Demand grows for price transparency

As employers and individuals seek ways to squeeze more value out of their healthcare dollars, their demand for solid pricing and quality data is growing. Bob Kocher, a partner at venture capital firm Venrock and a former special assistant to the president for healthcare and economic policy in the Obama administration, will detail the path toward better pricing and quality data on Wednesday, June 19, at the Healthcare Financial Management Association's ANI 2013 in Orlando, Fla.

Kocher recently took time to answer a few questions about the promise and challenges of creating more transparency in healthcare pricing.

HFN: When it comes to healthcare prices, what are the two or three biggest obstacles preventing the industry from being more transparent?

Kocher: In terms of obstacles, it would be helpful if payers would work to align their risk-based reimbursement models so that incentives and reporting are similar. Payers and providers universally support patients by disclosing out-of-pocket prices to patients, and disease and physician-level data on quality and experience so patients are able to asses value. And large employers embrace transparency to move market share towards better value providers at the service line level to make early adoption of transparency economically beneficial for providers.

HFN: Considering these obstacles, what are some possible solutions?

Kocher: Two big steps would be to preclude confidentiality clauses in payer/provider contracts that prohibit health plans from disclosing prices to their members and differences in quality, and to have Medicare grant wider access to claims data. Both of these reduce competition by making it harder to determine relative value and, in the case of confidentiality clauses, harms patients who pay more and, in some cases, take avoidable quality risks.

HFN: As more price data becomes available, what is the potential to drive costs out of the system and create a more competitive market?

Kocher: The potential is enormous to drive waste out of our healthcare system. As many have reported, excess spending in the U.S. is about 30 percent of all spending. While the factors driving this are many, most are attacked by making the healthcare marketplace work better. Perhaps most emblematic is the fact that our health system actually has negative labor productivity. Transparency and efforts to inject more granular price and value data into the marketplace will require providers to get unnecessary costs out of the system to be competitive at a disease level. A benefit of this is that costs related to lack of standardization, complications, and re-work are likely to be the first to be squeezed out of the system. This will lead to greater labor productivity, better healthcare products and services, and over time, the potential for falling prices. This is good for patients and great for providers.

[See also: Lessons learned from the ACO transition]