Why health care transparency is complicated and how it can be fixed

President Trump’s administration recently announced new guidelines requiring hospitals and insurers to give consumers more information about their health care prices. The administration decreed this transparency mandate as an unprecedented and revolutionary change to the American health care system. However, price transparency alone will not produce any groundbreaking change in our health care system. Policymakers should, in parallel, focus on improving the transparency of the quality of care patients receive. Consumers need to know not only the price of the service they are about to receive, but also the quality of it.

Increasing transparency in the health care system has long been a goal of policymakers and advocates alike. Those advocating for transparency often claim that when patients are equipped with more information, they will make better decisions, leading to improved outcomes. Therefore, it is not surprising to see the announcement that “President Trump has promised American patients ‘A+’ healthcare transparency” stating that this new transparency guideline is “a more significant change to American healthcare markets than any other single thing.”

While there may be advantages in the short term, understanding why increasing transparency is complicated and how it should be approached requires a deep understanding of potential responses from not only patients but also providers. A recent study in the INFORMS journal Operations Research, for instance, finds that harnessing the power of transparency in the long-term needs more careful considerations and policy interventions, or else, it might hurt the health care system. 

Indeed, at face value, increasing transparency in our health care system seems promising. But, like the system it is looking to expose, things are a lot more complicated than they seem. This study, and some related research, remind us that information needs to be made useful for the public (not simply available), targeted at patient populations whose choices can be influenced, and accompanied by complementary policy interventions that can incentivize suitable patient, provider and payer behavior.

First, information must not only be available to the public, but be provided in an understandable way. Information availability and patient awareness are not necessarily equivalent. Health care is a notoriously complex system for many reasons, including the fact that health outcomes are complex issues and measuring them in a meaningful way often requires sophisticated risk adjustments. Patients aren’t medical experts and ultimately consumers are imperfect decision-makers. Studies show that even when information is available, patients may not shop for highest-quality or lower-cost services. To make health care information useful, public reporting websites need easy-to-understand consumer interfaces that offer digestible summaries while still providing information that is customized to individual patient needs.

Second, the impact of providing information is not uniform across all patients. Thus, targeting efforts are needed to make sure the information is especially made available to those who are responsive to it. By deliberately targeting public reporting efforts to the populations whose decisions are most likely to be influenced by better information, policymakers can significantly improve the impact transparency has on patient outcomes.

Third, we need to supplement increased levels of transparency with policy mechanisms that can incentivize suitable patient, provider, and payer behavior. Increasing transparency will eventually alter patient decisions and the health care market, but it will make no difference if many of our nation’s barriers to health care still exist. For example, without some form of travel subsidy, patients may choose a nearby hospital instead of a superior or cheaper hospital, and thus, increased transparency may not offer any tangible benefit. Similarly, in response to increased levels of transparency, hospitals may shift their investment strategies in certain ways to attract particular types of patients or to focus on providing certain types of treatments, which can hurt the overall health care system. Identifying these barriers and accompanying increased levels of transparency with policy interventions can go a long way.

Finally, policymakers should note that not all long-term benefits of transparency can be obtained by market forces. Well-documented effects in health care such as the relationship between higher amounts of patients correlating to favorable patient outcomes, dubbed the “volume-outcome effect”, tell us that hospitals make use of “learning-by-doing” mechanisms in improving their outcomes. Therefore, the volume of patients at hospitals can play an important role in the quality of the care they provide. This means that careful considerations are required to make sure that increased levels of transparency do not leave some hospitals with lower-than-desired patient volumes.

If used correctly, transparency can be an indispensable tool in improving the health care system in various dimensions. However, using this tool requires a vast amount of care. A hasty use may yield unrepairable damages.

Soroush Saghafian, PhD, is a longtime member of INFORMS, the largest international association for operations research and analytics professionals. He is also an Assistant Professor of Public Policy at Harvard University and Adjunct Assistant Professor of Healthcare Systems Engineering, Mayo Clinic College of Medicine.

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