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To start a lively debate among healthcare leaders, ask “Who’s going to drive down costs?”

2:27 pm by | 8 Comments

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Say what you will about Steven Brill’s Time magazine cover story, Bitter Pill, but it’s hard to deny that it — and his media tour that’s followed — has magnified the discussion about the cost structure and the power plays that happen within the healthcare industry.

An example of that came Wednesday when a Center for American Progress event put Brill on stage with two other opinionated personalities: Dr. Giovanni Colella, the CEO of healthcare transparency company Castlight Health, and Dr. Ezekiel Emanuel, senior fellow at the Center for American Progress and vice provost at the University of Pennsylvania.

The most colorful and thought-provoking discussion sparked when they were asked about solutions for bringing down the cost of care.

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Colella, naturally, emphasized the role of price transparency and consumer education in lower healthcare costs. He likened the current approach to consumers paying for a Ferrari but getting a Toyota instead, and implied that a big part of the problem is that consumers don’t actually know what they’re buying when they receive care.

So one approach is giving consumers more transparency and letting competition among payers and providers drive down prices. “I don’t believe in a nationalized healthcare system. From a social standpoint, I like the idea, but from an economic standing, every time we’ve tried to regulate prices, it hasn’t worked,” Colella said. “If you don’t allow a market to set prices, I’m not convinced it’s going to work.” Rather, educating consumers and aligning financial incentives would drive behavior change.

A problem with that, Brill retorted, is that the nature of receiving healthcare often doesn’t allow the time or means for “shopping around.” A patient with chest pain, for example, isn’t going to compare prices on an emergency department visit before going. “There isn’t a fair market today where the individual buyer has any power in the marketplace.”

Emanuel fought back on the consumer-centric approach too, and asserted that the responsibility for driving costs should be more on doctors and insurers. “We need to shift from educating the public [...] because doctors and hospitals are where the real change is going to take place.”

Plus, he said, “everything we know about consumers is that educating them gets very little needle movement.”

Instead, he summed up an approach supported by the Center for American Progress, in which payers and providers would negotiate universal payment rates within a state. That brought up the impending shift toward a pay-for-performance reimbursement structure, which Brill doesn’t seem to be a big fan of. “To the people providing the service, how much time you spend doing something actually matters to your cost structure,” Brill said. “I wonder if you really want to go into that kind of insurance business,” which seems to be difficult to implement and make practical.

Although the conversation didn’t come to a real conclusion, it brought up some important points in each of these approaches. I recommend checking out at least the middle part of the discussion here. I’m also eager to hear thoughts on this. Of course, bringing down costs is going to require effort from all parties, but who’s really in the driver’s seat?

Copyright 2014 MedCity News. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

Deanna Pogorelc

By Deanna Pogorelc MedCity News

Deanna Pogorelc is a Cleveland-based reporter who writes obsessively about life science startups across the country, looking to technology transfer offices, startup incubators and investment funds to see what’s next in healthcare. She has a bachelor’s degree in journalism from Ball State University and previously covered business and education for a northeast Indiana newspaper.
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8 comments
Tami Hutchison
Tami Hutchison

Transparency is essential to functioning markets.  Transparency, however, is defined as each side being able to see through to the other.  There is a critical difference between transparency and "reflection".  The industry abounds with reflection vendors - companies that accept information and do something with it, then reflect it back to the party from which it came.  Reflection relies on one party to act.  True transparency enables informed action by each party - supply, demand, and payers.  That's what eLuminate Health is doing.

davisliumd
davisliumd

%s %s %s all true comments but MDs must lead way %sz%ssts

vivianleemd
vivianleemd

Where we need to place our focus is on alignment. This is not a market. If you don't want to buy a Ferrari (or a Toyota), don't buy a Ferrari. If you want to survive a heart attack, you're going to the ER.  A market requires choice with fully informed consumers (information symmetry) and in health care these are not always achievable. What we need is a system in which patients, providers and payers are all incentivized to maintain health. In part that's patient education and in part it's other incentives for patients to reduce their own health care costs (providers and payers). To that end, it becomes about payment reform and transparency that motivate improved health and lower costs. The positive side is that we are seeing some slowing in the growth of costs already. Only so much can be achieved if we don't know, actually know, our costs (see Michael Porter's NY Times editorialE. Emanuel's more recent editorial and Health Care "Market"). As health care providers, this—and the necessity to work together to find solutions that achieve this alignment— should be our responsibility.


Karen Burhans Laing
Karen Burhans Laing

The only thing that will drove down health care costs is teaching patients health literacy skills. Only 5-12% of Americans have the skills and knowledge necessary to navigate our healthcare system and make healthy choices. Once we get that figure over 50% health care costs will plummet.

Steve Zabriski
Steve Zabriski

THE COST OF HEALTHCARE IS TOO LOW!  At least for consumers.  The World Health Org. estimates that 80% of heart disease, stroke, and type 2 diabetes as well as 40% of cancer could be prevented with simple lifestyle changes.  If we don't get the consumer to make the right choices we'll never "bend" the cost curve.  Want to lower utilization and cost?  Charge patient insurance premiums according to health metrics they control.  Smoke? Higher premium.  Obese?  Higher premium.  High Cholesterol with poor diet and noncompliance with statin?  Higher Premium.  etc.  Couple this with education that shows how they can lower their premium and, in essence, earn a raise, and we can finally lower costs.  If they continue to choose poorly they should pay for it.

Howard Mann
Howard Mann

Before the cost to the consumer and funding source of companies shouldering the burden of insurance, or even the payors can be appropriately fixed, the front line business of buying and selling products and sevices within the healthcare provider arena badly needs to be repaired. The idea of safeharbors has become a keystone in the barrier to pricing transparancy to the purchasers of supplies, services and equipment and manufacturers have enjoyed the leverage too long of not having to implement standards of product, customer and categorization that in other industries are seen as an efficeincy for all parties, manufacturers, distributors and providers alike. To truely reduce provider expenses (before we can then re-look at what insurers, thus consumers have to pay), healthcare should be able to take transparancy and collectively bargin for better pricing.

breichjr
breichjr

A HUGE part of the costs built in to any office visit or procedure are directly related to the fear of being sued for malpractice. Remove the incentive trial lawyers have to sue and watch the prices fall dramatically. Same goes for huge institutions like the University of Pittsburgh Medical Center to continue to operate as "not-for-profits". I'm not in favor of more taxes on anyone, believe me. But if "companies" like UPMC were taxed at the same rate as corporations you'd also see dramatic reductions because they would be forced to price their services utilizing market-based realities.