Bringing Price Transparency to Puget Sound

The Puget Sound Health Alliance Board’s top priority is to reduce the cost/price of health care. A new Alliance report is the first product that shows variation in aggregate professional and facility costs for 24 select high-volume hospitalizations for reasons such as deliveries, joint replacements, and spine surgery.

“This report is a major accomplishment for the Alliance and for this community,” said Caroline Whalen, King County administrative officer and chair of the Alliance Board. “For the first time, purchasers are able to engage in meaningful dialogue with providers that is informed by community-wide cost data from a neutral and respected source.”

The Alliance laid the foundation for the report with its work on resource use for the hospitalizations, many of which are preference-sensitive conditions. The resource use analysis looked at all the elements that went into an episode of care, including tests, professional services, and length of hospital stays. The newreport uses aggregated data provided by six health plans and eight self-insured purchasers.

For each type of hospitalization, a delivery system (which includes both the hospital and professional services) was assigned an average case price index, which was then compared to an overall regional value of 1.0 for purposes of demonstrating variation among delivery systems. Each delivery system’s cases were also arranged in quartiles, ranging from the highest priced to the lowest, showing the percentage of cases falling within each pricing band. No specific prices are shown, due to antitrust considerations.

The report also looks at the magnitude of variation in price for all cases profiled. The resulting figures show that there is at least a 240 percent difference in individual case prices across delivery systems and as much as a 780 percent difference. These results are particularly eye opening, since the Alliance has been careful to compare patients with similar levels of disease severity for each condition.

To meet concerns about anticompetitive behavior, the Alliance made adjustments to the final results to comply with Department of Justice guidelines that no data suppliers represent more than 25 percent of the metric. For the same reason, only purchasers and plans can see the full report.

“This report could not be more timely,” said Tom Richards, managing director, employee benefits for the Alaska Air Group and chair of the Alliance’s Purchaser Affinity Group. “The national conversation about cost and price is changing the landscape, and the Alliance is instrumental in helping to shape the dialogue that is taking place in our region.”

The Alliance intends to combine the results of this report with information on clinical outcomes data from Medicare and resource use results in its Value Portfolio. By linking the three elements of care together—resource use, quality, and price—purchasers will have a more complete picture of the value of care in the region and the variation that exists today. To create more detailed reports on an ongoing basis, the Alliance is seeking agreement from payers to routinely collect allowed amounts in data suppliers’ semi-annual data submissions to the Alliance.