Using cost transparency to change physician practice patterns

Hospitals have an opportunity to serve their own interests, their patients’ interests and their physicians’ interests by providing cost transparency

Hospitals and health plans are using analytic data to scrutinize the cost effectiveness of physicians. They want to be sure that the doctors included in their risk-based contracting arrangements are providing good outcomes while holding down costs.

Like most people, physicians aren’t fond of performance grading, especially when the results can affect their careers. But there is a way for hospitals and health plans to approach this issue that can be a win-win situation. By using the data to educate rather than exclude physicians, you can improve the cost effectiveness of all your physicians. This will strengthen rather than disrupt relationships.

During a recent panel discussion on analytics and accountable care organizations, Darren Shulte, MD, MPP, president of Apixio, stated that cost transparency can have a powerful effect on practice patterns. By showing physicians how their costs stack up against their colleagues, Shulte said, they have a chance to see how the choices they make for a patient affect the total cost of care. (You can check out more of Dr. Shulte’s presentation here.)

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For a physician, cost data transparency can be a real eye-opener. Many of us have no idea what a particular drug or test costs. If our costs are higher than those of our colleagues, that’s information we need. We can revisit those decisions to see what alternatives are available and at what cost. That allows us to make a more considered judgment of whether the value of the treatment or test is worth the cost. Often, something as simple as switching to a generic medication can make a big difference in the cost of treatment.

And lowering the cost doesn’t just affect the hospital. As patients are asked to pay an increasingly larger deductible, many costs come straight out of a patient’s pocket before the insurance company begins to pick up the bill.

Also, as health plans narrow the network of physicians with which they will contract, being a low-cost, high-quality provider can make the difference between being cut out of a network, and possibly losing patients, and being included.

Hospitals have an opportunity to serve their own interests, their patients’ interests and their physicians’ interests by providing cost transparency. They can use analytic data to improve the cost effectiveness of all of their physicians rather than to narrow their physician network. This approach will help maintain the broadest possible network, which consumers want, while maintaining high standards for quality and cost.

It’s a win for everyone, and can help hold down the cost of healthcare.