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Expert: IT Can Improve Healthcare Costs with Pricing Transparency

December 3, 2013
by Gabriel Perna
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Uwe Reinhardt, Ph.D. Credit: Princeton University

 

A renowned commenter and researcher says information technology could remove what he says is the "shroud of secrecy" associated with private healthcare costs. 
 
In a recent review published in the Journal of the American Medical Association (JAMA), Princeton University professor, Uwe Reinhardt, Ph.D., who has authored several papers and has conducted research on healthcare economics, advocates for the use of electronic information technology to improve the transparency of private healthcare costs. He cites the Healthcare Blue Book, a website which allows consumers to search for fair healthcare prices by typing in their zip code.  
 
"The idea that American patients should 'shop around for cost-effective health care' so far has been about as sensible as blindfolding shoppers entering a department store in the hope that inside they can and will shop smartly for the merchandise they seek," Reinhardt, James Madison professor of Political Economy and professor of economics and public affairs at Princeton's Woodrow Wilson School, said in a statement. "In practice, this idea has been as silly as it has been cruel."
 
Along with Healthcare Blue Book, Reinhardt mentioned a startup in the West Coast that  
developed software which provides employees covered under group insurance both the prices and quality of care by individual clinicians and healthcare organizations. The startup, he says, is trying to introduce reference pricing, a concept introduced in Europe in the 1990s, to digital technology. 
 
Reference pricing is the cost a consumer anticipates paying for a service, Reinhardt says. He says it could contain healthcare costs in the U.S. 
 
"The power of reference pricing could be enhanced if all hospitals were mandated to use Medicare's diagnosis-related group system for all patients, with every hospital using the same scale," said Reinhardt. "Broad price competition in U.S. health care could then occur on the basis of only one single number: the monetary conversation factor, which could be easily made public."
 
Recently the idea of cost transparency, through IT, taken on a bit of steam. The Centers for Medicare & Medicaid Services (CMS) released outpatient data this past year and advocates have pushed for more transparency at this level for consumers.
 
It goes beyond consumer pricing. A recent study from the Boston-based Massachusetts General Hospital determined that providing physicians with the real-time cost of lab tests in an electronic health record (EHR) system may help them reconsider ordering costly tests
 
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