be harmful as people gravitate to the higher cost item based on an assumption that it is better; however, when price transparency is combined with quality metrics, consumers can truly make the most enlightened and informed decisions.
When it comes to healthcare, the belief that a higher price of services equates to more optimal outcomes is also widely prevalent. However, because there is such scarce transparency regarding price and quality metrics of healthcare services – in stark contrast to such information being readily available for the aforementioned consumer products – this belief is so often not grounded in reality.
And The Phia Group, as the country’s foremost expert in healthcare cost containment, has the numbers to prove it.
While the United States spends more on healthcare than any other developing country and still ranks last for quality of healthcare, the same dynamic plays out among the individual states. As indicated in the recently released The Phia Group Healthcare Index, a state-by-state healthcare quality and cost analysis grounded in clinician and facility data from publicly available CMS sources, incorporating both quality metrics and cost data derived from Medicare payment files, the states that ranked at the top (Minnesota, Hawaii, and Montana) had high quality healthcare and lower aggressive billing/more affordable services while those states ranking low on the list for healthcare quality (Nevada, South Carolina, and Texas) had more aggressive billing rates/less affordable services.
This tremendous irony may confound readers, but, in a sense, it should not come as a major surprise given that so many Americans are unaware of how to access information pertaining to healthcare quality and cost metrics. Subsequently, the overwhelming majority of people have no real understanding as to what their respective medical treatments cost – or that there is often such a wide range of prices for a given service. For just one example, the price of a knee surgery at one facility could be thousands of dollars higher than it is at another facility; in so many cases, unfortunately, the quality of the surgery at the higher-priced facility may be of vastly inferior quality, resulting in further costly complications and re-admissions. In other words, it’s a vicious cycle that can keep repeating itself. This same dynamic certainly holds true with maternity services, which tend to be some of the costliest medical services people consume.
So why aren’t more people aware of the actual costs of the medical services they receive? While there is such financial data available, it certainly takes a longer Google search to find than that for most consumer products. Also, because participants on health insurance plans are not paying the entire bill – but instead focused on their deductible amount and co-pays – they have little incentive to do some research and learn what the total price is. Indeed, many expecting mothers would be shocked to find out that they could be saving their respective health plans tens of thousands of dollars by delivering at certain hospitals, ones that may just so happen to offer superior services.
Ultimately, the mindset of patients needs to change. They need to view themselves as engaged consumers of healthcare services who shop around by comparing cost and quality metrics – no different than they would for products such as a lawn mower or refrigerator. By law, healthcare facilities are required to provide clear pricing information online for services rendered; patients/engaged healthcare consumers need to feel empowered to search for that information and then make educated decisions that are in their best interest.
That is, quite simply, the only way to prevent healthcare costs from spiraling out of control.
For reference, the list of states, ranked top to bottom, is as follows:
**Maryland was excluded due to its unique all-payer model, which regulates hospital payments differently from other states.