Conventional wisdom holds that if health care consumers have more financial responsibility for health care services they will be more likely to seek out the lowest price and highest quality than if a third-party payer is footing the bill.
But new research calls that logic into question. Indeed, even when patients are shelling out $2,000 of their own money to have a laser beam reshape their cornea, most people choose a health care provider without using reliable cost and quality information to compare providers.
Researchers at the Center for Studying Health System Change reviewed health care's self-pay markets — LASIK surgery, in vitro fertilization, dental crowns, and cosmetic rhinoplasty — to learn about consumer behavior. Their finding: Even when patients have skin in the game, to use the often used phrase, the game is too complicated to prompt conventional shopping practices.
"We caution against relying too much on consumer shopping as a way to contain cost and improve the quality of health care," says Ha T. Tu, senior health researcher and the lead author of the study published online recently by Health Affairs.
The research, sponsored by the California HealthCare Foundation, does not entirely repudiate the idea that cost-shifting — via high-deductible consumer-directed health plans or increased coinsurance and copayments — will bring market pressures to bear on health care services.
In the decade since LASIK — laser-assisted in situ keratomileusis — has been available in the United States, the average price for conventional LASIK has declined nearly 30 percent, adjusted for inflation. The researchers attributed that to two factors: (1) the large number of ophthalmologists who have entered the market and (2) the fact that price quotes can be obtained at little cost and inconvenience.
Pointing out that LASIK has also seen quality improvements, courtesy of new technology and better techniques, C. William Sharon, MBA, senior vice president in Aon Consulting's health and benefits practice, takes encouragement from the study.
"It really shows you that in the self-pay environment, we have seen movement on both the quality and price side," says Sharon,who is also Aon Consulting's national consumer driven health practice leader. "It's really kind of a great story."
Jill M. Yegian, PhD, director of health insurance for the California HealthCare Foundation, suggested the study to learn how consumers' responsibility for paying for health care services affects the market for those services. The study focused on services for which consumers pay the full cost, on the idea those situations would give consumers the greatest incentive to shop for price and quality.
The researchers cited experts who estimate that about 20 percent of consumers shop for LASIK solely on price, but almost no shopping behavior was found in the in vitro fertilization, dental crown, or cosmetic rhinoplasty markets. Tu's research team gathered information through interviews from industry experts, trade associations, and providers, as opposed to surveying consumers.
"I was a little bit surprised that they didn't find more concerted shopping," Yegian says. "The main takeaway is that even when price is a relevant factor, it is hard to do."
Compared to the other three services reviewed, LASIK is relatively easy to shop for. The service is not urgent, meaning patients can collect information and consider their options, and telephone price quotes are available if a patient has a vision prescription. Still, patients must obtain outcomes data from each provider, requiring the patient to be able to interview the provider and analyze the information. And there is not consistent bundling of services from one provider to the next, meaning that additional follow-up services might be included in the price quoted by one provider, but not another.
By contrast, the price of in vitro fertilization, cosmetic rhinoplasty, and a dental crown usually is available only if a consumer pays for an initial exam, which makes price-shopping both expensive and inconvenient. Quality data are not available for dental crowns. There is no consistent bundling of services across providers in the IVF or rhinoplasty markets.
Even in the LASIK market, where price and quality information is available, word of mouth from a previous patient is the predominant means of choosing a provider.
"The reality is there isn't anything more sophisticated available," Sharon says. "That's why this huge growing infrastructure is necessary to provide information to people in meaningful ways."
He refers to new kinds of price and quality information about health care services being made available by some insurers, some providers, and some government agencies.
Tu found that the market for health care services is as multifaceted as other consumer markets. The LASIK market can be segmented into discount, mid-price, and premium-price providers. Discounters advertise low prices and premium-price providers are paid higher fees because of their reputations or newer technology; mid-price providers are more akin to premium providers but lack the top credentials or experience needed to command top dollar.
"In the LASIK market, consumers who shop on price are often not the same consumers who shop on quality," Tu says. "Consumers who go to the discounters are shopping on price. Many consumers who go to providers in the premium price segment are shopping on quality."
While that is not surprising, that fact stands in contrast to most of the quality and price information that is being published under the banner of transparency.
"As we move forward with these consumer-directed products, we need to think about ways of providing information to consumers on both fronts, so they can make effective decisions based on value — some sort of combination of price and quality — because providing one or the other isn't really sufficient," Tu says.
Yegian says health care policymakers cannot count on consumers to use rational decision-making to sort out the health care market in a way that demands better quality and lower prices.
"To send people out into the market and expect them to be able to fully function as shoppers is not realistic," she says.