Making Way for Consumerized Healthcare

Demand for greater transparency in medical costs is giving rise to the consumerization of the healthcare industry.
Customer Experience

Navigating the U.S. healthcare system to receive affordable care is a notoriously complicated process. But as consumers shoulder a growing portion of hospital costs and other health-related expenses, the stakes for healthcare organizations to become consumer-centric are rising.

High-cost patients, an uptick in spending for specialty drugs, and the cost of complying with the federal Affordable Care Act are some of the common causes that employers say are driving up healthcare expenses. As medical costs increase, a growing number of employers are passing the expenses to employees in the form of higher deductibles and co-payments.

In 2015, nearly one-third of employers indicated that they will only offer high-deductible plans (up from 22 percent in 2014 and 10 percent in 2010), according to a study by theNational Business Group on Health (NBGH), which included 136 companies that collectively employ 7.5 million workers.

Under high-deductible health plans, consumers pay for medical services at the insurer's negotiated rate until they meet their deductibles. Afterwards, consumers often pay coinsurance, which is a percentage of each service until they reach the out-of-pocket maximum.

Making employees responsible for more of their care could motivate employees to comparison-shop for medical services, notes Dr. Cynthia Ambres, MD, an advisory principal at KPMG's Global Center of Excellence for Health.

"Consumers have been largely protected from medical costs and now a little less so," Ambres observes. "As consumers, we need to know more about the costs and as more patients come in with high-deductibles, the payers and health providers also need to provide information to the consumer around pricing."

Most consumers are in the dark when it comes to understanding healthcare costs, however. The lack of transparency in healthcare costs is an ongoing issue that is due to several factors, explains Will Hinde,healthcare practice director at consulting firm West Monroe Partners.

"In order to provide a member or subscriber with an accurate estimate for a procedure, you need access to a lot of information," Hinde says. "There are often numerous providers or physicians contributing a service to the surgery and they may have different network relationships. You also have to account for facility costs, coverage information, and other costs."

And while consumer-facing technology for understanding costs has "not kept up in healthcare as much as in other industries like retail and banking," this is changing, Hinde adds.

Shedding light on healthcare expenses is a lucrative space with startups offering various tools to calculate the costs. Companies like Healthsparq, Castlight, Practice Fusion, and ZocDoc have built technology that is designed to display information about doctors and medical procedures in a user-friendly interface to make it easier to find a health plan or doctor and compare costs.

"We're now seeing intelligence tools that guide you through the process of shopping for a health plan or doctor," Hinde says. "These apps are putting information at your fingertips as opposed to you calling a carrierThey're much more intuitive and similar to what you would find in the travel and retail industries."

There is an opportunity to "consumerize healthcare" and make it easier for people to compare medical costs, agrees Scott Matthews, vice president of product marketing at Castlight, which offers a cloud-based enterprise technology thatenables employers to deliver information about benefits and provide medical professionals/health plans a merit-based market to showcase their services.

"A savvy consumer can apply the same principles for purchasing a car or book to the healthcare market," Matthews says. "We partner with insurers to have access to claims and other sources of data to let people shop for healthcare services by having cost and quality information on a dashboard."

Castlight issued an IPO in March and its client roster includes CVS Caremark, Tesla, and Liberty Mutual. The company faces competition from other tech companies, though, as well as insurers who are creating their own pricing tools.

The nonprofit Health Care Cost Institute (HCCI), for example, is creating an online portal in a partnership with Aetna, Humana, and United Healthcare that will provide consumers with estimated costs for medical procedures. HCCI integrated claims data from all three insurersinto one database, and it has divided the information into two tiers, explains HCCI Executive Director David Newman.

The first tier, which will be launched in December, will be a free website in which consumers can search for the average prices for procedures. "The site will ask you for your zip code and using natural language, you can enter terms like 'upper respiratory tract infection,'" Newman explains. "And we'll give you an average price for that bundle of related services."

The second tier is scheduled to be launched next year and it will be available only to subscribers whose insurer is participating in HCCI's transparency tool. After registering, users will receive detailed price information that is based on their health plans and their deductible statuses. The advantage of the paid tier is "that hopefully in the future you won't need to get used to a new website every time you change insurance companies, because they will be on the same URL and all your information will already be there," Newman says. HCCI will be announcing additional insurers who have joined the portal in coming weeks, he adds.

Offering price and quality transparency tools has become critical as "transparency moves to the forefront of healthcare," observes Chris Riedl, executive director of national business strategy and product management at Aetna. "Healthcare is one of the last areas where you struggle to get cost information in advance of a service being rendered, but now it has become table stakes."

As healthcare organizations roll out more transparency tools, another challenge is making consumers aware of these tools and helping them leverage them, notes James Nastri, Cigna's vice president for cost and quality transparency.

The insurer, for example, launched the mobile app version of its website, MyCigna, which provides physician and facility quality and pricing information, six months ago, and has been downloaded more than 600,000 times since it was rolled out. While the app is still new, the majority of Cigna's 14 million US customers (the company has 70 million customers worldwide) have yet to use the app. About half of Cigna's US subscriber base are registered on MyCigna, which was launched in 2012.

"People have been led to believe that insurance companies don't want to share this kind of information and there are still customers who don't know about these tools," Nastri says. "There's a trust issue between insurance companies and the customer, and this has created a large barrier that we need to overcome."

In addition, patients and providers still need to become more sensitive to healthcare costs, points out Dr. David Rosen, MD, an anesthesiologist at Advocate Lutheran General Hospital.

"People on the frontlines like physicians and nurses still seem very detached from prices," Rosen says. "People come to the emergency room with mild abdominal pains and they'll get a CAT scan or a nurse will throw out a stapler that was just opened because it was the wrong one and now it's contaminated. There's a lot of waste in the trenches."

Healthcare providers need more reasons to become more efficient and price sensitive, according to Rosen. "Unless people have an incentive to do things differently," Rosen notes, "I don't see how this will change."

KPMG's Ambres estimates that the healthcare industry has accomplished "about 15 percent of what is needed in educating patients and making things transparent." Allowing consumers to compare prices for procedures or visits is not enough. "We may know what the cost is," Ambres notes, "but we still don't know if it's reasonable and what the incremental costs are that add up to a service bundle."

More resources and education is still needed to help consumers understand the true cost of their medical treatment, Ambres continues. People who struggle to navigate websites and mobile devices may not be able to take advantage of these new transparency tools or there may be a language barrier.

At the same time, the healthcare industry is slowly improving the customer experience. "Payers offering prices on different procedures is new and we are making progress," she says. "These changes are happening, but it's a very long road."