Among the emerging trends that were discussed both in speakers’ presentations and among attendees at G2 Intelligence’s 31st annual Lab Institute “It’s Make or Break Time: A Path Forward for Labs” (Arlington, Va.; Oct. 16-18), none were so prominent as the trend of increasing consumerism in health care. The facet of this consumerization trend that […]
Among the emerging trends that were discussed both in speakers’ presentations and among attendees at G2 Intelligence’s 31st annual Lab Institute “It’s Make or Break Time: A Path Forward for Labs” (Arlington, Va.; Oct. 16-18), none were so prominent as the trend of increasing consumerism in health care. The facet of this consumerization trend that is likely to most affect the laboratory and diagnostic industries is the rising cost-consciousness among both providers and patients. “Consumerism is here, like it or not,” explained Francisco R. Velàzquez, M.D., CEO of PAML (Spokane, Wash.) in a breakout session at the conference. “It is coming because we are shifting the cost to consumers. As they are being asked to pay more, they are more interested in what they are paying for. Cost will drive where they go and what we do.” Aside from the health care system reforms driving consumerization, Velàzquez says that the push toward consumer health has been accelerated in recent years because of technology, the poor economy, and, even more broadly, a shift in the consumer base. By the year 2040, Generation Xers will make up the majority of consumers, and their thought process in addressing health care is markedly different from the traditional mindset of older generations, who largely never questioned doctors. Velàzquez says Xers think of health care providers more as consultants, able to impart knowledge, but Xers believe providers are there to help them think about what to do, not make the ultimate decision. “For those over 50 years old, the way we see value is perceived quality and if you are nice to me,” Velàzquez says. “For those under 30 years—what do they value most? Knowledge and information, although cost matters. Health and wellness in 2013 is different than 10 to 15 years ago. It used to be that if I’m not falling apart, I must be OK. Now it is not the absence of disease. It is—am I at my peak physiological performance?” More Skin in the Game What underlies all of these shifts in the consumer population at large is that patients are starting to pay for an increasing share of their own health care bills. With a profound shift toward high-deductible health care plans, in part due to health care reform, Americans will no longer be shielded from the full cost of medical and laboratory bills, and they will soon face paying for a greater share of their own health care bills out of pocket than ever before with no increase in disposable income. In a paper published in the Oct. 16 issue of the New England Journal of Medicine (NEJM), J. Frank Wharam, from Harvard University in Boston, and colleagues uncovered some staggering statistics quantifying the magnitude of health care-related expenses patients will soon be facing:
In California, bronze and silver plans on the exchanges may have deductibles as high as $4,000 to $10,000 for family coverage.
Cover Oregon estimates that cost sharing for Oregon families with incomes between 200 percent and 399 percent of the federal poverty level will include $5,000 deductibles, 30 percent coinsurance for many services even after reaching the deductible, and out-of-pocket spending maximums of $8,500 to $12,700.
For a family of four with an annual income of just over $47,000 (200 percent of the poverty level) the highest allowable deductible plan could cause them to face out-of-pocket payments of 8 percent to 27 percent of its annual income.
With more skin in the game, experts predict consumers will rapidly become more discriminating consumers. “So are we seeing the dawn of a consumer-driven health care economy, in which patients undertake the same deliberations regarding medical purchases as they do when purchasing furniture or a new car?” ask Robert S. Huckman, Ph.D., and Mark A. Kelley, M.D., both from Harvard University, in a perspective piece also published in the Oct. 16 NEJMspecial issue. Many health care providers believe the answer is yes, the authors say, with consumers wanting clear, concise, understandable information regarding out-of-pocket costs. “I have high cholesterol and I go yearly to have it checked,” Jeffrey Rice, M.D., CEO of Healthcare Blue Book (Brentwood, Tenn.) tells DTET. “My physician switched networks, and what was normally a $20 to $30 test became a $300 test discounted to $200. If as a doctor and health care executive I was unapologetically taken advantage of, I decided I had to tell patients what I knew.” So are laboratories’ worst fears of price-shopping patients going to become a reality? The answer may be yes. Implications for Laboratories In 2014, with the implementation of the bulk of health care reform, providers will likely see a big uptick in the number of patients inquiring about their expected out-of-pocket costs and the price of tests and other procedures. Decisions about which providers patients utilize will no doubt be motivated by cost. “Since health care providers don’t often discuss potential costs before ordering diagnostic tests or making treatment decisions, patients may unknowingly face daunting and potentially avoidable health care bills, writes lead author Peter Ubel, M.D., from Duke University (Durham, N.C.) in an NEJM perspective piece titled “Full Disclosure—Out-of-Pocket Costs as Side Effects.” “Because treatments can be ‘financially toxic,’ imposing out-of-pocket costs that may impair patients’ well-being [from financial strain], we contend that physicians need to disclose the financial consequences of treatment alternatives just as they inform patients about treatments’ side effects.” “There is no reason why you can’t call a provider and find out how much something is going to cost,” says Rice. “We have found that providers unwilling to disclose typically have bad pricing, and they are probably not the provider you want to go to.” This informational barrier is being addressed by insurance companies’ and hospitals’ development of online tools to better estimate patients’ costs; legislation at the state level to improve price transparency; efforts by federal agencies, including the Centers for Medicare and Medicaid Services, aimed at disclosing cost variation; as well as private-sector efforts, like Healthcare Blue Book, all aimed at giving patients access to meaningful price information. Rice advises that all providers, including laboratories, need to be prepared to answer patient price questions, and they must strategically position their services in part based on pricing. “Unfortunately there are going to be winners and losers,” Rice says. “For a patient, paying 10 times what another lab charges for the same test is not going to be a win for them. Patients will look for where they can save money. Providers must respond with thoughtful information or risk losing patient volume.” Takeaway: In 2014 the health care system will begin to feel more fully the effects of cost-conscious consumers. With the reality of a much larger share of medical bills becoming the patient’s responsibility and an increasing number of measures to improve price transparency, laboratories and other providers must be prepared to respond to direct questions about the estimated costs consumer will face for testing.
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