Overcoming Our Instincts on Price and Quality

Most of us believe that when we pay more for a name brand product, we are getting more for our money. Some do this even knowing that some companies jack up prices to build a sense of exclusivity for the brand. In fact, marketing research shows that in the absence of evidence of higher quality, consumers still think, “It’s expensive, so it must be good.”

And yet, a casual glance at any issue of Consumer Reports shows that in many cases the price-quality correlation is spurious; many higher-quality products can be bought at bargain prices. This general relationship holds true for health care.

The mantra of payment reform is to move from paying for volume of service provided to payment for value. Value is the relationship of cost and quality. In order to get to value-based payment, we need metrics to prove quality and cost-effectiveness. Great strides have been made as far as the quality measure piece of the equation is concerned; not so much for the cost component.

The Hospital Inpatient Value-based Purchasing Program for fiscal year 2013 includes clinical process and satisfaction measures. For fiscal 2014 outcomes measures were added, including survival measures for acute myocardial infarction, heart failure and pneumonia. This month, we are expecting the proposed rule for fiscal year 2015 to be issued by the Centers for Medicare and Medicaid Services (CMS). It is expected that a proposed measure that was dropped in the final 2014 rule will be resurrected in the 2015 proposal – Medicare spending per beneficiary. This measure assesses Medicare Part A and Part B payments for services provided to a beneficiary during a care episode running from three days prior to an inpatient hospital admission to 30 days post-discharge. The payments included in this measure are price-standardized and risk-adjusted to remove sources of variation not directly related to a hospital’s decisions in providing care. CMS said it would post hospital-specific performance on the measure in April, so things are heating up.

Posting value scorecards such as this on a government website is supposed to drive patient choices of where to seek care. Of course, there are risks. Providers may try to game their ratings, for example, by avoiding care of patients with high-risk or costly conditions. The public may misinterpret what the reported measure scores really say about quality, cost and the interrelationship of the two. Attribution poses another huge challenge; a cost-measure spanning pre- and post-discharge leaves a valid question of how to hold the right providers accountable for high costs. For now the approach appears to be making the hospital responsible, leaving it to find a way to make it work. It’s the same approach CMS is taking with readmission measures, which ding a hospital for a readmitted patient even if the second admission occurs at another hospital.

Judith Hibbard from the University of Oregon just published fascinating results in Health Affairs of an experiment that tried to test how to best display quality and cost results together so that consumers could make choices based on overall value. I found it intriguing but unsurprising that a substantial portion of consumers in the study avoided lower-cost providers. So it isn’t only Mercedes and Prada and Apple that leave consumers starry-eyed; even consumers who pay a larger portion of their health care costs out of pocket tend to associate high cost with high quality.

An overwhelming amount of research into the cost-quality relationship in health care has found no substance to the assumption that high cost means high quality. If we want to break the vicious cycle of increasing cost of health care, consumers have to play a crucial role in making informed decisions where to seek care, and value should be an integral part of the decision-making process.

So are we doomed because of our beliefs? The results Hibbard and colleagues uncovered have a silver lining: When cost data were displayed together with easy-to-interpret quality metrics and high-value options, consumers were more likely to overcome the association between high cost and high quality and more often selected the high-value providers. Since consumers tend to be more interested in the quality of health care than in its cost, it will be crucial that public reports are designed to make it easy for consumers to understand the factors that drive value.

Health care providers and those of us who support performance measurement and improvement should embrace this kind of transparency. As coverage expands (if the Supreme Court doesn’t stop it) let’s welcome the new generation of value-savvy patients with open arms, ensuring that it has the most relevant and valid data to help choose the providers of high-quality and cost-effective care. In the long run, it will be best for all of us.