Lighting the Dark Corners of Health Care Information

Transparency and data flow surrounding multiple types of healthcare information have taken over the spotlight in the month of February. The spotlight has become so intense you can sense the heat being generated. There’s even talk of morality and ethics.

First, the Time magazine story everyone is talking about, or rather, shouting about. Steven Brill’s epic Time article “Bitter Pill: Why Medical Bills are Killing Us”, the longest story ever in Time magazine at 25,000 words, seems to have the healthcare world and the whole nation talking. If you haven’t read it, it’s well worth spending the time on.

tunnelBrill walks through seven jaw-dropping medical bills that seven patients received, a deep dive into medical billing and just how unreasonable it seems to be. Nobody interviewed seemed to be willing or able to defend the numbers or where they came from.

He summarize his article in this quote:

“Recchi’s bill and six others examined line by line for this article offer a closeup window into what happens when powerless buyers — whether they are people like Recchi or big health-insurance companies — meet sellers in what is the ultimate seller’s market”

This quote reminded me of another quote I read recently in “The Signal and the Noise,” referring to the work that won George Akerlof the Nobel Prize in Economics for his work on information asymmetries:

“…in a market plagued by asymmetries of information, the quality of goods will decrease and the market will come to be dominated by crooked sellers and gullible or desperate buyers.”

Brill hits the nail on the head. Healthcare really is the ultimate seller’s market. Buyers are unable to find out what they’ll be responsible for paying until the bill arrives and have few choices to turn down services or comparison shop. The window into what happens in these seven stories in Brill’s article are then, or course, stories of desperation. Bills arrive to people who thought they had good insurance, bills in the six figures, equating to lives turned completely upside-down.

While a worthwhile read (some are whispering “Pullitzer”) at 25,000 words, it’s a commitment, so here’s some key takeaways:

  1. The “chargemaster.” A new word to many, but bound to be one of the words of the year. According to Brill, “The chargemaster, I learned, is every hospital’s internal price list. Decades ago it was a document the size of a phone book; now it’s a massive computer file, thousands of items long, maintained by every hospital.” Few hospitals seem to know or are willing to admit how the prices in this file ever got there, but it’s clear that they don’t seem to be closely related to costs, and that the only people who pay those prices are individuals who don’t try to negotiate. In essence, in health care, the smaller the payer, the less clout they have and the more they pay, sometimes an order of magnitude more.
  2. Know your insurance policy’s annual payout limit. Many people in the article were surprised that their benefits capped out at $50,000 per year on their discount insurance plans. Obamacare does away with these limits in 2014, but if you need major health care before then, be aware. Of course, this is the exact opposite of how most insurance, such as homeowner’s or auto, is structured — we pay the small amounts and deductibles while the insurance company pays the catastrophic large amounts. This is an extreme definition of a scenario Nicholas Nassim Taleb calls “fragile,” and highly likely to destroy those who enter into these deals. Look for this model to be flipped, for the better, by high deductibles and Obamacare. This will mean higher premiums for all but fewer personal bankruptcies, 62% of which are driven by medical bills. That’s nearly 1 million U.S. households destroyed by medical bills every year.
  3. Medicare is, for now, the best price negotiator. In an earlier post on a possible healthcare bubble I said government controls much of health care pricing, so that health care, if it is in a bubble, was unlikely to burst. I was only half-right. The government pays for half of health care bills in the country, yet, according to Brill’s article, they actually get the best prices. Brill makes clear that there’s a lot of room for the health care bubble to deflate with just a little bit of price pressure.
  4. As great of a dissection of medical billing that it was, the policy recommendations Brill offers are painfully weak and inconsistent with the challenges brought forth in the article. He recommends “outlawing the chargemaster,” setting controls on drug and device profits, limiting the local clout of hospitals who have a lock on the local market, tort reform, and limiting profits or increasing taxes for many of the stakeholders. None of these put into effect the market forces necessary to bring prices down substantially.

Brill writes, “Indeed, the only player in the system that seems to have to balance countervailing interests the way market players in a real market usually do is Medicare.”

While Brill won’t recommend single payer because he views it as politically infeasible, and he’s probably right, it’s hard not to come away from the article thinking that no other entity beyond Medicare has the market clout to negotiate fair prices.

Aside from a wholesale “Medicare for All,” (or, at least, Medicare-negotiated prices) a good place to start would just be mandating more price transparency. In an era of ever-more high deductible care, how much can providers continue to obscure pricing? People are going to want to know. The lack of transparency seems unsustainable, and forcing price transparency seems like a great place to start.

I wonder which, if any, systems might make a bold statement by offering to open the chargemaster? With changes like All Payer Claims Databases that will continue to shed light on health care pricing, it seem like it’s just a matter of time before the information becomes known. Why not start now?

Providers suffer from obscure pricing, too.

It turns out patients aren’t the only ones suffering from the lack of transparency in prices. Providers complain they are suffering due to a lack of transparency by EHR vendors. Farzad Mostashari commented on a moral imperative of EHR vendors to play nice at the Feb. 6th HIT Policy meeting, summarized in article in Healthcare IT News:

“Talking about morality, social control, solidarity and authority, Mostashari recognized that not every problem could be solved via authority. Governmental regulation is one means of control, but may not be as effective as social norms. He declared that legal and right are different. ONC has called on the layer between self-interest and government regulation and is calling on moral behavior. He spoke of professionalism and fairness, cheating and harm, saying that he wishes to use all tools at his disposal to encourage societal enforcement of norms.”

The article in Healthcare IT News goes on to say that, “Mostashari said that some vendors go beyond the boundaries of what society views as proper, in their lack of opaque pricing. He said he gets complaints from providers on a daily basis, saying that some pricing or contract requirements are unfair to them, and asking if there could be some federally regulated norms around pricing.”

One could wonder if the same providers would agree that there should be federally-regulated norms around pricing in healthcare, including provider billing?

Mostashari’s comments seem to suggest that if vendors won’t take action on pricing and vendor and data lock-in, the government would.

John Lynn questioned whether Mostashari has any power to change things and goes on to add, “What could have the most [effect] in this regard is doctors, hospitals and medical groups reading their contracts and not signing contracts with EHR vendors that have language that will cause a problem for the doctor later. Once hospitals stop patronizing EHR vendors that don’t act well, we’ll see some change.”

Will the same be true of patients as they choose providers with more transparency? Mostashari’s comments appear to signal a shift from the financial to the ethical considerations of how pricing information is shared. It’s a new line of reasoning about how and why this information and behaviors should be more open and transparent.
If EHR vendors continue to be perceived as standing in the way of external health information exchange, expect a fight.

On the same day, ONC detailed plans on engaging patients. According to the article in Healthcare IT News:

“Technology is ‘rapidly democratizing information,’ Ricciardi and colleagues say, and as the ONC tries to help expand access to personal health technologies, it is also promoting the idea of evolving provider-patient expectations, toward “a less hierarchical, more collaborative partnership.”

Considering Brill’s reporting, will this partnership include more open information about price and costs? While patient sharing of health data is gaining momentum, how long will it be before there’s more open sharing of price data?

Finally, there was a good validation of what happens when a connected community gets behind a movement towards more complete information.

In my last post (that came out on the day of the State of the Union), I wrote about 16-year-old Jack Andraka and how he used information in open access articles as the basis for his research to develop a simple test for cancer using antibodies and carbon nanotubes.

Scientific journal subscriptions can cost tens of thousands of dollars. If Jack had had to pay tens of thousands of dollars, he likely would not have made his discovery.

It turns out Jack was invited to the State of the Union address and was able to have a conversation with the President after the event. I understand that Jack did talk with the President about open access, issuing a call to action following his meeting. This comes on the heels of an access2research petition that was signed by over 25,000 people in a matter of days, causing John Wilbanks to do the “Snoopy dance.”

Then, on Friday, The White House issued a statement on open access to Federally-funded research that states: “OSTP Director John Holdren has directed Federal agencies with more than $100M in R&D expenditures to develop plans to make the published results of federally funded research freely available to the public within one year of publication and requiring researchers to better account for and manage the digital data resulting from federally funded scientific research.”

Enabled, engaged communities are beginning to emerge all across health care and having significant impact on information sharing. Where will be next?

One area I look forward to seeing emerge is increased adherence to and adoption of the HL7 Standard itself. All this opening up of information stores makes the HL7 decision to become a free standard beginning in early 2013 a prescient one. Looking forward to seeing the outcomes of this decision in the coming months.

What changes might occur?

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Leonard is Principal and Co-Founder at VivaPhi, an agency that solves multi-disciplinary business problems involving data science, software, biomedical science, behavioral science, health care, product design, community development, marketing, consumer engagement and organizational design. He has been quoted in Forbes and other top-tier publications for thought leadership on patient and consumer engagement. In addition to his role at VivaPhi, he is Chair of the Marketing and Communications Group for the Collaborative Health Consortium. Prior to VivaPhi he held the position of Vice President of Operations at Capitis Healthcare International as well as executive positions with several startups. He started his career as a software requirements analyst on Qwest Communication’s highest priority IT project while earning a triad of advanced degrees from the University of Colorado. These included an MBA, a Master’s of Science in Information Systems and a Master’s in Biomedical Sciences (Thesis on System Dynamics in Parkinson’s Disease). Leonard earned a Bachelor’s in Zoology from Miami University in Oxford, Ohio. He’s interested in how systems evolve, and how to help them evolve, in a variety of unique contexts. Connect with Leonard: @leonardkish, LinkedIn and Google+