As an industry, the notion that “health care is different” has been our go-to justification for a multitude of shortcomings. That needs to change.
For consumers, it’s true that buying healthcare services is different from buying other services. There are several reasons for this discrepancy.
For one, physicians (i.e., the sellers) know much more about health care than consumers do. Economists call this “information asymmetry.” Additionally, third-party payment puts a buffer between sellers and buyers, confounding traditional supply-and-demand curves. Also, in emergencies and other life-threatening situations, people who incur financial obligations for healthcare services are not doing so of their own volition.
For these and other reasons, economists say, health care will never meet the definition of a pure free market.
News flash: pure free markets exist only in textbooks. Reasonable people can disagree about where health care falls—or should fall—on the spectrum from pure free markets to non-markets (i.e., markets that are heavily regulated).
Consensus on Consumer Engagement
But there is widespread consensus on at least one principle that is characteristic of free markets: consumer engagement in healthcare purchasing decisions leads to better outcomes.
To facilitate engagement in making decisions about their health care, consumers need more information—timely, reliable, relevant, and easy-to-understand information—about price and quality. For example, tomorrow’s healthcare consumers will expect access to information that allows them to compare different treatment options, such as surgery for a herniated disc versus nonsurgical treatments like exercise and physical therapy.
That information includes both comparative health outcomes and out-of-pocket expenses. (Some providers make data on diagnosis-specific outcomes available to consumers, but individualized out-of-pocket expenses typically are not integrated into those decision aids.) By providing such information, we will reduce the information asymmetry that is inherent in health care and enable people to become better healthcare consumers.
Tomorrow’s consumers—especially the growing number covered by high-deductible health plans—will also want to shop for “commodity services” like diagnostic imaging at both hospitals and nonhospital facilities. They will expect shopping for an MRI, for example, to be as easy as shopping for airline tickets. When the difference in out-of-pocket costs amounts to thousands of dollars, as it can in the case of an MRI, market forces may eventually compel acute care providers to justify their costs, change their cost structure, or simply accept a loss in volume.
That will be a consequence—whether intended or not—of benefit designs that reduce the buffer between buyer and seller and restore some of the price elasticity of demand that third-party payment takes away.
First Things First
Much work needs to be done on the basics before consumers can truly be empowered by access to price and quality information. As an industry, we must work to ensure that price information is accurate, reliable, and easy to obtain. We also must inform consumers of payment policies, options, and potential discounts for which they may qualify. HFMA’s Healthcare Dollars & Sense initiative offers a roadmap for mastering the fundamentals of improving the patient financial experience.
Additionally, consumers will expect to have no financial surprises, particularly when it comes to out-of-network bills. Today, among people with large-employer coverage, nearly one in every five hospital admissions results in an out-of-network bill, according to a recent Kaiser Family Foundation study.
Beyond these fundamentals, mobile technology is the next frontier. Tomorrow’s consumers will demand the instant mobile-account access and online payment process to which they are accustomed in other sectors. They will also expect to have the whole range of information needed to manage their out-of-pocket expenses at their fingertips—or, more accurately, on their screens—meaning digital platforms that integrate health insurance, bills from various providers, prescription spending, and health spending accounts.
The reality is that tomorrow’s consumers are already here. Those who are dissatisfied with their financial experience no longer accept that “health care is different.” They expect and deserve to be treated with the same respect as consumers in other sectors that are closer to the free-market side of the spectrum. It’s time to embrace the new age of consumerism in health care.
