Lack of transparency in healthcare raises costs and prevents innovation
28 March 2007
Dallas, USA. A new study from the US National Center for
Policy Analysis (NCPA) has found that the lack of real competition for
patients has a profound effect on the cost and quality of healthcare. It
also found legal, regulatory and cultural barriers barriers to competition,
innovation and transparency
While business and government leaders in the
US complain about the lack of price and quality information in healthcare
and pursue government-based health reforms to increase access and set
prices, the study says the complainers are actually causing the problems
they are so vexed about.
Unlike other markets, prices for healthcare are
difficult to obtain and often meaningless when they are disclosed. The study
notes the only area of the healthcare marketplace where price and quality
information is freely available is where patients pay for the services
"The primary reason no one knows what doctors and hospitals
charge prior to treatment is that they do not compete for patients based on
price," said NCPA President John Goodman, who co-authored the study. "When
they don't compete on price, it turns out they don't compete on quality
either. In a very real sense doctors and hospitals are not competing for
patients at all."
Since the fees are usually paid by employers and
insurance companies, patients have little reason to care about prices and
providers have little reason to make that information public, the study
notes. In addition, the lack of competition for patients has a profound
effect on the cost and quality of healthcare, since insurers typically do
not pay for many services that would lower overall healthcare cost and would
improve the quality. As a result, the following innovations are largely
- No integrated care: doctors offer fragmented services to diabetics,
for example, but no one offers diabetic care as such
- taking responsibility for the treatment of a patient's case from
beginning to end.
- No patient education: patients with chronic conditions could manage
much of their own care, if someone taught them how.
- No telephone and email consultations: potentially, the chronically
ill could have more, better and less-costly care through modern
communication devices, but few doctors consult by phone, and only a
fourth use email at all.
- No electronic medical records: despite studies showing that
electronic medical records can reduce costs and improve quality (by
reducing errors, for example), only one-in-five physicians stores
medical records electronically.
In the markets where patients are paying for services directly, the
behaviour of providers is radically different. For example:
- Cosmetic and LASIK Surgery. Patients are offered package prices
covering all aspects of care. In both the markets, the real price
has gone down at the same time demand has soured and technological
improvements are rampant.
- Medical tourism. Cash paying "medical tourists" who travel
outside the United States for treatment or surgery often receive a
package price that includes all costs of treatment, and often
airfare and post- operative hotel accommodations. Prices are
one-third to one-fifth as much as treatment in the U.S. and quality
is typically high.
- Walk-in clinics. Located in drugstores, shopping malls and
big-box retailers, walk-in clinics post prices and minimize waiting
times. Staffed by nurse practitioners, they use computer software to
follow treatment protocols, store records electronically and even
order prescriptions online. Quality is often higher because the
technology encourages best practices, improves care coordination,
reduces errors and prevents adverse drug interactions.
- Internet medicine. Services such as Rxaminier.com provide
information on prescription drug prices and possible alternatives.
AskAPatient.com allows patients to compare experiences. Patients
using their own money can also use the Internet to order numerous
lab tests on samples collected at convenient locations for fees that
are nearly 50 percent less than tests ordered by physicians'
"We are likely to see more of these challenges to traditional
health care in the future because patients are increasingly paying
more costs out-of- pocket or through a Health Savings Account," said
Goodman. "This consumer-driven health care revolution gives
individuals the opportunity to benefit financially from being wise
health care consumers."
Sensing this change, some health plans are now offering price and
quality information to their policy holders. And objective,
independent third parties often provide price and quality data for a
Despite these changes, the study notes that legal, regulatory
and cultural barriers to competition, innovation and transparency remain.
- Medical societies and hospital trade associations discourage
price competition among their members.
- Laws in many states restrict the practice of medicine to
face-to-face consultation, discouraging the use of the phone,
email and other innovative services.
- Doctors and hospitals are discouraged from sharing
information on medical errors and other quality indicators for
fear of being sued.
"Transparency will only occur once we fundamentally change
the way we pay for healthcare," said Goodman. "While some of
these changes are occurring, government could speed the
transition by removing obstacles to competition and innovation."
Source: The US National Center for
Policy Analysis: www.ncpa.org