Consumers' and providers' responses to public cost reports, and how to raise the likelihood of achieving desired results

Abstract

There is tremendous interest in different approaches to slowing the rise in US per capita health spending. One approach is to publicly report on a provider's costs--also called efficiency, resource use, or value measures--with the hope that consumers will select lower-cost providers and providers will be encouraged to decrease spending. In this paper we explain why we believe that many current cost-profiling efforts are unlikely to have this intended effect. One of the reasons is that many consumers believe that more care is better and that higher-cost providers are higher-quality providers, so giving them information that some providers are lower cost may have the perverse effect of deterring them from accessing these providers. We suggest changes that can be made to content and design of public cost reports to increase the intended consumer and provider response.

EXHIBIT 2. Illustration of How to Implement the Consumer-Pathway: Report Card for Maternity Hospitals

SOURCE: Author’s views Footnote: In this Exhibit, we illustrate our recommendations on how public reports can better engage consumers. We focus on choice of a maternity hospitals, an area of health care where patients are motivated and have the time to make a choice. We present the key piece of information that consumers want, their out-of-pocket costs. We also differentiate between the high-value providers by putting them in a separate section and highlight them in green. Because we recognize consumers may distrust the cost information and link higher costs with higher quality, we made quality the first column. We do not even list the cost metrics used to distinguish between the two tiers (that information is available using the question symbol for only those that want more data). In some sense we are creating different depths of data, the initial report for the “1 minute reader” while the more in depth information is available for the reader with greater interest.

EXHIBIT 3. Illustration of How to Implement Reputation Pathway: Report Card for Myocardial Infarction

Source: Author’s views Footnote: In this Exhibit, we illustrate our recommendations on how public reports can better motivate providers to focus on value. We focus on rehospitalizations, because we feel it is important to choose a measure where poor performance is viewed negatively by the provider’s peers. In contrast, higher reimbursement might not be viewed negatively by the provider’s peers. We do not list all hospitals, but only identify the high-cost outliers. This helps increase the negative reputational impact on these hospitals and, maybe more importantly, it decreases the likelihood of the perverse impact that low-cost hospitals will increase their costs. We have chosen to use the term “excessive” to make it compelling and easy to interpret that poor performance is wasteful. We have illustrated this for a condition, myocardial infarction, where patients cannot choose the provider. When focusing on the reputational pathway, it is not critical to focus on conditions where patients can make a choice