A Health Plan Work in Progress: Hospital-Physician Price and Quality Transparency

Originally published as HSC Research Brief No. 7 by the Center for Studying Health System Change (HSC), 2008. Authors: Ann Tynan, Allison Liebhaber, Paul B. Ginsburg. HSC was a nonpartisan policy research organization funded principally by the Robert Wood Johnson Foundation.

A Health Plan Work in Progress: Hospital-Physician Price and Quality Transparency

In response to large employers' growing demand for greater health care price and quality transparency, health plans were developing consumer tools to compare costs and quality across hospitals and physicians. But these tools remained limited in their reach and usefulness, according to findings from HSC's 2007 site visits to 12 nationally representative metropolitan communities. While large employers viewed transparency as an important lever for containing costs and driving value, the tools available fell short of their expectations.

The Push for Price and Quality Information

Large employers were the primary force behind the transparency movement. With health care costs consuming a growing share of compensation budgets, employers wanted workers to have information that would help them choose higher-value providers and services. The idea was straightforward: if consumers could see price and quality differences across hospitals and doctors, they would gravitate toward providers offering better outcomes at lower cost, creating competitive pressure that could help moderate spending growth. Several major employers had made transparency a condition of doing business with health plans, and employer coalitions in a number of markets were actively pushing for publicly available cost and quality data.

What Health Plans Were Building

Health plans across the 12 communities were at various stages of developing transparency tools. On the hospital side, some plans offered online tools allowing members to compare hospital prices for common procedures, though the information was typically presented as estimated out-of-pocket costs rather than total charges. Hospital quality data was somewhat more widely available, drawing on publicly reported measures such as those from the Centers for Medicare and Medicaid Services' Hospital Compare program. On the physician side, progress was slower. Physician-level price comparisons were technically challenging because of the complexity of measuring episode costs across multiple providers and services. Quality measurement for individual physicians remained in its early stages, with most available data focused on process measures rather than outcomes.

Barriers to Effective Transparency

Multiple barriers limited the effectiveness of transparency efforts. Provider resistance was significant -- hospitals and physicians often opposed the public release of price data, arguing that it was misleading without clinical context and that it could be used by competitors. Contractual restrictions between health plans and providers sometimes prohibited the disclosure of negotiated rates. The technical challenge of defining and measuring episode costs was substantial, since a single patient's care might involve multiple physicians, facilities, and diagnostic services. Consumer engagement was another major obstacle: even when transparency tools existed, relatively few members used them, and those who did often found the information confusing or difficult to act upon. Most consumers still chose providers based on physician referrals, personal experience, or geographic convenience rather than comparative price and quality data.

Tiered and High-Performance Networks

Some health plans were moving beyond simple information tools toward benefit designs that steered patients to higher-value providers. Tiered networks assigned providers to different cost-sharing tiers based on price, quality, or both, giving consumers financial incentives to choose lower-cost or higher-quality options. High-performance networks went further, limiting the provider panel to those meeting specific value criteria. These designs represented a more active use of transparency data, but they also generated controversy -- providers excluded from preferred tiers objected strongly, and consumers in markets with limited provider options worried about losing access to their preferred doctors and hospitals.

Sources and Further Reading

This Research Brief was based on HSC's 2007 site visits to 12 nationally representative metropolitan communities, including interviews with health plan executives, employer representatives, hospital administrators, and physician leaders. The research was conducted by Ann Tynan, Allison Liebhaber, and Paul B. Ginsburg of the Center for Studying Health System Change. The study was supported by the Robert Wood Johnson Foundation.