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Invited Commentary
March 5, 2020

Price Transparency in Otolaryngology: More Questions Than Answers

Author Affiliations
  • 1Rancho Los Amigos National Rehabilitation Center, Los Angeles County Department of Health Services, Downey, California
JAMA Otolaryngol Head Neck Surg. Published online March 5, 2020. doi:10.1001/jamaoto.2020.0031

In this issue of JAMA Otolaryngology-Head and Neck Surgery, Kondamuri et al1 illustrate the extensive informational gap limiting the ability of patients to understand just how much their health care costs. As of August 2019, only 8 states sponsored price transparency (PT) websites with cost data from all-payer claims databases, with half of these including data pertaining to otolaryngologic procedures. These data, which were of uneven quantity and quality, demonstrated substantial price variation both within and among states for tonsillectomy, diagnostic flexible laryngoscopy, and other common procedures.

Price transparency has been touted as a strategy for allowing patients to compare known costs for a given product or service and decrease their own spending by gravitating toward less expensive options. The resulting market competition would subsequently reduce costs to patients further. But how successful have efforts been to promote PT in the United States so far?

This article by Kondamuri et al1 shows that even executing the first step toward PT, providing actual data to consumers, is a challenge. Unlike most consumer goods and services, which are usually discrete, predictable, and comprehensible, medical care is often none of the above to a typical patient. An outpatient tonsillectomy that suddenly evolves into an inpatient hospital stay because of postoperative bleeding can generate unexpected use of additional goods and services and, thus, more costs. Bundling costs into a single episode of care may be more useful in such instances, particularly for patients who may not completely understand all the possible permutations of care delivery.

Insured patients also are generally insulated from many medical costs. The difference between baseline price and true out-of-pocket cost to insured patients is a complex calculation dependent on many factors, such as the patient’s insurer and specific policy, prior deductible spending, and whether the clinician is in network or out of network. The individualized impact of health insurance, coupled with the often unpredictable nature of medical care, can make the process of posting prices difficult to standardize. Even among the 4 websites analyzed by Kondamuri et al,1 pricing was reported in myriad ways: insured vs uninsured, single organization/insurer vs aggregate, discrete service vs bundled service, and overall cost vs out-of-pocket cost.

According to the Executive Order on Improving Price and Quality Transparency in American Healthcare,2 issued by the Trump Administration on June 24, 2019, 73% of the 100 costliest inpatient medical services and 90% of the 300 costliest outpatient services are shoppable, meaning that patients can evaluate pertinent services in advance and receive them at a time and place of their choosing.3 Providing the costs of such services ahead of time, as is done in other commercial sectors, is ethical business practice. However, simply making PT data available does not guarantee usage. Desai et al4 found that among 2 large US firms with nearly 450 000 employees, availability of a PT website was not associated with a decrease in health care spending. This observation held true even among patients with higher deductibles and those with preexisting comorbidities.

Kondamuri et al1 suggested that New Hampshire was able to increase visits to their PT website through a combination of advertising, a rewards program, and restructuring deductible costs for state employees. Nonetheless, lasting impact on health care expenditures requires more than simply boosting web traffic. Health care decision-making by patients is not predicated solely on cost. Most patients are reluctant to disrupt the patient-physician relationship solely because of price, and they often realize that care coordination may become more fragmented if they pursue cheaper services outside of their usual practice, medical home, or network.5 Also, patients generally try to seek care of the highest quality possible, but measuring quality is a significant challenge not yet being tackled by existing state-sponsored PT websites. Organizations from the Leapfrog Group to US News & World Report have long sought to capture health care quality in consumer-friendly metrics but often find themselves embroiled in controversy over the measurement process. Moreover, using cost as a proxy for quality is a dicey proposition. A systematic review of 61 studies by Hussey et al6 found no conclusive association between quality and cost in health care.

Price transparency shows more promise in informing patient decision-making when paired with other financial incentives, as opposed to being a standalone intervention. Benavidez and Frakt7 compared the results of 2 studies that separately examined reference pricing, in which payers set a maximum reimbursement threshold for shoppable health care services and required patients to pay the excess cost out-of-pocket, and rewards programs, in which payers set the maximum reimbursement threshold but patients received rebates for using less expensive services instead. Although both studies found that patient use of PT tools increased in both cases, reference pricing may be more effective than rewards programs in driving down expenditures.

Price transparency should not be viewed only as a strategy to modify consumer behavior. The federal administration’s executive order on PT requires hospitals to publicly post true prices of goods and services and mandates that clinicians and insurers inform patients with estimates of their out-of-pocket expenditures prior to receiving care.3 However, geographic price variation reflects local and regional distribution of the market power of health care organizations rather than underlying quality. Additionally, evidence to date suggests that clinician behavior does not meaningfully change when patients are given personalized pricing information, and it is unclear whether PT will lead to market competition or collaboration.8 Nonetheless, like the US Centers for Medicare & Medicaid Services Open Payments Database, which lists payments from the life sciences industry to physicians and hospitals, reliable, up-to-date PT websites could serve as useful data repositories for patient advocates, journalists, policy makers, and other stakeholders seeking to highlight particularly egregious pricing scenarios among third-party payers, vendors, and clinicians.

Many questions remain about the value and effectiveness of PT in health care. It remains to be seen whether PT will be linked with other practical initiatives to reduce spending and improve patient outcomes.

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Article Information

Corresponding Author: Gordon H. Sun, MD, MS, Rancho Los Amigos National Rehabilitation Center, Los Angeles County Department of Health Services, 7601 E Imperial Hwy, Downey, CA 90242 (gsun@dhs.lacounty.gov).

Published Online: March 5, 2020. doi:10.1001/jamaoto.2020.0031

Conflict of Interest Disclosures: Dr Sun has received personal fees from MAXIMUS Inc as a contractor, from Medscape from WebMD for serving as a columnist, and from Partnership for Health Analytic Research, LLC, for serving as a consultant.

Disclaimer: The author’s opinions expressed in this article do not necessarily reflect the opinions of the Los Angeles County Department of Health Services.

Kondamuri  NS, Suresh  K, Rathi  VK,  et al.  State-sponsored price transparency initiatives for otolaryngologic procedures in 2019  [published online March 5, 2020].  JAMA Otolaryngol Head Neck Surg. doi:10.1001/jamaoto.2019.4861Google Scholar
Trump  DJ. Executive Order on Improving Price and Quality Transparency in American Healthcare to Put Patients First. Accessed January 31, 2020. https://www.whitehouse.gov/presidential-actions/executive-order-improving-price-quality-transparency-american-healthcare-put-patients-first/
Wilensky  G.  Federal government increases focus on price transparency.  JAMA. 2019;322(10):916-917. doi:10.1001/jama.2019.12912PubMedGoogle ScholarCrossref
Desai  S, Hatfield  LA, Hicks  AL, Chernew  ME, Mehrotra  A.  Association between availability of a price transparency tool and outpatient spending.  JAMA. 2016;315(17):1874-1881. doi:10.1001/jama.2016.4288PubMedGoogle ScholarCrossref
Mehrotra  A, Chernew  ME, Sinaiko  AD.  Promise and reality of price transparency.  N Engl J Med. 2018;378(14):1348-1354. doi:10.1056/NEJMhpr1715229PubMedGoogle ScholarCrossref
Hussey  PS, Wertheimer  S, Mehrotra  A.  The association between health care quality and cost: a systematic review.  Ann Intern Med. 2013;158(1):27-34. doi:10.7326/0003-4819-158-1-201301010-00006PubMedGoogle ScholarCrossref
Benavidez  G, Frakt  A.  Price transparency in health care has been disappointing, but it doesn’t have to be.  JAMA. 2019;322(13):1243-1244. doi:10.1001/jama.2019.14603PubMedGoogle ScholarCrossref
Sinaiko  AD.  What is the value of market-wide health care price transparency?  JAMA. 2019;322(15):1449-1450. doi:10.1001/jama.2019.11578PubMedGoogle ScholarCrossref
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