EP334: Do Consumers Ditch High-Cost Providers After Shopping With Price Transparency Tools? With Sunita Desai, PhD

Let’s discuss price transparency, which isn’t an end unto itself obviously. The great hope of price transparency (or at least one of them) is that it furthers consumerism, which is also not an end unto itself. Obviously. The great hope of consumerism is that it effectively forces the health care industry to straighten up and fly right.

Before I dig into this, let me make one critically important point for context. Enabling consumers to find low-cost providers is not the only goal of price transparency. Employers should be hiring companies to do cost analytics and bring them back insights which should, along with quality indicators, be part of network selection or direct contracting or bundle considerations. Add to that something I heard Katy Talento say the other day. She said something along the lines of: Anyone sitting around whiteboarding cockamamie reasons to keep their prices secret ... how is that not corrupt? You’re trying to conceal the prices that your patients will ultimately be responsible to pay, as per, by the way, the financial document that every provider I’ve ever seen makes patients sign on the way in. You, patient, are ultimately responsible for the bill here. Don’t be thinking otherwise. What did I hear the other day, which is a great message for patients everywhere? If you can’t see who’s holding the bag, check your hands. It might be you.

But let’s get down to the business of this particular podcast here. As I tend to contemplate many complicated things, I like to play a kind of simplified version of moneyball, otherwise known as sabermetrics, if you are as big a geek as I am. You start at the end state, and you work backwards. If the goal of price transparency ultimately is to drive the usage to better, lower-priced providers, then people/patients have to be shopping. OK … for patients to shop, there has to be shopping tools. For shopping tools to exist, there has to be price transparency. If you look at this flow in reverse, that’s the progression needed to realize the goal of disrupting the health care system and causing competition and health care providers and others to get themselves subjected to free market forces to up their game and lower their prices.

Going through this again in a bullet point list, here are the seven steps to get from price transparency to the impact of consumerism to create health care quality overall improvements and for costs to go down:

1. Price transparency
2. Shopping tools
3. People shopping
4. People taking the information gleaned from the shopping tools and putting it to use
5. Higher-quality, lower-priced providers get more business.
6. Lower-quality, higher-priced providers get stomped on by the market.
7. Health care quality overall improves, and costs go down.

It’s funny because we talk about concepts like the impact of consumerism all the time, but I don’t think I’ve ever seen anybody literally write out the mechanics of that progression. And this is an incredibly valuable exercise (I think anyway) because, as we all know so well, to actually achieve anything, we have to be willing to check out how it’s going, to learn some lessons, and then evolve our approach accordingly.

The short version of the “how’s it going,” based on available research, is that most people—your average civilians, I mean—do not really use shopping tools when they are made available. Good news is, if there’s advertising and other outreach efforts, then this number of users goes up. So then the next question becomes, what are people then doing with the information? Are they heading to lower-cost providers? Bad news is, sadly, no. They do not tend to do so.

Let me just interject right here. There’s going to be two different reactions to what I just said. One reaction is going to be anger. I just kicked somebody’s sacred cow, and they’re all “Earmuffs!” right now. Another reaction is the more productive one, and frankly, it’s the only reaction for anyone who is truly committed to transforming health care. That reaction is, “Huh … so then how do we incrementally improve? What are the barriers to this mechanism of action, so to speak, and how are we going to then address those barriers to get the results that we’re looking for here?”

This is what the conversation with Sunita Desai, PhD, is about in this health care podcast. Sunita Desai is a health economist and assistant professor in the Department of Population Health at the NYU Grossman School of Medicine. She and her colleagues have done extensive research into everything that we discuss in this episode. We talk in depth about the barriers that consumers face when trying to make price information actionable, and you gotta know what the problem is if you’re going to solve for it. IRL, if we want consumerism to work, we must overcome its challenges. It would be nice if we didn’t need to, but we do.

One last thing, and this is going to be a recommendation: I really enjoyed Adam Grant’s latest book, which is called Think Again. He talks, for an entire book basically, about how most of us are accustomed to defining ourselves in terms of our beliefs, our ideas, and our ideologies. He says that this becomes a serious issue when our opinions become so sacred that our totalitarian ego leaps in to silence any counterarguments, squash contrary evidence, and close the door on learning, effectively. 

You can learn more at Sunita’s NYU Web site or by emailing Sunita at sunita.desai@nyu.edu.

Sunita Desai, PhD, is a health economist. Her research investigates how policies and incentives shape health care provider behavior and organizational structure. She also examines the role of information and price transparency in consumer decision-making in health care. Her work has been published in leading journals, including JAMA and Health Affairs, and has been covered by media outlets such as the New York Times and Washington Post.

She is an assistant professor in the Department of Population Health at NYU Grossman School of Medicine, with secondary appointments in the Department of Economics at NYU Stern and the Department of Health Policy at NYU Wagner.

From 2015 to 2017, Sunita was a Seidman Fellow in Health Policy and Economics at the Department of Health Care Policy at Harvard Medical School. Sunita received her PhD in health care management and economics from The Wharton School of the University of Pennsylvania in 2015 and her bachelor’s degree in economics from the University of Pennsylvania.

06:23 Why is everyone so interested in price transparency right now?
07:30 How does price transparency enable consumerism?
08:05 What are the two aspects to consumerism in order to enable it in health care?
11:01 Does access to price transparency tools lower costs and spending?
15:19 Why is there such low utilization of price transparency tools?
16:13 What’s the first barrier to using price transparency tools?
17:10 Why bypassing the physician at the point of care limits the use of price transparency tools.
17:53 EP284 with Carm Huntress.
23:20 EP308 with Mark Fendrick, MD.
23:31 How does reducing spending with high-deductible health plans negatively affect high-value health care?
25:23 “There is not a strong correlation between prices of providers and quality.”
28:48 How does a reduction in physician choices undermine price transparency?
29:30 “We owe that information to patients … it’s useful for patients to know what out-of-pocket costs they should expect.”