May 13, 2013 Back to All Blogs

What’s rationality got to do with it? Health care’s price-quality connection

Most of us believe in the notion that price generally correlates with quality – “you get what you pay for.” The higher the quality, the more we pay. For something as important as health care, this expectation is particularly salient. Not true at all, says Leapfrog Group’s Leah Binder.StethDollar

Binder’s nonprofit, The Leapfrog Group, issues a Hospital Safety Score,  which assigns letter grades of “A”, “B”, “C”, “D”, or “F” to more than 2,500 general hospitals. It rates them on safety, errors and avoidable infections that unintentionally harm patients. Writing for Forbes, Binder shatters the price=quality assumption with a list of examples from new CMS Medicare data that reveal a stunning disconnect between what hospitals bill and the quality of care they provide:

The average cost of a pacemaker implant at one hospital is $127,038, while at another hospital it’s just $66,030. Joint replacements range from $5,304 in Ada, Oklahoma, to $223,373 in Monterey, California.

What you will find is that a hospital that gets an “A” (on Leapfrog’s Hospital Safety Score) isn’t necessarily high-priced, but hospitals that get a “C”, “D”, or “F” sometimes are. In my community, Washington, D.C., the highest scoring hospital is Sibley Memorial, which earned an “A.” Sibley also lists charges of about half of the highest-priced hospitals in the region.

Americans would probably be willing to pay more for care that made them healthier, but not for care with unpredictable and even harmful results. The good news is that the more consumers learn through reports from those like CMS and Leapfrog and the more leverage consumers have in making purchasing decisions that reward safety and quality, the better the value for every dollar spent.

Higher education suffers the same problem of dramatic variations in cost and quality that we can no longer afford. With tuition costs escalating, elected leaders, students and taxpayers are demanding more information about what we get for what we pay. In his State of the Union Address, President Obama unveiled an online College Scorecard website to make it easier for students to make more informed college choices. Visitors can learn the net cost of attending a particular college and see data on loan defaults and graduation rates.

While the motivation has never been stronger, creating a more informed, empowered consumer in health care and higher education won’t be easy. In a world accustomed to Amazon and Zappos, we want information that is easily understood and actionable without a lot of effort. Here are three ways we can get there.

1. Make it work for users
Ultimately we need consumers to act on information and accomplish something. That means finding better ways of presenting and delivering data. “User experience” testing is a growing trend, which recognizes that just launching a website or creating apps with the right information is not enough. We must make it work for users. In health care, we have a growing body of experience and examples of what works and what doesn’t. Pantheon is privileged to be working with AHRQ to expand and redesign MONAHRQ® (My Own Network powered by AHRQ) — a downloadable website builder tool developed to help organizations create their own health care performance reporting websites.

To ensure the redesigned MONAHRQ reaches more consumers with information they can use, the initiative will include the input of a committee of top experts in health care and public reporting led by the National Quality Forum. We can also look outside our sectors to models like TurboTax® and online dating websites.

The new “health insurance exchanges” (HIXs) being set up under the new health care law will make quality and price information actionable. By providing competitive “one-stop shopping” for individuals and businesses looking for high-value health insurance coverage, health insurance plans have incentive to encourage patients to seek care from providers with good track records in quality and affordability.

2. Repeat in more channels and places
While health insurance coverage will be mandatory under the new law, taking a “field of dreams” approach won’t ensure a competitive marketplace will improve health care quality and affordability. Information about how to make wise choices should be distributed early, often and in more places (where consumers are).  Users shouldn’t have to forage from website to website. The information should come to them.

3. Inspire confidence and enthusiasm for data
Nothing creates a repeat customer like a good experience. If the informed decision turns out to be the affordable, healthy decision, consumers will be back for more. Information that is valid, relevant and easy to use will inspire confidence and enthusiasm. Earlier this year, we imagined red carpet premieres for health care public reporting like LeapFrog Group’s hospital safety ratings.

Attaining blockbuster public reporting will require measuring what matters to consumers. In the late ‘60s, former U.S. Secretary of Defense Robert McNamara warned: “We have to find a way of making the important measurable, instead of the measurable important.”

In health care and higher education, that means a greater focus on the results for patients and students. We want to know not just that a degree was conferred or a medication was prescribed, but whether the degree led to a good paying job and the medication improved health.

The Health Care Incentives Improvement Institute and Catalyst for Payment Reform issued a report card showing which states offer the best health care information. Higher education would benefit from a similar rating.

We’re optimistic about creating a culture of transparency in higher education and health care that will dramatically improve value. The light and heat of meaningful public reporting has the power to create marketplace pressures that reward more effective and affordable health care and education.

Mark Tobias (@PanthTech) is president of Pantheon, which combines technology expertise and a deep knowledge of health care, education, and social impact markets to provide online technology solutions for nonprofits, associations, and government.