3M Commentary

Look beyond pricing to understand health care value

March 26, 2021 / By Megan Carr

As a mom of four growing (and constantly eating) boys, I’m always trying to find ways to manage our grocery bill.  Occasionally, I try the generic brands to see if I can save a few dollars. I’ve done well with generic deluxe cheese, but not cream cheese. Recently, I tried generic peanut butter. I may have saved a dollar or so when I bought it, but it was actually a complete waste of money because no one would eat it. The price was right but the quality just wasn’t there. As my husband told me, it’s not a bargain if it just goes in the trash can.

He is right—determining value is usually more complex than just looking at the price. Health care is no different. Just knowing the price isn’t enough; you also need to know the quality of the service. Unfortunately, when it comes to health care, that’s a lot trickier than my weekly grocery list.

Starting this year, hospitals are required to publicly disclose their negotiated prices for services. There are a lot of reasons why prices may vary, and it’s no easy task for hospitals to disclose prices in an understandable and comparable way.  Researchers and payers alike will be digging into this data to find ways to lower payments to hospitals. Patients will be looking to understand what they personally will end up paying out of pocket.

What is missing in this scenario is the link to the quality side of the story. Just like prices, quality performance must be expressed in an understandable and comparable way so that patients and payers can be informed users of health care services. Hospital A may do a procedure for a lower price (or lower range of prices), but what is the rate of complications and readmissions for that procedure in that hospital? Is Hospital B, a better option, even though they charge a higher price for the same procedure? Does Hospital B have fewer complications and readmissions, or does Hospital B simply have a higher price? Is a patient really getting more value from Hospital B?  Without knowing a hospital’s quality performance, price by itself doesn’t provide enough information to assess real value.

A recent analysis of hospital pricing data in Healthcare Dive revealed that prices for a hip or knee replacement can range from $22,865 to $101,571. Although my research wasn’t as extensive as the authors’ effort, I too went to a few of the websites listed in the analysis and looked up service prices. Maybe other websites are more sophisticated than those I researched, but in no instance did the prices shown reflect quality or price differences for medically complex patients.  Maybe there isn’t a notable difference for a colonoscopy, but I would expect there could be higher prices for placement of a coronary artery stent through a catheter for some highly complex patients (e.g., requiring multiple stents). A true price and quality comparison must be done for clinically similar patients—because prices and quality benchmarks differ based on patient severity of illness.

As policy leaders look to understand this new data, they should be asking for the whole picture—price and quality. They also need to ensure “apples to apples” comparisons that reflect clinically similar patients.

As for me, my bargain grocery shopping efforts will continue—and the only issue with generic ice cream is not buying enough!

Megan Carr, head of the Regulatory and Government Affairs team at 3M Health Information Systems.


Read our report examining the impact of inpatient quality outcome performance on the overall functioning of the inpatient delivery system for the Medicare population in each state.