Transparency – including price, quality, and
effectiveness of medical services is a vital component to lowering costs and
improving outcomes. However, it is
imperative transparency go hand-in-hand with financial incentives for patients
and consumers; otherwise the quest will be in vain. The single best way of reducing costs while
not worsening health outcomes is to redistribute resources from less
cost-effective health services to more cost-effective ones. Americans are extremely uncomfortable with
the idea of making decisions based on cost but we must become fluent in the
language of cost and more comfortable making decisions based on price information
for healthcare expenditures to stabilize.
Legislators in more than 30 states have proposed legislation to promote price transparency,
with most efforts focused around publishing average or median prices for
hospital services. Some states already have price
transparency policies in place. California
requires hospitals to give patients cost estimates for the 25 most common
outpatient procedures. Texas requires providers to disclose price information
to patients upon request. Ohio passed price transparency legislation last year;
however a lawsuit filed by the Ohio Hospital Association has delayed implementation. The cost of a knee replacement is $15,500
at the Surgery Center of Oklahoma,
whereas the national average is $49,500.
Trends suggest in
the future Americans will be more price-sensitive when seeking care as high-deductible
insurance plans become commonplace coupled with greater cost-sharing. For consumers, paying less out-of-pocket
costs could be a powerful motivator. According to an article
in Health Affairs, price transparency has helped reduce
costs in the long run. Another study found consumer-driven health plans led to lower use of
name-brand medications, less inpatient care, and lower use of specialists.
Comprehensive transparency is only relevant if
packaged in a reliable comparative context.
Information regarding cost, value, and effectiveness should be readily
accessible to patients enabling them to make meaningful comparisons across
providers and specialists. However, choices must be incentivized properly, so
they are not only empowered but also motivated to use the information to make
informed choices.
A benign, viral skin infection known as molluscum
contagiosum (MC) provides a simple case for transparency because there are a
vast number of ways to successfully treat these wart-like bumps (called mollusca.) They can occur extensively on the face and
genitalia, are contagious, and may cause itching or tenderness, yet are not
harmful. Looking at four different
treatment modalities can illustrate where transparency, for cost, value, and
efficacy might make a difference. It
illustrates perfectly how health insurance can incentivize incorrectly
resulting in higher expenditures with no difference in outcome. Molluscum can
be treated by application of topical cantharidin or liquid nitrogen, oral cimetidine, surgical
curettage, or no medical intervention. The
efficacy of each is roughly equivalent in that the benign lesions eventually resolve.
Lesions can last two weeks to four years --the average being two years without
treatment.
On average,
children have about 15-30 lesions by the time a family seeks treatment. Liquid nitrogen costs $50 per patient for supplies;
Cantharidin, an extraction from blister beetles, is a topical vesicant that
costs about $100. There are two CPT
codes for lesion destruction in the physicians’ office: 17110 ($113.75) and 17111 ($134.69.) A follow-up treatment is usually necessary one
time after 3-6 weeks at which point lesions resolve. Total expenditure is
approximately $500. Most insurance plans
do not cover this procedure so cost is borne by the patient out-of-pocket.
Oral Cimetidine is a
controversial treatment, because efficacy is somewhat lower compared to topical or surgical
methods, but has held up well enough in studies to remain a viable, painless
treatment option. Time to cure is 2-3
months. Including the physician visit of
9921X x 3 plus the prescription for 3 months ($16/mo), we are looking at a
total cost to resolution of approximately $300-$450, with a 20-25% failure rate. Insurance covers cost of office visit and
medication except for applicable co-payments, so out-of-pocket could be as
little as $100. There may be medication
side effects and parents must remember to give their children medication twice
per day for 3 months, increasing the “nuisance factor” (lowering “value” for
some.)
Some physicians
incise and drain each bump individually as the core contains infected cells and
if they are surgically removed, the body can “do the rest” to fight the
infection. Lesions often reappear 6
weeks later (as with topical methods) because they represent areas already
infected at the first visit but too small to be seen, so a second round of treatment
is necessary. Cost estimates are in the
ballpark of $1K-2K per treatment, as cost information was difficult to find. Total cost to cure is $2000-4000. Surgical intervention is partly covered by
insurance with out-of-pocket costs in the $500 range, though this is an
educated guess.
Finally, no medical
intervention is safe, low in cost, and efficacious. However, watchful waiting can be challenging
for parents when there are multiple children at home with one contagious
infected child during the two year time period until the lesions completely resolve. Cost of one physician visit for diagnosis:
$125. Cost for google to diagnose: $0.
As an insurance company executive, I would
incentivize topical therapy for treatment of molluscum resulting in lower
expenditures and less need for specialty care.
Most private insurance companies do not cover codes 17110 or 17111,
instead kicking the entire balance to the patient. Unfortunately, they incentivize the less
efficacious oral medication or partially subsidize surgical curettage. In plain, straightforward language: this is utterly
stupid. If patients are not financially
incentivized to choose the lowest cost, most effective option then efforts
toward transparency are a waste of time as healthcare expenditures will not
decline.
Not every condition can be easily evaluated as I
have done above (though many can.) Redistributing resources from less
cost-effective health services to those that are more cost-effective is a
winning strategy for patients, physicians, and insurance. Individual physicians and hospitals should
post prices for general well and sick visits (including applicable facility
fees), basic procedures, and other services offered whenever feasible, because
it is the right move to empower patients to make informed decisions. Finally, insurance companies should
financially incentivize patients to choose the lower cost, equally efficacious
treatment methods if they want transparency of cost, quality, and efficacy to
have a large impact on driving down expenditures.
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