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May 2013
Transparency on Health Care Costs and Quality
By John Paul Galles

     As the Affordable Care Act (ACA) is implemented, it will become clear that there is little in its guidelines and regulations that addresses health care costs. Nevertheless, the ACA positions business owners and consumers to become increasingly engaged and active in making health care decisions.

     To make good health care decisions, they need to be armed with access to information about costs as well as quality, in addition to the overwhelming variances in coverage from one plan to another, one provider to another, one doctor to another and even from one procedure to another.

     The current U.S. health care system was substantially configured in the mid-1960s when Medicare was introduced and approved by Congress and then President Lyndon Johnson to provide for the elderly. While most would agree that care for the elderly has been vastly improved—most seniors had no health coverage prior to its passage, it also created an incredibly complex system.

     What is needed is health care transparency.

     Health care transparency provides employers and consumers the ability to see provider-specific information on the quality and cost of medical services reflecting the true costs that include any group-negotiated discounts, as well as the costs of various facilities and diagnostic tests, and accounts for co-pay, co-insurance and deductibles.

     Equally important to the display of costs is information about the quality of care indicated by collectible data such as patient outcomes, rate of complications, readmissions, hospital-acquired infections, and other factors.

     In the 1980s, Medicare reimbursement was built around a diagnosis-related group system (DRG) classified into 467 DRGs. These were used to compensate hospitals for patient care. In 1992, Medicare adopted the resource-based relative value scale (RBRVS). From this system, providers received payments determined by the expected resources needed to provide care including physician work, practice expense and professional liability expenses. These could be adjusted by geographic differences.

     As you might expect, providers started to use the Medicare reimbursement rates as the baseline costs and then add other expenses when individuals were not covered under Medicare. This is known as cost-shifting.

     From 2006 to 2010, health care costs have increased by 19 percent while inflation over the same period has increased by 8.6 percent. Presently, consumers often have no idea what the cost of care will be until they receive sometimes multiple bills in the mail weeks or months after the services have been rendered. Health care transparency will benefit consumers, employers, providers and health plans to make sure costs are not being unfairly shifted and to assist them in determining the extent to which they can afford health care and in paying for the health care they consume.

     A report delivered by the Catalyst for Payment Reform and Health Care Incentives Institute compares and rates health care transparency from state to state. Unfortunately, North Carolina and South Carolina were given Fs by the Institute. From their research, only two states deserved As, five earned Bs, seven achieved Cs and Ds, and more than half, 29 states received Fs.

     To have any impact on health care costs, it is important that health care transparency be adopted as widely and as soon as possible, and delivered to employers, consumers and their families so they can make appropriate judgments regarding their own health care. As consumers increase deductibles and co-pays to afford health care, transparency becomes even more important.

     One company that I know—Castlight Health—works with large self-insured companies to provide their employees with information about health care costs in their communities and how they vary with in provider networks within the company’s self-insured plans. This is exactly the type of resource that smaller businesses and their employees need to make wise decisions about purchasing health care in their communities.

     Now is the time to act. The sooner policies, laws and regulations encourage health care transparency; the sooner consumers can act in their best self-interest and the better the outcome for the health care system. Technology will be helpful, but education and articulation of the need for transparency to our lawmakers will be immensely important.

     Remember that costs are only one side of the equation. Quality outcomes are the other side of the equation and they should be contemplated and considered at the same time. With the tools that transparency can provide, our health care will improve and costs will be contained or maintained before they become unsustainable.

John Paul Galles is the publisher of Greater Charlotte Biz.
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