Price transparency in health care seems pretty straight forward. Bring attention to pricing. Allow patients and competitors to more clearly see pricing. Drive down prices.
It usually works. Industries that are largely based on retail sales or driven by commodity markets have a quick consumer response time. These are considered elastic markets. If a product costs $1 on one side of a street, and a store on the other side of the street offers the same or an equal substitute for a lower price, consumption of the lower-priced item goes up.
Markets where consumers fail to respond to price are inelastic. Economists have long held health care as the poster child for inelastic markets. That is to say: consumers don’t respond to price when it comes to making health care decisions or choices.
So what do they respond to? As a health care communications and strategy executive working in this space for more than a decade, my job is to identify what moves consumers and what drives their attention. When it comes to driving patient volume to a specific health care service line, it’s rarely, if ever, price that drives patients through (or away from) the door … for two reasons:
- Other factors such as the advice of a trusted personal physician, which often comes in the form of a referral from a primary care physician, are much more influential. When we experience an ache or pain, we consult with a primary care physician at a well-visit, or we schedule an appointment to identify the potential culprit and rule out potential maladies we’ve searched out on the internet. Other times, we visit with a friend, family member, or co-worker, and their experience feeds our decision-making. An expectant mom talks with friends about their favored obstetrician, for example, and that advice informs a decision.
- Health insurance. About 80 percent of Texans have health insurance, most of which is through an employer. This coverage makes many of us blind to overall costs. In essence, in the minds of consumers, the care is already paid for, and aside from out-of-pocket expenses, many of which are predictable based on the health plan’s parameters, the consumer’s health care decision focuses on convenience and promise of treatment or cure. Choice of health insurance, too, is limited to what the employer has deemed affordable. Employees typically do not have unlimited choices of health insurance options. The result is that even before patients make a choice about where to get care, an employer likely already has limited their options by narrowing the coverage options.
A recent study conducted by the Pioneer Institute of patients in Massachusetts – the state with the most robust health care price transparency laws — revealed 70 percent did not know their insurance companies hosted price estimator tools on their websites. More importantly, 15 percent of patients said they believed prices would be the same regardless of health care provider, and more than half said they didn’t think to check prices before receiving care. The conclusion: even with information readily available, price isn’t a significant factor in health care decision-making.
So what is a key factor? In an industry where health insurance largely insulates patients from costs and choices, patients rely on trust, referral, and convenience to make health care decisions because ultimately their goal is to restore health and get them back to home and work.
Lance Lunsford, MBA, FACHE, is senior partner of Groundswell Health, a strategic marketing and communications agency based in Austin, Texas. Lunsford is a former newspaper reporter and editor. He also served in leadership roles in hospitals and health care advocacy groups.