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Researchers: Web-Based Report Cards Influence the Cost of Care

February 10, 2015
by Gabriel Perna
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It has a long way to go, but Medicare’s Hospital Compare initiative may go a long way in reducing the cost of care, according to the findings of one research study.

Researchers from the Milken Institute School of Public Health at the George Washington University looked at the impact of Medicare’s Hospital Compare website on the price of care. They found that the public reporting method led to a slowed increase in the cost of two major procedures.

Hospital Compare, which launched in 2005, aims to compare hospitals on various quality of care measures. Thus far, researchers have been inconclusive about its effect on the cost of care. “Generally, people have looked at the impact of quality report cards, not so much on cost but rather on healthcare outcomes, such as mortality and readmission rates,” Avi Dor, Ph.D. lead author a professor of health policy and management at George Washington University’s public health school, says Healthcare Informatics.

The study evaluated the affect of quality reporting data added by the Centers for Medicare and Medicaid Services (CMS) in 2007 for certain states. The researchers examined the Truven Analytics MarketScan Commercial Claims and Encounters database from 2005 to 2010, which told them actual prices paid to hospitals for individuals by private insurers, when adjusted for risk factor variables. This allowed them to see how the price of two procedures— coronary artery bypass graft (CABG) or bypass surgeries and percutaneous coronary interventions (PCIs)—shifted over that time period.

What they found was that while the prices of those procedures continued to rise after 2007, in states where the quality reporting data were added then, the rate of that price increase was significantly slowed. In states that had just added the quality metrics to Hospital Compare, the rate of price increase for those procedures was 3.9 percent for CABG. In states where those quality metrics had been added before 2007, the rate of price increase was 10.6 percent. Similar trends held true for PCI. Dor hypothesizes that the insurance companies used this data to negotiate better prices at the bargaining table.

“What caught my eye is the overall result that providing information to consumers and insurance companies actually has an impact in the market. It was our hypothesis. It’s what an economist such as me and my co-authors would have expected. But it's only surprising when what you actually anticipate, that’s difficult to observe directly, is confirmed to be the case.” Dor says.

Dor and his co-authors chose CABG and PCI because those are two of the most common, costly procedures for cardiac conditions. He calls them “indicator procedures.” Plus in 2007, the quality data added by CMS to Hospital Compare targeted heart disease.  Using those procedures, the researchers figured, would be the best way to determine the impact of the quality data added to Hospital Compare website.

The movement to make hospital and provider-based quality and pricing data more transparent continues to grow. Just recently, The Wall Street Journal reported that CMS plans to annually release physician payment data. Other data sets, from the government and private payers, have been released and will be released and will continue to shape how healthcare economists look at the market. What Dor and his colleagues hope to determine is if high-quality hospitals are benefiting or are being priced out of the market.

“We want to see whether high-quality hospitals’ prices are decreasing faster than lower-quality hospitals or not,” Dor says. “If they are being priced out that’s a huge concern.”

Despite this potential downside to the transparency movement, Dor is a big fan of it. He says making this kind of information available creates competitive pressure, which benefits consumers and contain healthcare costs. He would like to see CMS provide more quality measure scores, specifically more precise measures of hospital performance to improve the system.