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Learning Pricing from the Airline Industry

Can price transparency websites be a game-changer for health care costs?

Source: Kevin Dooley (Flickr/CC)

Source: Kevin Dooley (Flickr/CC)

Traveling by air during the 1950s and 1960s during the Golden Age of Flying was different from what most of us are used to today. Lavish layouts, complimentary drinks, and exorbitant ticket prices made air travel for the majority of people out of reach. Nowadays, the average person can travel around the country at a fraction of the cost by using websites that compare among discount and premium airlines. There is a great lesson in airline industry history that, if a key group of states have it their way, can serve as a case study for the future of health care consumerism in America.

Since 2006, several states have created consumer websites that display health care costs for common outpatient services. From outpatient visits, magnetic resonance imaging (MRI) to even simple lab work, these price transparency websites could drive down health care spending.

A recent study evaluated how often New Hampshire’s HealthCost, one of the oldest price transparency websites, was utilized among residents in the state. HealthCost also shows what patient out-of-pocket costs would be for 42 commonly used services.

Between 2011 and 2013, close to 1% of the state’s population visited the site, and demographic data showed 41% of the visitors were uninsured. The researchers noted that three services accounted for 50% of the searches: imaging studies (MRI or computed tomography), outpatient visits, and emergency department visits. The price variation among services was remarkable: providers from the 10th and 90th percentile have as high as 350% difference between them.

Although data show a 1% utilization of the website among residents, unintended effects such as more awareness of the price variations can change market dynamics and drive down costs. Individuals who stand to benefit most from these sites include the uninsured and those with high-deductible health plans (HDHP).

With growing participation in HDHPs nationally, more and more Americans will be exposed to out-of-pocket costs. It is highly likely that the popularity of these websites will continue to grow. Public scrutiny on outliers of price variants, known as the sunshine effect, can influence negotiations and leverage among health plans and providers. A health care focused Expedia.com-type website may not be too far away.

commentary by Nii Darko, DO, MBA

Abstract

To help people shop for lower cost providers, several states have created their own price transparency Web sites or passed legislation mandating health plans provide such information. New Hampshire’s HealthCost Web site is on the forefront of such initiatives. Despite the growing interest in price transparency, little is known about such efforts, including how often these tools are used and for what reason. We examined the use of New Hampshire HealthCost over a 3-year period. Approximately 1% of the state’s residents used the Web site, and the most common searches were for outpatient visits, magnetic resonance imaging (MRI) or computed tomography (CT) scans, and emergency department visits. The results provide a cautionary note on the level of potential interest among consumers in this information but may guide others on practically what are the most “shop-able” services for patients. PMID: 25466414.

Mehrotra, A. et al. Inquiry. 2014.

Nii Darko, DO, MBA
About Nii Darko, DO, MBA

Dr. Darko is a board-certified general surgeon who currently practices in Pennsylvania. He began writing for Policy Prescriptions® in 2012. Contact: Facebook | Twitter | More Posts