Can consumerism reduce health care costs?
Insights from the OptumLabs Research & Translation Forum.
Many believe consumerism offers promising pathways to more affordable health care. When consumers make choices based on price and quality, it should create incentives for providers to compete on these dimensions and lead to lower prices and improved outcomes.
To engage consumers requires more transparency into the cost of services, along with better integration of care into their lives and proper incentives. Dr. Rushika Fernandopulle believes focusing on relationships in a primary care setting is key for consumerism to work.
Reimagining primary care
Learn how Dr. Fernandopulle thinks primary care should be restructured to fit with a patient’s life. Building a community-based delivery model with the patient at the center prioritizes relationships over transactions and engages patients in their care.
Speaker: Rushika Fernandopulle, MD, MPP, Co-founder and CEO, Iora Health
- Rushika Fernandopulle is a physician, who for, better part of over a decade now, has been rethinking the ways in which we should just reimagine healthcare broadly. And I think that as Kavita Patel talked about earlier this morning, is it possible to actually get to that healthcare system in the future through incremental change, through those nudges, or do we need to essentially rebuild the whole system from scratch. And my sense is Rushika, we'll have to hear what you say, but I think you've been arguing that we need to rebuild it from scratch. So, without further ado, I'd love to introduce Rushika, our closing Plannery speaker. After Rushika speaks, I do think we will have time for some questions, and then we'll talk just a little bit through some closing housekeeping details. Rushika, thank you so much for being here.
- Thank you. Don't know why I deserve to be the last speaker between you and going home, but it's fabulous to be here, and again, thank you for for having me, Darsha. Good to see so many friends here. So, what I want to talk about work that I've been doing for the last 15 years or so, of trying to build a new model of care delivery. So, you know, this is one of my favorite quotes. This whole, the theme of the session here is really about the future of healthcare. And this is a quote by William Gibson. He was a science fiction writer, among other things. He said, "The future's already here. "It's just unequally distributed." Right, and so, I wanna talk about stuff we're doing with a huge caveat that this is not possible in most current health systems or medical practices. But that's the whole point. What we're trying to do, again I spent most of my career trying to change the system incrementally. Worked for the advisory board that's now a part of OPTUM. I worked for Don Berwick at IHI, worked in an academic, I held policy group at Harvard. And to be honest, got frustrated at the pace of trying to get to where we want to go, by doing these small incremental steps. And figured maybe, what we need, is we need a vision of where we want to go. We need a vision of the future. And the way to build that vision maybe is not to start with what we have, but just start over. And then we still will have to figure out how to get from here to there, but let's at least create a vision of what there is, that we can touch and feel and learn from. So that's really what I want to talk about. And one of the principles of building, the goal is to change the whole healthcare system. But instead of going top down, and starting with an insurer or a health system, let's start bottom up. Right? Let's actually start with the consumer, or the patient, or the person, and build up from them, as opposed to down from one of these arbitrary institutions we've built over the last hundred years. Right? And really felt like that would be more like then. Why primary care? It's a great lever point. Right, because we can help people, we can do primary care, obviously. But we can help people with what we know is the thing that a lot of the speakers spoke about, is the upstream part of care. How do you get people to eat better and exercise more and deal with stress. We'll talk more about that. But then we can also help them navigate the downstream part. This crazy complicated non-system we've done. Right, so primary care's this great lever. That's what we're going to do. Change the whole system, start from scratch, bottom up. The problem was of course, when we started doing this, is that the current primary care systems we have aren't built to do this. So when I went into primary care, I'm a primary care doc, this was my image of what it would be. This is a painting called the Doctor, it hangs in the Tate Gallery in London, you know, it's about relationship and looking at the girl's eyes. And really primary care is more like this picture, which is a picture from a great article in JAMA where a little girl drew a picture of her visit to the doctor's office. And you see the girl in the middle with her mom and there's a doctor on the side, looking off into the computer screen, trying to get his RBUs up, and meaningful use dollars. And that's really what we've turned healthcare into, right? And I think that the core insight that we had is what we need to do is actually change primary care in general, but healthcare in specific, from the ground up. And the thing we have to change, if you had to identify one thing, is to remove the transactions and move to relationship, right? So we have turned healthcare in this country into a series of transactions. Documenting, coding, and billing. 99213's, 99214's. Check the boxes. Meet the meaningful use criteria. And many of the things we're trying to do to fix healthcare, this quality industrial complex someone mentioned, is adding more of that crap on top of it, right? When last I checked, our job is to heal, and last I checked, transactions don't heal anyone. So maybe what we need to do, is stop adding stuff on, and actually refocus on relationship. One of my favorite quotes is from Michelangelo. They asked him, how do you get the Pieta, this beautiful sculpture. He said it's really simple, I take a block of stone, and I chip away everything that's not the Pieta. Right? We know healthcare is beautiful. We've been doing it for thousands of years. And we've added all this cruft on top of it, and maybe we need to get rid of some of that cruft, and that will emerge what we ought to be doing. So I started a little company, Iora Health. We are trying to build a new model of care from scratch, starting with building new primary care practices. We're based here in Boston. Literally, a few blocks away. It's so nice to come to a talk where I get to walk, as opposed to airplanes or even cars. We're tiny, right? We are about 450 people. We have about 30 practices across the country. But I think we're starting to learn a lot, which is why I want to talk about. So, if you want to change healthcare and primary care, I think the four P's, you have to change everything. You have to change the payment, the process, the platform, and the people. Let me talk about each of those. I think thinking you can change one and not the other and get the results is fooling yourself. So first payment. I think the original sin is fee for service payment for primary care, right? Fee for service is the wrong way to pay for relationships, and there's a period at the end of that sentence, right? By the way, there's a whole range of payment models. A lot of people, you know obviously, they take fee for service and give me a bonus, or fee for service, give me a little case rate on top of it. And they call those value based payment models. All of Medicare's current primary care, advanced payment models, are all based on a fee for service chasse. Fee for service is the wrong way to pay for primary care, remember Michelangelo, get rid of it. So we don't take any of that. Very simple. We just say hey, it's the wrong way to get paid. We won't do it. We'll only do stuff to the right of the line. Give us a fixed amount to take care of our patients, and let us get on with it. We're one of the first direct primary care practices out there. By the way, make it double typical primary care. Primary care is about five percent of health care spend. You know, it's ridiculous. 95% of what we're spending money on is failure primary care. Let's actually double down on it, and then we can reduce it in the downstream. All the way moving onto, all the way to full risk, and increasingly we're saying, you know, just give us the whole healthcare dollar, or as much of it as we can get. And now let us actually take care of the patient. That centers around relationship, that aligns our interests with doing the right thing. And so three ways we've done it, we continue to do a little bit of retail work, where we simply ask patients to pay us a fixed amount per month. We started that way 15 years ago, because no payer would give us the time of day. We still do a little of it. We have a great practice in New York, with a group called Grameen America, it's a microlending company that give small loans to largely indigent women, who are largely undocumented. We have a dollar a day primary practice. By the way, they think the way to solve their problem of being uninsured, is to give them high deductible health plans. That's not what they need or want. They don't need insurance, they need care, right? And high deductible plans doesn't fix their problems. But what they really want is care, for themselves, their kids. So that's what we do. That's probably about the 5% of what we do. We then evolved into working with self-insured employers, people like the Boeing company, state employees here in Massachusetts, Dartmouth's college employees, where they actually pay us a fixed amount for their folks. And then we moved into working with Medicare Advantage plans. So our biggest partner is Humana. We have a little contact with United. We've not seemed to be able to get United to pay attention yet. But really, can we work with Medicare Advantage plans to manage their patients this way, with again, a fixed amount, not fee for service. So step one is change payment. So step two is you now need to actually build a different delivery model, right? So we build built for purpose practice, we start from scratch. We build them in places where patients are gonna go. Patients don't want, by the way, big Marriotts with 50 rooms off of it, They want a bed and breakfast. They want something in their community, that's easy to get to, that's tailored to them and their community. So we have these, you'll see a few pictures of what they look like, you know they don't look at all like typical practices. They're built about relationship, there's no glass. People walk in, we give them a cup of coffee. Particularly on seniors, they treat like a senior center, they come and do puzzles, right? So space matters. We build teams, right? This is actually very profound, right? So in the typical primary care practice, you would think your job is you walk into the door every morning, you have 35 patients booked, you have seven or eight minutes per patient. Your job is to do the best job you can for each patient. Order the right tests, document code, bill as high as you can. Turn your brain off and go to the next patient. Right? That's your day. Everyday. Day in, day out. That's not the right job, right? The job we have, because of this global payment, is we have a population of people, and we know exactly who they are, and they are our responsibility. And our job is to improve their health and keep them out of trouble, meaning the hospital, the ER. And this is the key, and do whatever it takes. No one tells us what we get paid for, and what we don't get paid for, right? The whole point of fee for services is someone else, some idiot sitting in an office somewhere, are telling us we'll pay for a doctor's sick visit but not a health coach visit. We'll pay for a visit, not an email. We'll pay for this and not that, right? We never have to ask that question. It's very profound, right? Because these things are not protocol-izable, right? This is a very human endeavor. You need empathetic teams on the ground who can figure out the needs of that patient and be able to make that call, right? So this is our team. Of course we have doctors. I'm a doc. We're important. Our job is to diagnose and prescribe. What's the right thing to do? That's not the hard part. Particularly in primary care, the hard part for patients is actually executing on the plan. So I got tired in my practice at Mass General down the street, of seeing a patient seven minutes, I would say you should eat less, exercise more, take your medicines. Good luck, sucker, I'll see you in three months. And then you come back in three months, and you didn't do it. You bad, bad patient. I told you to take your medicines, eat better, exercise more. Good luck, sucker. I'll see you in three more months, right? Of course it doesn't work. So we need human beings to help them execute this plan. It's a little what the intention of the health plans, with the nurse in Idaho calling you at dinnertime. You know, but, there's no evidence that that works, by the way. This is a human thing. This is mano a mano. So we have these people we call health coaches. They are from the community, speak the language of the people they serve. They're picked for one thing only, which is empathy, right? Connecting to another human being. We can teach everything else. And they meet the patient with the doctor's arm around them. So we take this doctor magic and move it onto the coach. And then the coach can work with the patient to figure out how to eat better, how to exercise more, take them for walks. Hold their hand when that's the right thing to do, kick in the behind when it's the right thing to do, right? And it's actually stunning. By the way, I don't like the word health coach. You know, I sort of came up with it. Unfortunately, it stuck. The right word is what Paul Farmer, one of my mentors, who read mountains beyond mountains, he does this sort of work in Haiti and Rwanda, and he uses community health workers, and he calls them accompagnateurs. One who accompanies you in the journey to health. That's exactly who they are. But I can't spell accompagnateurs and no one else can so that's why we don't use it. But it's exactly the right term, right? And they came from everywhere, so Alex, this is one of our first practices, this in Las Vegas, Nevada, working with the casino workers union in Vegas. You see only two doctors, myself and Eva Snow, who's all the way on the right. Alex, the big tall guy, he was a softball coach. Barbara, standing at the back, she was a food and beverage server at Sahara, she was one of them. Chadima was the hot yoga instructor. Dennis was a manager at Target. Doesn't matter where they come from, right? It's just get people with empathy, who we can teach to do it. We also integrate, by the way, mental health into the model. We integrate social work, etc. So we start each day with a huddle. We sit around the table for 45 minutes, and talk about our patients, right? Because remember, our job is we have a population of people, they're our problem. What we don't do is sit in our office and wait for them to come in. If you're on the hook for a population, that's the stupidest thing you can do. Because the people getting into trouble aren't the people coming in that day. They're the people who are not coming in, right? So we talk about our patients, we talk about the ones we think we're concerned about and we make a plan to reach out to them. A lot of little things to see, by the way. This is about the thousand little decisions. A lot of people when they come in to the huddle, they say, I can't tell who the doctor is. That's very intentional, right? The first thing we say every day and every practice, is we all run the practice, we all run the huddle. We take turns running the huddle. So as a doc, I get to do it one out of every 12 days. But so does the health coach, and the nurse, and the social worker, right? It's about changing power dynamics. You know, we of course see people and visits. We think it's actually important. We think this is really important. This is all about behavior change. Trying to do behavior change with an app alone, or even calling them people at night and at dinnertime from Idaho, we think it's ineffective, right? This is mano a mano. We have to build a relationship, and there's no substitute for building a strong relation than meeting at least once in person, right? Little hug, eye contact. So we do it in person. After that, by the way, we can do a ton of stuff by email, and phone and text message. By all means, we should do that. Video chat. But it's important to meet at least once. So we meet in the room, a couple little things to point out, you know we sit at those chairs. We always begin and end it every visit, sitting in real chairs at a real table, right? Including with a family member there. So how are you supposed to have a real conversation, in most practices, with a paper gown with your butt hanging out, right? Now people say that's inefficient. The point isn't to be efficient, the point is to be effective. Primary care is 5% of health care spend, who cares if we spend a few minutes with people? And that prevents a hospitalization or an ER visit, right? So again, this sort of trying to be as fast as possible seems like a silly thing to optimize for. You notice a little screen there? So we carry around little laptops, little Macbook Airs, we plug them in during the visit. So use the screen, and people see their whole record. By the way, at home they can login to see their whole record. We've been doing this for 10 years, by the way, long before Open Notes and the like. Because it's the right thing to do. It's your chart, you ought to see it. That's what the law says. That's the right thing to do. And by the way, again, we have the big advantage. We started our practices knowing our patients would see their records. So we just don't write this malingerer comes in, we just don't do that. We assume they will see it. But then it becomes a teaching tool as opposed to something that gets in the way. Again, I talked about integrated mental health, we have behaviorists in every practice. If you take groups of sicker people, the incidents of mental health is huge, right? Whether it's depression, anxiety. Good luck finding a psychiatrist, so we sort of in source it in with integrated model we learned from the VA. Integrating social work into the practice because of all the social issues that people, by the way I completely agree, social determinants is, A, it's ridiculous that people are just now discovering this, it's really poverty, right? And we've had poverty for hundreds of years and they're not determinants, right? But these are the barriers we need to address with people. We do lots of groups. I think there's a huge power in patients helping each other. By the way we don't call them groups, we don't call them classes, we call them clubs. Because everyone wants to be in a club. We have Zumba clubs, this is a chair yoga club, we have women's clubs, we've got walking clubs, you know. We do a ton of these, and you start doing it thinking it's an efficient way for you to teach patients but you realize it's really about patients teaching each other and supporting each other. We take people to the grocery store, one thing that a lot of our health coaches do, is they'll tell people, say someone with diabetes, let's meet and let's go to the grocery store with your spouse, by the way, of course. Let's go around and pick up what you usually get. Hm. Let's look in your cart. Why is this a really bad idea? You know, if you look at the label. Let's go find something else in your grocery store that meets that same need. And why don't you buy it and take it home and see what you think. That's inefficient. It's not, that's the best hour we could ever spend with people. Instead of a lecture or a tape, it's go to them, to their grocery store, with their food, etc. So I think it's really powerful. This is one of my favorite stories. We have lots and lots of stories of trying to meet people's needs. This is a guy, his name is Mr. Edwin. And he had diabetes and hypertension, didn't take care of it and ended up in end stage renal disease. So we'd go to dialysis, get plugged into dialysis. But poor Mr. Edwin also had an anxiety disorder. So he would every now and then, sort of wig out. Gotta move, gotta move, gotta get up. And they'd unplug him, because he's competent, and he goes home. So what happens the next day? He shows up in the emergency room in renal failure, because he didn't get dialyzed. And so they would admit him two days of inpatient dialysis. They would give him an ativan tablet on the way out. He hates it, so he threw it away. And this cycle continued 13 times the prior year. 13 times. $260,000 of health care costs. No one did anything about it. So he came in, empathetic health coach. Mr. Edwin, this must be awful. Yes, I hate it. By the way, you know the main reason he hated it? Because his cat would be home alone for two days. Any other time, at home, you'd have to feel like you had to get up and move? Yes, it does happen. The key question is at home, is there anything you can do to make it better? Oh, at home, I put my music on, it calms me down. Health coach comes out of the room, says, Doc. You know they have a fund, where they can spend money on patients. Can we buy one of these iPod things? I say, absolutely. So we go on eBay, $35 used iPod shuffle. I was like, what sort of music does he like? He likes meringue. Well, tell the girls to bring the meringue CD's in, block an hour out next week to download the meringue onto the iPod. Next week, Mr. Edwin comes in. I say to everyone, stop what you're doing. We all go to his room. Congratulations, Mr. Edwin. You win our patient of the month award. We don't have a patient of the month award. But I want an excuse to give him this thing. Here's your prize. And he puts it on. Wow, it's my favorite song, exactly. Every time you go to dialysis, you take this, and you listen to it, and you think of us. He did. Next year, zero admissions. We just save $260,000 of healthcare costs with a $35 iPod shuffle. Why does no one else do that? It was exactly the right thing to do. Because there's no CPT code for buy iPod on eBay. And there's no CPT code for download meringue onto said iPod, right? People think their job is do what you're paid for. It's exactly the wrong way to think. It's about how do you solve the problem of the patient? Do whatever it takes. Now you gotta be careful, a lot of these patients are bottomless pits of need. So you have to be careful, and we've gotten good, and this is about a conversation with the team. About, is this the right use of resources? We've had to build our own IP platform. You know, as you can imagine the Epics of the world are not built for this. They're built to doctor, encode, and bill hire. They're fancy cash registers. We needed what we call a collaborative care platform that allows us to actually manage populations, have the center be actually a version of registries, not be off on the side. We needed to track performance, engage patients, their families, so we built our own. People said that's crazy, how can you do it, and patients needed to see their whole records, they needed to schedule their own visits. People said how could you do that? Well, you know in 2018, it's not that hard, because you can use pieces. I'm like, Epic, there's dozens of walled gardens, that's stupid, that's not how you build software in 2018. If people build pieces that work, use them, and put modern APIs in. And what you have to build is the core, data, and interface layer, but all the other stuff. So we use Box.com to do our doctor management, IMO, to do some of our coding stuff for diagnosis. Mirth is an open source HL7 engine. Eligible API does some of the pushing back and forth of 837 feeds if we need to. So, we don't need to build any of that stuff. It's really centered around a patient app. Probably the most important thing though, you know, payment, process, platform and technologies. This is a very different culture. And one of our earliest investors was Tony Hsieh. You know, the CEO of Zappo's. And I think we learned a lot from them about the way you build great service companies, which by the way, we're all in, you may not realize that, is you start by building great teams. And treat them really well, and they then will take great care of patients or customers, and that will lead to better outcomes, and then you'll make economic value off that. So many healthcare institutions somehow think they can treat their teams like crap, and somehow then they'll treat customers well. That's sort of magical thinking. This by the way, is our values. You know, at Iora, they're not typical healthcare values, really. About empathy, creativity, humility, passion and courage. But about how do you build this, and build that culture, and then be able to scale the culture. So we are scaling it, right? This was not about building one cool practice. What we said was how do we actually build this so we can scale it across the country? And we had an early on, New York Times article, Sunday business section, which called us the Starbucks of healthcare. Like I wish it was that easy, right? Because coffee is coffee, you can stamp the same thing out everywhere, right? Healthcare is local. It is what it is. But it's also not chaos, right? So I think what we wanted to learn, I think we're learning is what must be the same, because it ought to be done at scale, and what needs to be different, because it's different. So we're in 38 places, some of our various sponsors, employers, etc. around the country. In very different places. So it doesn't work, you know. The quality metrics work well, you know we're running four, four and a half stars. I would completely agree they're not clear we're measuring the right things in these star ratings. But it is what it is. By the way, we track the other things. We track things like, asking patients how do you think you're health is? My favorite question is, the John Walson how's your health question. How confident are you in managing your health? You manage those two things, I think we'd make a big impact. You know, we drop admissions by a lot. We're continually dropping admissions by 40 or 50% off baselines. We're running MLRs by the time we get people in their third year in the 70% range on Medicare. We're dropping costs on a commercial relative to a control group by about 20%. So these are big, big numbers that drives value. But I think the thing that's actually very profound, is not any of that. I think a lot of people focus on the value based stuff. I think of this as an incredibly consumer-centric model, that patients really like. We are doubling the number of patients we're serving, every year. And you can say you're little, but things that double in the beginning, seem like they're pretty little, and in the end, they grow pretty fast. So we run that promoter scores, and if you all know, you ask people how likely you'd refer this to a friend or colleague, zero to ten scale. Take the people who love you, the nines and tens, subtract out the zero to sixes to get a net number. I mean airlines, health plans, throw parties when they break zero. I think we continually run in the 80-90% range. People love this. Of course they do. And I think this is the age of the healthcare consumer is here. What's interesting is there are, I think they're the big play, all of you know that these folks like Google, and Amazon, and Apple are trying to get into healthcare. And I think there's this big open question, is will healthcare figure out how to be consumerist, or will these other companies figure out how to do healthcare? And which will happen first? And I think there's an open question out there. So we're sort of playing in between, and think that this is the right direction to be going in. So, what are just some lessons we've learned? You know the current delivery model is very inadequate. That getting primary care right is a really important part of the new system. That these new models, by the way if you go to one our practices, and I invite any of you to come visit, they're not a little different than the typical practices here, they're completely different. We were all these people, level three medical, walk into the practice, it's the same old crap. And they just paid a consultant to have them check the right boxes. These are fundamentally different. The new model of care is not a little different, it's completely different. By the way, I think what's really hard, and actually a fool's errand, is trying to do both at the same time. Thinking in the same practice, you can optimize for fee for service and volume and optimize for this sort of consumer-centric value based care. These are not the same thing, trying to expect teams to do both of them is just completely silly. The key, I guess, I think if you had to leave with anything, is how do you build around what consumers need and want. Every other service business in the world, that's a no duh. In healthcare, that's heretical. And I think people like us, new entrants, have an important role in moving this forward. So thank you!
Transparent information is important for patients to understand the cost benefit of the health services they use. Dr. Ateev Mehrotra and Dr. Anna Sinaiko believe patients also need the proper incentives to use this information. Higher deductibles alone aren’t working.
Changing policy incentives
See how Dr. Mehrotra and Dr. Sinaiko view incentives and benefit design to help patients navigate lower cost care. There is a cascade effect in using lower-priced primary care options to other health services (e.g., specialists) that offer quality care at lower costs.
Speakers: Ateev Mehrotra, MD, MPH, Associate Professor of Health Care Policy, Harvard Medical School; and Anna Sinaiko, PhD, Assistant Professor Health Economics and Policy, Harvard T. H. Chan School of Public Health
-One of the really fundamental shifts in U.S. healthcare today is this recognition that the responsibility for caring for America's health relies not only with the physicians and the provider systems and payors, but increasingly with the patients themselves, and the term given to that is consumerism. Both of our panelists today have done a tremendous amount of work in this area. Just in keeping with our theme today in data-guiding our decisions moving forward, we've invited them both to share their work. We provocatively titled this discussion, Is Consumerism the Answer To High Healthcare Cost. We may not get an answer, but at least perhaps, as I said before, at the end of this we'll be confused but hopefully confused on a somewhat higher level. So with that, I'll allow you both to introduce yourselves before your remarks and thank you very much.
- Alright. Hello, thank you all for having me. I'm Anna Sinaiko. I am a health economist at the Harvard Chan School of Public Health and I do research on this area of decision-making in healthcare settings. Ateev and I have worked together a lot over the years, so we're going to share this presentation and go back and forth a little bit. A little bit unusual, but I think it's gonna work. We'll see. And I'll let you introduce yourself when you get up here. Okay, I wanted to start by saying for the last 15 years at least, consumerism, which describes individuals taking a more active role in deciding about health insurance providers and their medical services, has been proffered as a pathway towards improving the affordability in healthcare here in the U.S. And that's for a few reasons. So, why is that? We're gonna start out with a promise and it's the price is stupid. The first of the three reasons is that the prices for healthcare are high in the U.S. relative to other countries. I know this is not a new fact for most of you in the room. I just wanted to show a little data that shows how, for most services that are available in other developed countries, here in the U.S., we pay a higher price for those services. But the real promise of consumerism looms large for the other two reasons. The first is that there's very wide price variation for healthcare services within geographic markets. Here, I'm showing you, for six cities, how the price for a leg MRI varies across hospitals. You can see that a patient in any of these cities, the total cost for their MRI would vary quite a bit, depending on which hospital they go to. That gives patients an opportunity to spend less or choose lower cost hospitals or equivalent costs but higher quality hospitals, if they have the information to do so. I think that another important fact is that overall, quality has found to be either not correlated with this price variation or weakly correlated. So, there seems to be this real opportunity to direct patients to lower-priced facilities. The third reason, though, is that we also find that high-priced providers have a pretty high volume of patients. So the promise of consumerism wouldn't be so big if there were a few high-priced places and they didn't have that much volume. That's not at all what we have. We have, in particular, for some services where we think there's really equivalent quality or very small quality differences across facilities like labs, imaging and durable medical equipment, we see very large variation in prices and if we simulate moving patients from high-priced places to medium-priced places, there's on the order of 10% outpatient spending on the table for savings, so a meaningful amount of money. Here's a quote from Regina Herzlinger from HBS. It says, 'When consumers apply pressure on an industry, "whether it's retailing or banking, cars or computers, "it invariably produces a surge of innovation "that increases productivity, reduces prices, "improves quality and expands choices." This quote sort of sums up why we think consumerism has promise. It's not just this single time period. The consumer who goes to the lower priced place would actually spend less. When we move consumers or consumers make choices that reflect price and quality, it actually gives providers an incentive to compete on price and quality, to lower their prices, and that lowers spending. So, turn it over.
- We're gonna do the tag team thing and Ateev Mehrotra. I'm a physician researcher at Harvard Medical School and I take care of patients at the Beth Israel, one floor above the labor and delivery unit. I get to tell you what isn't working and then Anna gets to jump in after me and tell you what is working in terms of trying to fulfill the promise of the price variation we're seeing. The general approach right now to price shopping is to say, how do we get people from going to higher-priced places to lower-priced places, is all focused on skin in the game. We need to increase, and we've done an amazingly successful job of getting people, more skin in the game, more out-of-pocket costs. This is a rise in deductibles we're seeing, both among people with a deductible among all workers. I think we're all facing this. I have a high deductible health plan. I imagine if I asked many of you, you all have high deductible health plans. It is now becoming the norm. Push this button on the And as all of you are aware from the midterm elections, this is a big problem and very clear and front center for the American public. Healthcare costs are now the number one financial concern for families. That's what they're worried about. Not college, not putting food on the table, not their housing. It's about healthcare costs, is the number one financial concern and almost half of Americans now are struggling to pay their out of pocket costs. We did a very good job on skin in the game. What do we need to do next? What we need to do next is give them price transparency so we can fulfill Regina's vision of consumerism. As you're well aware, this has become an important topic in the Trump administration and many administrations before that. Over half the states have now passed laws requiring either payors or providers to provide price transparency. As I indicated, this is not a new idea. Here in Massachusetts, our governor is very excited about this idea also. He says, "It's always troubled me that if you're a low-cost, "high-quality provider, player in healthcare, there's really "no way for anybody to figure that out about you. "We've got to do more in the whole transparency piece "if we want to be successful." Alright, so we're gonna put high deductibles, or out-of-pocket costs, we're gonna put price transparency, magic's gonna happen. How does this actually look like out there? A lot of initiatives, many of you are familiar. This is one in New Hampshire, which is the New Hampshire Health Cost website that uses all payor claims data from the state and what you do is, this is the website, so I typed in here arthroscopic knee surgery, and you can see that the estimated total cost for someone in an Anthem health plan with a $1000 deductible, what is the price variation as well as what is the variation in what you're gonna pay. A point we'll come back to a little bit later is you can see that it's always $1000, 'cause that's what your deductible is. All the health plans, I'm sure United, others here in Massachusetts and by law, all the health plans have to have a price transparency website, so this is a similar thing. This is Aetna's tool, where you can see both what the plan is gonna pay and then what you're gonna pay out of pocket, breaking it down both by deductible and co-insurance. Now, showing you how that's been played out in terms of these price transparency tools, how successful have they been in fulfilling that promise? We've published several papers evaluating the availability of a price transparency tool to employees, comparing them to controls. This is one paper we published in JAMA, and a follow on paper that doesn't come up right now, but it was also published in Health Affairs, and it's a very consistent story. Nothing. We didn't find any decrease in overall spending. We see no shifts in care from higher-priced to lower-priced providers, little exceptions, and no decrease in spending among those with higher deductibles, 'cause that's the group that we thought was gonna be affected by this. What about just the high deductibles themselves? Again, we know they're very, very effective in reducing spending, but I think most of you in this room are well aware that all the margin at which that reduction in spending is coming from is just people get less care. They are just scared to go get care, so there's about a 12 to 14% reduction in spending, unfortunately, often non-discriminant, both high value and low value care. When we looked more specifically are people price shopping, we find that enrollees in high-deductible health plans are no more likely to shop than those in traditional plans and we see, look at rates of switching, and they're only slightly different among those with high deductibles. So, to summarize, we have this idea, so much potential for savings, if we could move people from higher-priced places to lower-priced places, but the mechanisms that we have implemented from a policy perspective of combining higher deductibles and price transparency, have been ineffective. Anna's now gonna tell you what does work.
- Oh, why and what does work.
- Why and what does work. I think that this is the part where, if we wanna think about what would work instead, we really have to understand why the price-transparency tools that are available haven't worked. It's really for a few reasons. First of all, as we laid out, patients, in order to realize the promise of consumerism, need both information and the incentive to use it. So, there is absolutely the case that patients care about information on price and their own out-of-pocket costs for healthcare, but when patients are surveyed about where they get that information, their own health plan's price transparency tool is only one of a variety of sources that they go to for that information, and it's second on this list. A friend, relative or colleague is the most often used source, and the third most used source and fourth most used source are the practice, their physician or another clinician or staff member in the office, and so three of those top four sources don't have the information needed to actually provide accurate price information for patients. We also saw that, as Ateev mentioned, having a higher deductible is not an effective incentive to lead people to price shop for care, so as your deductible increase, we don't see much higher rates of people looking for price data. Why is that? We do see, when people search, they don't go to a lower-priced provider on average. Evaluation and management, or visits, lab visits, there was no impact. There was a small impact observed for some imaging procedures, but other than that, there's really not a lot of effect, and in part, it has a little bit to do with what services are patients even looking for. Here's some descriptive data from one of the health plans' price transparency tools where we looked at what are the most frequently searched services. Not that many services fall into the category where it's easy for a patient in advance, with time, to go to a website or call and find out the price. These are relatively low cost, not all, but many of them are relatively low-cost services. We looked also at the timing that people were searching for some of these tools and it was not at all when you might expect if they were actually gonna incorporate the cost into their decision. For example, for childbirth, you can see that vaginal delivery and C-sections are both high on this list. Most women were searching for the price of those procedures sometime in their third trimester and the rates of searching went dramatically up closer to the date of delivery. When we think about what we know about how patients choose where they're delivering at this point, most of them have had care and know where they're delivering, so it might be simply to find out what the cost will be, as opposed to be incorporating it into choices, which is really what we're hoping for if consumerism is gonna bring us the result that we hope. A few other reasons that we uncovered for why we're not seeing this promise of consumerism through the available price transparency tools. We spoke to patients enrolled in health plans with an employer who was promoting their price transparency tool and learned a couple additional important pieces of information. First is, the complexity of medical billing makes it very difficult for patients to even understand how to price shop for healthcare and, in large part, people who felt like they were facing large prices and would have liked information about other options didn't realize that that was the case until they had already received the service, because medical bills come after you've had your care. This is an illustrative quote, "All of a sudden, "my husband took an insulin shot in the hospital, "and it cost me $500. "If I had known that, I would have "brought the insulin myself and given it to him, "but, you don't know." The other main driver we found of some patient decisions is their loyalty and trust to their own physician and the unwillingness of a lot of patients to switch providers or choose a provider without the consultation of their own personal doctor. Again, a couple of illustrative quotes here, both on referrals and loyalty to their own physician, which is, "Once you've started a relationship, "that relationship is really important "to future decisions about receiving care." In fact, that's part of the reason people go to their physicians, is they want their expert opinion about what care to receive and where to go. I think it's not surprising to understand that this physician relationship and the importance of getting your own physician's recommendation about where to seek care is potentially interfering with a stand-alone price transparency tool that was built in order to help people choose a provider. In sum, there's a series of reasons that we're learning about why price transparency tools haven't led to lower spending. There are limited circumstances where people can price shop. High deductibles are not the incentive that it was thought they would be to encourage people to choose care based on price. Then there are these, what we're calling search frictions, where it's just the nature of the system makes it difficult to do. I think, what does that mean going forward? That's why we're all here today, to think about, is consumerism still part of the answer for the future? To begin to answer that question, I wanna go back to the data that we presented at the beginning of this talk. Here, there's two charts. So spending, we wanna lower spending. Healthcare spending is price times quantity. When we decompose spending into price and quantity, that's the chart on the left here, you can see the growth rates in different categories of spent price and utilization in healthcare over the last five or so years. Prices are growing, but utilization is not. Again, it really is this question of what are we paying for healthcare and we wanna reframe the goal of consumerism here. It has largely always been that individuals need to take a more active role in their decision-making, but in reality, what we really want in order to achieve lower spending, is to steer patients or individuals to lower-priced places in order to create some incentive for providers to consider price as part of what they're doing in terms of attracting patients. If we think about that, there are a few things that we know are actually giving some positive results in terms of achieving lower spending. I'll talk about one, then turn it over to Ateev. The first one is some different forms of benefit designs. High deductibles haven't worked; what is working? Reference-based pricing, benefit design and tiered networks are both, I think, variations on a theme, where essentially, what you're doing is, the health plan is saying to patients, we're gonna give a maximum allowed amount for a service, that's reference-based pricing, or tiering, we're gonna instead of a maximum allowed amount for a service, we're gonna tier the out-of-pocket costs that you pay depending on your choice of provider, and if you choose to go to a provider where the price per service is above the maximum allowed amount or the provider's tier is above the lower cost-sharing tier, then you're paying the difference. Instead of having the patient pay the first dollar, they're paying the difference in total cost, if they go to a more expensive place. Both of these forms of benefit design have been found to lead to savings. The evaluations of reference-based pricing have largely looked at joint replacement, colonoscopy, imaging and ambulatory surgery, and find savings on the order of 20 to 32% in lower spending for those procedures. Tiering, again, this is where patients pay a differential co-payment or deductible depending on which provider they go to, there's evaluation that we did a couple years ago, finding association with 5% lower spending overall. The last one I put up here is bonus programs. Again, it's the same idea. It's trying to allow patients to share in the savings or get some of the reward, which means that they spend less if they choose a lower-priced place. Ateev has done some work with his colleagues to look at some of these programs, so interest in this particular type of benefit design, I'm sure he's available for questions later, but finding some impact in terms of reduction in prices for select imaging services when patients received rewards, which is money back if they go to a lower-priced place. Just to give you a little more sense of how we're seeing this, for enrollment in a tiered network plan here in Massachusetts, we looked at patients who were enrolled in their tiered network plan and compared them to patients in a similar health plan with similar carrier, similar network, except for they did not face tiered co-pays, and we see lower spending across the board. Overall, about a 5% decrease, and that was observed both for outpatient spending overall and outpatient radiology spending. Does seem to be some promise that with different forms of benefit design, we can steer patients to lower-priced providers.
- Hopefully, the tie keeps working. One of the take-aways that we wanted to emphasize to all of you is, in terms of the incentives here, just to emphasize what Anna said. First dollar versus last dollar. First dollar is the deductible. You pay the deductible and you're responsible until you meet your deductible. The research says it decreases utilization. Then, if the patient is responsible for the last dollar, in reference pricing or in tiering, then people become much more price sensitive and we see them shift. As we think about it, if we wanna fulfill this promise, thinking through it this way. We also wanted to emphasize, Anna describes different forms of benefit design which have been more effective. We also wanna emphasize, there are other things that we can focus on, which is, instead of thinking about it as a per-individual service, like you're gonna go shop for your lab test, you're gonna shop for your MRI, your dermatologist, at the same time, we're encouraging patients to go to patient-centered medical homes and ACOs, where they're getting coordinated care. Those two trends are in conflict. Can we reconcile those? One idea here, it's a very basic one is, just get them to the lower-priced PCP and then maybe that'll be sufficient. We've done some research demonstrating that's the case, that lower-priced PCPs refer to lower-priced cardiologists, get lower-priced labs and get lower-priced everything else. A relatively small difference in the price of the PCP has a cascade effect and really increases the savings. Beyond benefit design, thinking about, is it all about getting them to the right primary care physician, you can think about, when we start thinking about these different forms of benefit design, can we combine them to create a cohesive product possibly for employers that can take advantage of what seems to be working. Possibly, what you do is, you go to an employer and the first couple of years, you start up with that rewards program. People love rewards programs. Enrollees love them because that means they get more money in their pocket. They get a check out in the mail. You start making people more aware and price-sensitive. Then you build upon that with the other forms of benefit design that seem to be working, focusing on the tiering work that Anna has done and really demonstrated they're very effective and also the fact that if you can get them to a lower-priced PCP, you can have these downstream effects. Then, the incentive or benefit design that is potentially the most difficult for employees, the reference pricing, maybe you start introducing those. Trying to think through, as we move forward here, of making this a more cohesive benefit design may be a way that we can move forward in terms of addressing some of this price variation. One issue that often comes up in this is that, what about the doc, right? What about me? I'm a doc. All of this benefit design hasn't really taken advantage of my role in terms of guiding the patient in terms of where they need to go. As Anna described, that is obviously the key issue that patients are thinking about. There has been a lot of interest in this idea, because patients' physicians do care what their out-of-pocket costs of their patients and also, under these new payment reforms, ACOs, et cetera, physicians now have an incentive to go to lower-priced places, and we have seen from some evaluations that physicians start steering patients to lower-priced facilities. There have been some interesting randomized control trials, building on what Amy said, where physicians have been randomized at getting price information. It's been mostly on the total cost, and that has been ineffective, but I think, many of you are aware, there's a lot of awareness in seeing if we can get at the point of decision-making, the individual patient's out-of-pocket costs, maybe that's gonna be effective. To summarize, our overall take-aways here are, first, I think most of you in this room are aware, but just to emphasize, shifting patients from higher-priced places to lower prices could have a tremendous amount of savings in the U.S. healthcare system, even focusing on labs, imaging, durable medical equipment, just alone in that area, significant reduction in spend. But, the strategies that we have taken as a society here in the U.S. have been ineffective to date, which have been mostly focused on just cranking up the deductible, creating price-transparency websites, which have not had the impact that people have hoped in terms of encouraging price shopping. What we would argue is, the way to move forward is really focused on different benefit designs and focusing on the choice of the primary care physician or the system that they're going to. Also, to emphasize, though we haven't figured out exactly how to do so, how do we involve the physicians so they have, at the point of decision-making, the out-of-pocket cost implications for their patients.
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