The tool, found at www.mnhealthscores.org, was developed by the MN Community Measurement, “a collaborative of state health care providers that collected the data from insurance companies,” according to the story. More than 110 providers throughout Minnesota provided insurance reimbursement data on 103 medical procedures, and not surprisingly, there is a wide variety of costs. For example, the article leads off with the comparison of colonoscopies, which would cost $1,354 at Olmsted Medical Center in Rochester (not affiliated with the Mayo Clinic, btw), and $402 at Hennepin County Medical Center in Minneapolis.

Of course, it’s not until after the jump on page A10 that it is stated that these aren’t actually prices consumers will pay, but rather the average negotiated reimbursement that insurers pay providers. What patients would actually pay for those colonoscopies would depend on their insurer, plan and specific components such as copy, deductible, etc. Still, this is helpful information for someone like me, who has a high deductible plan for my kids. Or, who – as noted in previous posts – is battling a stubborn wart on his foot (“Removal of small wart: Olmsted Medical Center – $216; Broadway Medical Center, Alexandria, $130).

Information like this usually leads to more questions than answers, and this tool is no exception (my first attempt to use it this morning has me still waiting for the site to load procedures to compare). Why is Olmsted more expensive than Hennepin County Medical Center? Are there valid reasons, related to experience, convenience, quality of care, etc.? But there’s no doubt if this information becomes comprehensive (covering more providers and procedures) and is simple to use, it will be a useful tool for those shopping for care.

On a side note, our White House-seeking Governor, Tim Pawlenty, jumped on board fast, lauding the tool as an example of why we should have a “consumer-driven model, not a government-centric model.” The expressed hope is that transparency of costs at this level will help foster price competition among providers, driving down healthcare costs overall. (Political editorial alert: I’m growing tired of the old free-market mantra – “let the consumers run healthcare.” Sorry, but consumers for the most part don’t drive demand in healthcare, providers do, and that’s a bigger problem (i.e. fee-for-service). Frankly, unless we all receive our medical degrees, we’ll never have the expertise to be in the driver’s seat. But off my soapbox.)

Politics aside, what do you think of this new tool? Will it be a game changer, or just one more resource among dozens that, while seeking to help consumers, may end up causing more confusion than ever? Tell us what you think.

There does seem to be an acute difference among markets when it comes to hospital and healthcare comparisons and the role of pricing. For example, here in the Twin Cities, the issue of hospital price comparisons (even with the rudimentary gauge of how many “dollar signs” a hospital is assigned) has been prevalent for at least three or four years. We’ve had advertising wars among local payers promoting their proprietary hospital shopping web offerings, we’re the home of the innovative healthcare shopping site, Carol.com, and both the state government and the Minnesota Hospital Association have offered hospital price comparison tools on the web for a number of years.

Yet when I spoke in Chicago a couple of years back at a healthcare marketing conference and asked how many in the audience were starting to receive pricing questions from potential patients, all I got was blank stares. “We don’t get that here,” someone offered. “Just wait,” was my response.

How strong a factor is healthcare pricing in your market? What do you think causes the differences among markets when it comes to the impact – or lack thereof – of hospital price comparisons? (Concentration of provider market? Power of payers? Medical culture?) Let us know your theories, and if you’re from Chicago, let us know if you’re starting to get those questions on prices from your customers.

As a healthcare marketer, how is your organization exploring the possibility of price-based positioning? If prices were transparent, how would you stack up against your competition? If you’re the lowest priced option in town, is that a good or a bad thing? And if you’re the highest, can you support higher prices with value in other areas, or is it all driven by reimbursement disparities? Wonder how – or if – these discussions are progressing at hospitals across the country.

Then I saw a tweet from Gregg Masters, a self-described “recovering X-managed care executive, converted health system reformer,” who goes by the Twitter handle “2healthguru.” Gregg had passed along a link to a new web site called the Healthcare Blue Book, which touts itself as “your free guide to healthcare pricing.” The site is aimed at those with high deductible insurance, or no insurance at all – in other words, those with the most skin in the game. It purports to provide a “fair price” for hospital, physician, lab, cosmetic and other services, adjusted for zip code. So I decided to test it out, using myself as a guinea pig.

I tested two procedures I’ve had recently to see how close the estimate from the web site came to my actual costs. First, I looked at a rather routine procedure I’ve mentioned before – having a wart removed from my foot. My provider charged $208 for a one-time liquid nitrogen application, and my insurance “allowed” $202.03, which is what I would have been on the hook for had I had a high deductible plan (which I don’t – I have a $15 office copay with 80/20 co-insurance, which applied here, makes my final outlay $40.41.) On the web site, I typed in “wart removal,” and the web site showed a “skin lesion removal (benign)” at $116 for the physician fee. Is that the same thing? Hard to say, because the web site didn’t provide any description of the service. So really there’s no way to know if I’m comparing the right service or not (I’m guessing no). I tried to enter some other descriptions, but couldn’t get any further clarity.

Next I looked at a high-level diagnostic – a CT scan. When I enter “CT scan” in the web site, I’m provided with a number of detailed choices from which to pick. I can’t tell from the hospital bill or the EOB exactly what kind of CT scan I had (shocker), but I’m pretty sure it was an abdominal CT, with contrast (that part I didn’t forget – yummy). Choosing that version of the CT scan on the site leads to a price of $396, which the site says should cover both physician interpretation fees and the technical imaging fees. On my EOB, the price of the CT scan was $567, which is relatively close in the overall scheme of things.

But here’s the problem: That wasn’t my only cost for the procedure. I actually had two scans done, one at $567 and one at $615, at the same visit. In addition, there is a pharmacy charge for $223, which I would assume is for the six gallons of contrast they made me drink. If I were a consumer trying to price shop this procedure, how would I know they would conduct two scans? Did the physician order that, or did the tech decide we needed two? Same goes with the wart removal – a $40 outlay seems reasonable, but I had to return for seven treatments. How would I have known that in considering my budget? My physician couldn’t say how many treatments it would take to rid my foot of the wart, and if he doesn’t know, there’s no way I can know, so no real way to calculate my out-of-pocket costs.

So the results of my little experiment show how far we have to go if we really want to provide clear, accurate pricing that will allow consumers to shop for medical services (whether that’s even a good thing or not is best left for another day). Or if you’re a pessimist, it shows we’ll never get there, because there’s no way to truly nail down what it will take to diagnose and treat any given affliction for any given individual. Not to knock the Healthcare Blue Book web site – the branding is smart (though assuming they’re not affiliated with the Kelley Blue Book, I wonder if they’ll run into some trademark issues), and the site is clear and easy to use. I couldn’t find any detailed explanation of how they are determining the prices that show up from searches, so who knows how accurate they really are. And obviously given my brief experience, I’m not sure the basic information they provide is enough for consumers to feel confident in using the information to negotiate with providers. At least they’re trying, and hopefully over time, they’ll continue to hone the site to become more transparent and accurate.

In the meantime, we’ll keep exploring this topic, and what it means for healthcare marketers.

Kudos to the NP! She clearly gets it, and is being proactive in including price considerations as part of her consultation. I’ve had physicians mention price before, for sure, but usually as an afterthought, or after prompting (see my guest blog post on the HealthLeaders Media site vis-a-vis pricing and a stubborn wart). This was my first encounter (outside of MinuteClinic) where pricing was a natural part of the experience.

After a lunch of potato sandwiches and SweeTarts (just kidding), I had an appointment with a nutritionist, and I had been told previously it might not be covered by insurance. At the registration desk, the woman reminded me again of this, and asked that I sign a form stating I knew this was possible. Of course, this is as much a CYA policy as it is savvy patient communications, but what I was struck by was they had included the cost of the session on the form ($260 – yikes). Even better, the woman made a point of showing me the price and saying, in a respectful tone, “Just so you’re sure, here’s what the price would be.” Now, while standing in line in the waiting room, it would be hard for many to say, “Holy crap, are you kidding? Count me out.”. But nonetheless, she was making extra sure I had all the relevant information, even if it might cause me to reconsider or cancel. And that is what I call transparency in action.

For me, these were new experiences, and given my frequent encounters with the healthcare system, I found them enlightening given current market trends. What other examples do you have that seem to point to changes in how hospitals and health systems are dealing with price transparency? Do you find these examples encouraging, as I did, or do you feel they’re signs of trends moving in the wrong direction? And, does anyone know of a nutritionist who offers volume discounts?

This week, Walgreen announced that it is offering free visits to its in-store clinics to customers who no longer have jobs or health insurance. According to a story on the Reuters web site, there are some restrictions. For example, the offer only applies to those who have already used their Take Care clinics at least once in the past.

So what are traditional hospitals and health systems doing to help consumers continue to utilize their services? We all know most hospitals and health systems already provide a significant level of charity care and community benefits. But what about those customers who aren’t eligible for charity care, or who traditionally wouldn’t need help if the economy weren’t so deep in the crapper?

We mentioned in an earlier blog post how many in the Twin Cities are becoming more proactive in working with patients to offer options for paying for care, which is a start. But what other options are out there, especially in an industry where every penny is precious?

How about offering free quarterly diabetes check-ups, in small group settings, for those with financial troubles? Or one free orthopedic assessment? Or a discount on screenings, labs or tests?

Who knows if the ideas above are even feasible, but imagine the awareness and loyalty providers could build by offering help to those who typically don’t need it.

The Tide is Turning
In 2007, roughly 10% of those with health insurance had some form of consumer-driven coverage, defined as an HRA, HSA or other high-deductible option. Combined with the uninsured, adult U.S. consumers with significant skin in the game are still in the minority. But given the accelerated adoption of consumer-driven plans and the current economic crisis, dramatic change is coming. Consider the following:

• Many predict adoption of consumer-driven plans will rise to 15% in 2009. According to Clayton Christensen, author of “The Innovator’s Prescription: A Disruptive Solution for Health Care,” that adoption will likely hit 50% by 2013, and 90% by 2016. (His book “The Innovator’s Dilemma,” cites research that shows the rate of adoption of innovation typically starts slow, then hits a tipping point when wide-spread use skyrockets.)
• Tough financial times are causing more employers to drop health insurance altogether. A new survey by Hewitt Associates shows that 19% of employers are planning to stop offering health benefits over the next three to five years, a response nearly five times higher than the previous year.
• The economic crisis has led to growing unemployment (8% nationally at this writing). Many expect that number to reach 10% before the end of 2009. This restructuring of the national economy is ratcheting up the number of uninsured and underinsured.
• Even those that have avoided job loss are tightening their belts in significant ways. Not only is income being threatened, but the old fall-back resources of home equity lines and credit cards are drying up. Many are watching every penny as their spending resources dry up, and pulling back on spending “just in case” of job loss, medical emergency or other dire situations.

All of these trends are causing an increase in exposure to out-of-pocket healthcare costs for consumers, and the impact has been significant. According to a recent Kaiser Family Foundation Health Tracking Poll, 53% of respondents said their households had cut back on healthcare in the previous year due to cost concerns. A recent Wall Street Journal online piece noted that retailer CVS is closing 90 MinuteClinics for the season, to “align with consumer demand.” Many hospitals and health systems are reporting dramatic drops in utilization. Summing it up recently was David Wessner, CEO of Park Nicollet Health Services in Minneapolis, who was quoted in a recent Minneapolis Star Tribune story on the financial ills of hospitals. Wessner said: “We’re seeing that demand is far more elastic than it was in other years.”

Of course, much of the drop in healthcare utilization attributed to the economic crisis could be seen as short-term. When the economy recovers, consumers will return to regular healthcare usage, and all will be fine. But chances are many of the changes we’re seeing will become permanent.

A permanent shift
Economic crisis has driven societal behavior change before. For example, those who lived through the Great Depression of the 1930‘s (often referred to as the “Greatest Generation”), were very cautious with their money. Debt was considered bad, as was spending beyond your means. The norm was to save carefully to buy a home, car and to have a significant cash reserve at the ready to meet unexpected, emergency expenses such as the need for medical attention. Economic crisis taught this generation (the youngest of which are in their 70’s now) the critical importance of making smart financial decisions, of not over-extending themselves, and the value of saving first and spending later. These financially conservative attitudes did not change until the next (Baby Boomer) generation.

Will we see the same shift in financial attitudes as a result of this crisis? A recent article in Time talked about how consumers are walking into stores with a new level of negotiating power:

“Store owners will tell you horror stories about shoppers with attitude, who walk in demanding discounts and flaunt their new power at every turn. They wince as they sense bad habits forming: Will people expect discounts forever? Will their hard-won brand luster be forever cheapened, especially for items whose allure depends on their being ridiculously priced?”

Once new consumer habits are formed, it’s very difficult to change them. Given how most of us have been blind to the true cost of healthcare our entire lives, it’s not surprising that old habits in choosing care die hard. Note the struggles of Carol.com in the Twin Cities market, which had trouble convincing enough consumers to shop for care through their innovative web site. Could the shift of greater out-of-pocket exposure to more and more people trigger a permanent change in healthcare behavior?

The impact on healthcare providers
The economic storm will pass eventually, but what if the newfound value priorities of healthcare consumers stick around? The impact would be profound for healthcare providers:

• The current drop in volumes may be a permanent reduction of utilization, as consumers avoid non-essential treatment, stretch out physician visits, and find lower-cost alternatives (alternative medicine, “home made” remedies and more). Of course, the wave of Baby Boomers and their increased need for care may cancel this out, or override it altogether.
• Price shopping will become the norm, as consumers carefully consider their alternatives and negotiate for lower costs whenever possible.
• While price will be one value driver, others such as convenience, experience and service will continue to grow in importance, relative to clinical quality, as patients demand more for their money.
• Competition in the healthcare market will become even more intense, while the resources to grow market share, increase volumes and build brands become increasingly scarce.

The healthcare hurricane is coming
The potential impact of consumer-driven healthcare on providers is like a hurricane forming in the Gulf of Mexico. The storm is out there but no one knows where it will hit: North, South or direct? Will it stay at its current level of strength, fizzle out before reaching shore, or grow to a Category 5 “killer”? Until recently, the “consumer-driven” hurricane was too small and too far out at sea to be a major cause of concern for providers. But depending on what happens with the economy over the next few months, it could rapidly grow in power and race toward shore. Is your hospital or health system ready?

“We’re seeing that demand is far more elastic than it was in other years.”

This, in a nutshell, is one of the primary reasons for the financial suffering hospitals are experiencing this go-around, as opposed to previous recessions. The old saw used to be: “It doesn’t matter what the economy is doing, people still get sick.” That, of course, is still true. The difference this time is that because more and more people are having to pay for care out of their own pocket through high-deductible plans, more people are thinking twice about seeing a doctor, renewing prescriptions or getting a test for a chronic condition. The severity of the recession means more people will be tight with their money, lowering patient volumes further. In addition, more people will be without insurance at all (no job, no insurance), and government budget reductions will hit health subsidies for the poor. Both of these factors effectively raise the rate of the uninsured, causing more financial stresses for hospitals.

The key question for healthcare leaders: which force has the most impact on this drop in patients? The shift to consumer-driven health coverage, and the subsequent focus on costs by consumers? Or the economic downturn, and the focus on costs by consumers? The answer has huge ramifications. If it’s the economy, then much of the pain will end when the economy recovers (whenever that happens). But if it’s the trend toward consumer-driven health coverage, which most likely will only continue to grow, then leaders are facing a potentially permanent shift in how patients seek and use healthcare services.

For healthcare marketers, how does the answer to this question impact your strategies? How will you deal with greater elasticity in demand for care? How do you communicate the value of your offering when out-of-pocket patient dollars are at stake? Will consumers become increasingly suspicious of recommendations for additional diagnostics or testing? Is there anything you can do now to help your audience deal with the economic pressures they’re facing? How does price-based marketing fit in healthcare? Should it? Lasik eye surgery is one thing, diabetes care is quite another.

As often occurs, there seem to be way more questions than answers.

“It’s brand darwinism at its best. Currently, we simply have too many of everything. Too many clothing stores, too many gas stations, too many malls, too many sandwich shops, too many coffee shops, too many furniture stores, too many car dealers, too many condos, too many real estate agents,” says Ries. “Thinning the herd means more food and a greater chance of survival for the stronger animals and their young.”

In her e-newsletter, Gienna follows this citation with the question, “Should we add hospitals to the list?” Well, if hospitals and health systems are truly part of a market-based system, where competition drives better value, then yes, maybe we should.

Of course, there are specific areas of healthcare where access to providers is a huge issue (rural hospitals, inner-city EDs). But consider a market like the Twin Cities: do we really need all of the hospitals found here? Do we need a dozen heart centers, joint replacement centers, birthing centers? Everyone is facing a lower census, dropping volumes. “Thinning the herd” would help with this problem (as it’s supposed to in any market-driven industry). It also might help with the shortage of nurses and other medical professionals.

Nothing is ever that easy in healthcare, though, is it? We can’t close a hospital in the innner-city, but keep keep just the ED open. In some cases, closing a hospital would cause issues of proximity for critical services like cardiac care. And in typical market-driven industries, too many companies typically mean prices are driven downward, while consolidation drives prices higher. That’s not the effect we want (or can afford) in healthcare.

But it’s an intriguing concept to consider. Let the strong organizations thrive, the weak pass on. And when considering all the growth and expansion Twin Cities healthcare organizations have experienced over the past decade, it’s interesting to consider another point from Ries:

“Unchecked growth in all directions weakens a plant which needs constant pruning to remain healthy. The same holds true for companies.”

What do you think? Time for a healthcare pruning?

But now, there are two factors that are serving to hit hospitals financially. The first is uniquely related to this particular financial downturn – the freeze of the debt markets. In a dark statement in the current issue of BusinessWeek, Ralph De La Torre, CEO of Caritas Christi Healthcare sums it up well: “We live and die on the tax-free bond market, and right now we’re dying.” Hospitals use the debt markets to raise funds for facilities expansions and upgrades, new technology and acquisitions. With the debt markets frozen, this source of revenue has dried up.

Worse, those organizations who had variable-rate debt have seen their interest rates, and subsequently, their payments, sky-rocket. Locally, the Fairview Health System had to scramble to refinance its debt when faced with large debt payment increases, and other systems are feeling the pain. Today’s Star Tribune paints a depressing financial picture of the local Twin Cities healthcare market in a story by Chen May Yee.

The story also notes the effect of the second factor, this one more long-lasting: the impact of consumer-driven healthcare. With more consumers paying more money out of their pockets through high-deductibles, co-pays and co-insurance, many are delaying or opting out of care in the face of tough economic times. In addition, capturing receivables from consumers is much more difficult for hospitals than receiving reimbursement from payers, resulting in higher levels of bad debt.

What does all of this mean for healthcare marketers? At best, a tightening of budgets and hiring freezes. At worse, layoffs, as we’ve seen throughout the Twin Cities. It doesn’t help that many healthcare leaders don’t understand or value marketing in the first place. And there’s always the natural inclination of business leaders to cut marketing first in the face of bad financial times.

What impact has the economy had on your healthcare organization? Has your department faced cuts in budget or staff, or do you expect cuts in 2009? Our guess is that the majority of healthcare marketers would answer yes to one or both of those questions.

On a side note, the CEO of HealthShoppr, Vijay Goel, M.D., has what looks like a great blog, Consumer-focused Health Care. Check it out…