Consumers' and Providers' Responses to Public Cost Reports, and How to Raise the Likelihood of Achieving Desired Results
Apr 1, 2012
One of the key approaches to slowing cost growth is to provide public reports of the costs of individual providers. The hope is that health care consumers will consider cost data when choosing a physician and opt for lower-cost providers — a process referred to as the selection pathway. The assumption is that if the public learns that they can get high-quality medical care at a lower cost, high-cost providers will reduce their prices in order to remain competitive in the health care marketplace.
Unfortunately, the available evidence does not support this assumption. This study determined that current initiatives to report provider costs are unlikely to motivate consumers to select lower-cost providers. In fact, they may do the opposite. However, there is evidence that higher-cost providers — particularly hospitals — may positively respond to public reports if the measures signal wastefulness or poor quality.
If public reporting of provider costs is to influence consumer choice, the cost measures reported must focus on choices that consumers care about, and the information must be presented in a way that can be easily understood. In addition, tying cost measures to quality — for example, showing cost rankings within broad quality tiers — might help counteract the consumer belief that lower-cost care is of lower quality than high-cost care. Consumers may also need financial incentives to switch providers — for example, when higher-cost physicians are excluded from health plan networks, patients could face higher co-pays if they continued to use these physicians.
There have been no systematic studies of whether providers respond to publicly reported cost data. However, provider response to publicly reported data on quality of care appears to be driven by concern about reputation. Thus, by analogy, it seems likely that public reporting of cost measures could change physician or hospital behavior if poor performance is viewed by opinion leaders and the physician's peers as signaling inefficiency. For example, a substantially longer-than-average hospital stay following a heart attack is a measure of a doctor's performance that may be negatively viewed by the provider's peers on the hospital staff.
Policymakers can pursue both pathways simultaneously. Indeed, synergy between the two approaches could result in more favorable change. The study's authors propose practical ways to make public information on health care providers more understandable and influential.
The figure illustrates how public reports could better engage consumers, focusing on the choice of a maternity hospital, an area of health care in which patients are motivated and have the time to make a decision. The data include the key piece of information that consumers want, their out-of-pocket costs. The figure draws attention to the high-value hospitals by putting them in a separate section highlighted in green. In recognition that consumers may distrust cost information and link higher costs with higher quality, information about quality is presented before information about cost. The cost metrics used to distinguish between the two tiers are not shown — consumers who want more information can drill down by clicking the question marks.