Price Transparency Embraced in Massachusetts

The Bay State is leading the country in establishing price transparency for healthcare services, but setting quality standards and wariness among providers are significant obstacles.

A recently adopted state law has moved Massachusetts to the front of the national class on price transparency.

The price transparency provision of the 2012 law, Chapter 224, went into force last month making Massachusetts one of the first states to require healthcare providers and payers to make medical service prices accessible to the public.

In March, The Bay State and Maine earned the highest national grades for price transparency from Berkeley, CA-based Catalyst for Payment Reform. Forty-five states received failing grades.

"CPR believes price transparency is a fundamental building block of a higher-value healthcare system," says Suzanne Delbanco, the organization's executive director. "We will be evaluating any new laws to produce an updated 2015 Report Card. My sense is these two states likely continue to lead the nation, along with a small number of others like New Hampshire and Colorado."

Barbara Anthony, Massachusetts undersecretary of consumer affairs and business regulation, says her agency has high hopes for the impact Chapter 224 will have on healthcare in the commonwealth. "This is going to drive down costs over time at providers," she said. "This is how markets work."

Anthony says states are facing several challenges establishing healthcare price transparency, such as building websites that are capable of providing consumer-friendly access to medical service price information. The biggest challenge is changing mindsets, she said.

"This is more than just a website, this is an effort to change attitudes," she says. "We wouldn't think about buying a car, a television, or any sophisticated piece of equipment without doing our homework… You have to feel comfortable taking charge, which is a challenge."

The mindset hurdle extends beyond consumers to a key healthcare stakeholder, Anthony says. "We don't hear resistance from insurers. Where we hear resistance is from some provider groups. Not everybody is at the same level yet. This is a collaborative situation. When the insurers and providers are willing to have a discussion about value, [pricing] is not going to be a secret discussion anymore."

Provider and Payer Perspectives Differ
Chapter 224 requires both providers and payers to make pricing information available to the public, but they apparently have varying enthusiasm for the new law.

"Our industry [and its members] have been strong advocates for price transparency," said Eric Linzer, senior VP of public affairs and operations for the Massachusetts Association of Health Plans. "It allows consumers to shop and compare prices across different service types… These are tools to encourage individuals and employers to really engage. Without that information, it makes it really hard for health plans to expect people to make informed choices about where they get their care."

Massachusetts health plans have launched pricing websites crafted to individual beneficiaries such as EmpowerMe at Watertown, MA-based Tufts Health Plan and SmartShopper at Worcester, MA-based Fallon Health.   

"In partnership with Compass Healthcare Advisers, the Fallon SmartShopper program provides real-time cost transparency for all Fallon commercial plan members and incentive rewards for many commercial group members," says David Przesiek, VP and chief sales officer for Fallon Health.

"We believe that [the tool] is a way to reward members for taking a proactive approach to their own healthcare. Not only will the tool educate and empower members to choose the care that is right for them, but it will help members to save money on procedures while earning incentives."

Karen Granoff, senior director of managed care at the Massachusetts Hospital Association, has a more cautious perception of the commonwealth's price transparency push.

"The Massachusetts Hospital Association is in favor of price transparency, but it's important to keep in mind that price is just one factor to consider in deciding where to receive care. Other considerations include quality, the ability to share information via electronic medical records, and whether a particular facility promotes patient-centered medical homes; for example, by allowing primary care physicians to help determine where care can be provided so it can be integrated effectively with all of the providers caring for a patient," she says. 

Price transparency is a laudable goal, but it has the potential to undermine other healthcare initiatives, Granoff says. "On the one hand, the state is promoting integrated care, including accountable care organizations and patient-centered medical homes, while at the same time encouraging patients to shop for the best price. This 'shopping' paradigm may not always be consistent with promotion of care integration."

Quality Data Poses Challenge
In economic terms, the value of a service can be boiled down to a consumer's assessment of cost and quality. While there is widespread agreement in Massachusetts that Chapter 224 has made a giant leap forward in publicizing healthcare service costs, there is an equally broad consensus that greater strides must be made on the quality side of the healthcare value equation.

Anthony says most Bay State health plans include "some kind of quality metrics for providers" on their websites, but she acknowledges that more work needs to be done. "This is an area that needs attention. This is an area where we are lagging a little bit," the undersecretary said.

Linzer says an arduous effort will be required to reach the point where Bay State consumers can make fully informed decisions about healthcare value. "These tools are in their initial stages. These websites will mature. These websites require a significant amount of work and significant information technology build."

Granoff says making healthcare service quality data easily accessible to Massachusetts consumers is a work in progress.

"Payers and providers are trying to incorporate quality information with the pricing information that's provided, and hospitals and insurers alike agree this is critical. However, there are not always good metrics available for all types of procedures or for comparing physicians, and different payers may use different metrics, so it's not always comparable. It is evolving."

Delbanco says the quality factor in defining healthcare service value remains a daunting hurdle. "Most health plan tools these days do incorporate some quality information, but not in a way that is very useable by most consumers."