Tying price transparency to incentives is necessary to change consumer behavior

Suzanne Delbanco is executive director of Catalyst for Payment Reform, a San Francisco-based not-for-profit organization working on behalf of large employers and other private-sector purchasers to improve the payment system for healthcare services and promote higher-value care. It was launched in 2010 with support from the Pacific Business Group on Health. CPR participants believe purchasers need to use their purchasing leverage to make the healthcare system more transparent and increase market sensitivity to quality and price information such as pay for performance. CPR sees its role as providing thought leadership and coordination among purchasers. Modern Healthcare editor Merrill Goozner recently interviewed her about her organization's efforts, what health plans and employers are doing to narrow their provider networks, price transparency, how payers are using reference pricing and efforts to engage consumers. The following is an edited transcript.

Modern Healthcare: Providers and payers across the country are moving toward establishing narrow networks as a way of providing lower-cost alternatives on the new insurance exchanges. Are major employers moving toward this approach for their employer plans?

Suzanne Delbanco: There are employers that are very eager to improve the value of their healthcare spending and they are looking at many different ways of doing that. Narrow networks are one of the things that they are considering, especially if there is a quality component to it where we can identify a smaller set of providers that meet quality criteria and also can deliver care at an affordable rate.

MH: Transparency also is playing a big role in what you are looking for. What are you doing on the transparency front around the country. and why do you see that as really important?

Delbanco: It is very hard to engage consumers in being smart shoppers if they don't have access to any information about what healthcare actually costs. And it has been very slow in coming that we have had any information about price. We have worked for over a decade now to have more quality information available, but we haven't had much information on price. And so we are working in myriad ways to try to make that a reality, whether it is highlighting what states are doing through laws to ensure that citizens have access, pushing health plans to improve the tools that they offer to their patient members, encouraging providers to stop demanding gag clauses and providing release of information about what they are paid, etc. So, there are many different ways we have to approach this issue to advance price transparency.

MH: And the prices that people see, a lot of insurers are incorporating new elements, things like reference pricing and value-based insurance design. Explain what those are and tell us why they are important?

Delbanco: Price transparency alone is unlikely to change behavior. We know from all kinds of research that giving people information is not the same as changing their behavior. People have to have an incentive and a motivation to use that information and to act on it. Reference pricing, as an example, is a method by which an employer will say, we have identified in the market what we think is a reasonable price to pay for a certain service and we know at that price we can still guarantee enough access, and that anything above that price is now going to become the employee's responsibility. And that creates an incentive for the employee to check to see what the service is going to cost at different providers and to select one that either meets or beats the reference price.