Does higher price means higher quality in health care?
In health services research the literature is quite clear and unconflicted. In pretty much every area examined there is no correlation between health care costs and health care quality at the provider level. - Marcus Thygeson, M.D., Surest Chief Health Officer
That is a stunning statement about the way Americans consume health care.
And yet we know it's true. The cost of health care has skyrocketed, but the quality of that care, as measured by improvement in clinical outcomes, strays far behind.
In what other marketplace would you not expect higher price to mean higher quality?
"It’s pretty simple—if you’re not accountable for outcomes and costs, you don’t manage for outcomes and cost," says Marcus Thygeson, MD, Surest Chief Health Officer. "If you’re not managing for them, then why would we expect there to be a relationship?"
Does higher spending improve outcomes?
That makes sense. What doesn’t make as much sense is why we don't manage for outcomes (the best indicator of health care quality) or costs.
The U.S. health care system has never tied pricing to quality, partly because quality care is hard to measure. Over the past 30 years, there has been a slow-growing movement among providers to better standardize those measurements. But even those efforts rarely compare measurable improvement in health care quality to spending by patients.
Most markets rely on a strong relationship between price and quality. Cars are a great example. You can buy a low-cost economy car, or you can buy a performance sports car. In either case you have a very clear understanding of what you’re getting, how it’s likely to perform and what you’re going to pay for it. You might negotiate a little over seat coverings and warranty packages, but you’re never going to get a luxury sports car for the price of an economy car.
Most people in the market agree that sports car manufacturers can charge a premium price because they are creating a higher-quality product. That’s not always true in health care.
When providers don't know insurance costs
Patients don’t know exactly what to expect when they have surgery for knee pain. The doctor often doesn’t exactly know, either. She may have a good idea, but she can’t guarantee the final health outcome.
Until very recently, it was likely that a doctor had not even measured the outcomes for dozens or even hundreds of patients she had operated on before. Probably, her practice group was not gathering basic clinical statistics about, say, how far patients could walk without pain six months after surgery, or how many became infected—standard measures of the quality of the care.
Add to that the likely fact that your doctor has no idea how much you're going to pay for your knee surgery. She knows what she is going to make for providing the service, but not what the hospital bills or how much the anesthesiologist charges, or the cost of complications. Because health insurance plans vary widely, doctors really can’t know what insurance covers as opposed to what their patients are spending.
Lots of complexity, little transparency
So, there’s little transparency around how likely that surgery is to improve the way your knee feels versus other clinical treatments, and you have almost no ability to know how much you'll be spending on the surgery. Nor do you know if seeing a higher-priced doctor for the procedure will lead to a better outcome. Cost and quality are completely disconnected.
There are some characteristics of health care that make it hard to solve with the market's invisible hand. Health is not a "nice to have," it’s a "need to have." Emergency medical treatments are not negotiable. Nobody has time to shop for ambulances or ER doctors. Widespread access to information, which is the key to a healthy marketplace, is tricky when we’re talking about the ways modern medicine works on the complex system that is the human body.
There are two ways to manage healthcare costs and quality—regulation and markets. In the U.S., many fundamental principles of a market are not in place in the health care industry. And, while certain areas of the industry are highly regulated, those regulations are not helping control costs—in some instances they may be driving higher costs.
"Consequently, we have higher costs and poorer outcomes," Thygeson says. He says other countries use regulation to control costs. Still, Americans want markets to solve problems. And there are areas of the health care system where the marketplace can make a difference.
A quality vision for health insurance
"One of the reasons I got involved with Surest as because it is the best approach I have seen that can rationalize the market for health care services in the U.S.," Thygeson says.
The Surest plan is trying to improve health and the affordability of care by strengthening the basic elements of a market for health care. It is working to measure health outcomes and tie prices to quality. Surest is also making costs clear and visible before patients decide on treatments, which will help them make informed choices—a necessary element of a marketplace.
"We’re beginning to create that correlation between costs and outcomes," Thygeson says. "Making that correlation visible enables people to make informed decisions and choose higher-quality, lower-cost care."