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Soaring health care costs and quality concerns have prompted a transparency initiative aimed at creating a more customer-friendly health care system.

Transparency — the publicreporting of meaningful and useful information to a patient prior to receivinga service or undergoing a procedure — enables patients to make more informeddecisions about their care.

According to a 2006 survey,sponsored by the Kaiser Family Foundation and the Health Research andEducational Trust, the cost of family health care coverage has risen 87 percentsince 2000, while consumer prices are up 18 percent and the pay of workers hasincreased 20 percent. The annual rise in the cost of benefits has slowed since thedouble-digit increases that peaked in 2003 — but with its 7.7 percent rise in2006, the cost continues to grow at an unsustainable rate.

Concerns over the quality ofcare is also a driving force behind the transparency initiative. According to theInstitute of Medicine’sreport brief, To Err is Human: Building A Safer Health System, up to 98,000patients die in hospitals each year as a result of medical errors that couldhave been prevented — making medical errors the eighth leading cause of deathin the U.S.

The government views health careas one of the only industries in the U.S. where a competitive retailmarket place does not exist. With the transparency initiative, the governmentis leading the effort to drive competition in the health care industry. Bymaking relevant information about the cost and quality of care available to thepublic, patients have the ability to choose the best provider for theircircumstances. This value-driven consumer choice drives greater competition andincreasingly better service.

Transparency: the foundationof the four cornerstones
In recent months, thetransparency initiative has gained momentum. The Department of Health and HumanServices (HHS) announced May 9 that, less than one year after launching the HHSValue-Driven Health Care Initiative, more than 100 million health planenrollees are served by plans committed to the four cornerstones of health careimprovement established by President Bush’s Executive Order issued in August2006. The order’s four cornerstones are transparency in pricing, transparencyin quality, health information technology standards and incentives that promotequality and efficiency in health care.

Transparency in pricing. Transparencyin pricing is the process to provide relevant pricing information aboutservices and procedures to consumers. Patients are able to find out the totalcost of the service or procedure, as well as their out-of-pocket expense —before receiving the service or undergoing the procedure.

Transparency in quality. Providinga fair and consistent comparison for the quality of health care is difficult.To overcome this challenge, organizations of insurers and health care providershave come together to establish consistent standards and measures for healthcare quality. With standardized measures, patients are able to link quality ofcare to cost, which allows them to make informed decisions.

Health informationtechnology standards. Information technology is key to accomplishing pricing andquality standards. Through information technology, interoperability standards —seamless exchange of information among providers — can be achieved. Healthinformation technology standards also gives health care providers instant,secure access to accurate patient records through electronic health records(EHRs). Systems are able to talk to each other and exchange data accurately,efficiently and securely. Connecting providers and payers across the nation alsoprovides a data repository necessary to compile and measure cost and quality ofcare. As a result, patients have the ability to shop around and compareproviders to find the one that best meets their needs.

Incentives that promotequality and efficiency in health care. As part of the incentives cornerstone,programs that reward providers and purchasers drive quality-based decisions. Doctorsand hospitals are rewarded for quality outcomes. In fact, some insurance plansand Medicare are already experimenting with pay-for-performance programs. TheDeficit Reduction Act of 2005 authorized the Centers for Medicare &Medicaid Services to develop an approach to value-based purchasing for Medicarehospital services by 2009. With this approach, Medicare rewards hospitals forthe quality of care they provide — giving hospitals differential payments as afunction of their performance.

Improved quality of benefitsat a lower cost
The high level of commitmentto the four cornerstones is a result of extensive efforts by HHS Secretary MikeLeavitt who has traveled to over 30 states promoting the four cornerstones andvalue-driven health care. He has targeted his message to private and publicsector employers since they are the largest collective purchasers of healthinsurance and health care benefits. As such, health care benefits are a substantialinternal expense for these employers.

The government, and othertransparency advocates, view employers as an impetus to health care reform. Themessage being sent to employers is that fostering the four cornerstones willlead to improved quality of care at a lower cost. Employers are encouraged tohelp employees make value-based decisions in purchasing health care services,thus reducing the employer’s internal health care benefit expense.   

HHS is encouraging employersto use their health plan “purchasing power” to support the cornerstones. Theagency has collaborated with The Leapfrog Group and Bridges to Excellence todevelop tools employers can use in selecting a health plan for their company.One of these tools includes sample questions designed to help assess how ahealth plan is fostering the cornerstones. For example, there is a section on transparencyof price information. One of the questions included in this section asks theuser to describe what Web-based cost-estimation tools the health plan will makeavailable to employees for hospital services. This tool is designed to helpemployees compare prices for health care services based on the best value ofcare.   

“The message HHS is sendingis very clear,” says Susan Horras, manager for health care consulting-RSMMcGladrey. “And, regardless of which advocacy group is leading the transparencyinitiative, hospitals need to be prepared to disclose their prices.”  

As a hospital, consider thefollowing questions:

• Do employers have the necessarylevel of knowledge to be leading this initiative?
• Can employers adequatelyeducate consumers on how to make valid price comparisons and health careprovider decisions?
• How will issues be addressedrelated to the consistency and accuracy of price information that is disclosed?
• Does the provider communityneed to shift the momentum so that hospitals are the ones educating patients onhealth care decisions?
• Do hospitals need to beproactive and become pioneers of transparency by developing internal transparencymechanisms? 
• Is your organization readyto publish its prices? 
• Are you prepared to defendyour prices once you disclose them?
• Are you prepared to educatepatients on how to make accurate price comparisons?

Get involved: Stepshospitals should take to get in the driver’s seat
“Hospitals need to bedriving the transparency initiative and educating their patients and the communityon health care decisions,” says Horras. “Becoming involved sooner rather thanlater affords hospitals the opportunity to help define how the process is goingto work.”

Ready to get involved? Hereare some steps hospitals should take to lead the transparency initiative:

Establish transparencypricing. Define a methodology and a consistent policy for establishing transparencypricing. Develop a cost-based methodology that aligns charges as they relate toresource utilization and costs.

Develop an internal mechanismto disclose prices to patients. Internal mechanisms like patient Web portalsallow patients to view meaningful information about a service or procedure andlink quality metrics to cost of care. An effective internal mechanism is a hugecomponent to helping hospitals deliver superior customer service. To ensurepatients are routed to the appropriate liaison the first time, hospitals must alsoimplement a centralized process for handling customer service.

Perform a technologyassessment. To support patient Web portals and EHRs, hospitals must have adequatetechnology systems. Performing a technology assessment helps providers examine theircurrent use of technology and identifies future information systems needs.

Examine staffing levels. There’sno doubt the transparency initiative requires hospitals to change the way theyoperate. With significant process changes comes the need to examine staffinglevels. Having appropriate staffing levels helps providers support the newprocesses and standards of a progressive health care system.

“Health care is receivingheavy public scrutiny, both from the government and consumers,” Horras says. “Thisintense scrutiny has broken down the provider-patient relationship. Becominginvolved in the transparency initiative provides an opportunity for hospitalleaders to begin repairing trust and rebuilding relationships with consumers.”