Our mission is to deliver the best insights to help you grow and prosper in our rapidly-changing world of healthcare. To that end, from time to time, we have decided to showcase what we consider to be some of the best and the brightest minds in the industry here in the Catalyst Healthcare Research blog.

Today, it is my pleasure to welcome as a guest to “For the Record” Christopher Parks, Founder and Chief Executive Officer of change:healthcare, a technology company that makes consumer directed healthcare (CDHC) work for employers and their employees.

Of all the issues in the American healthcare system today that I find terribly frustrating is the lack of cost transparency. 

There is a much-needed desire today among healthcare providers, the government, consumers, employers and insurers to reign in the cost of healthcare.  This change is critical to building better healthcare and I contend the move will need to be led by an informed buyer.  Up to this point, however, buyers have been denied access to the information needed to make informed decisions about care and cost.  And if they magically had the information, would they know what to do with it, since “shopping” for care is not a refined skill they possess. 

But to make our healthcare system a better one, the first step is overcoming cost transparency. 

The lack of transparency is one of the reasons why I founded change:healthcare, with the mission to reduce healthcare costs for employers and employees.  While working through bills associated with my late parents’ estate a few years ago, I could barely decipher which physicians, hospitals and other professionals were owed what, by whom and how much.  The paperwork was overwhelming.  Here I was a 17-year veteran of the healthcare industry and I couldn’t make sense of it all.  If I couldn’t figure out all these bills and costs, how could other patients who have no professional understanding of the system?

As consumers, we know the cost of most every item we purchase before we ever buy it.  But if you need a simple hernia repair, one of the most common procedures performed by surgeons, no one can tell you what it is probably going to cost.  Why is that the case?  It doesn’t have to be. 

Sure, the price of most sick care is pre-negotiated between providers and insurance companies.  And that price can differ from patient to patient, insurer to insurer.  Medical complications can also sometimes increase the cost of a procedure.  But getting a handle on what a procedure or product or prescription should cost is a lesson in total frustration because there is no cost transparency.  How can you make smart, informed decisions about your and your family’s healthcare with so little knowledge?

I believe consumers today are paying way too much for their healthcare simply because they don’t know they could pay less somewhere else.  And, right now, the system is shrouding the very information that would help.  As today’s health insurance becomes even more expensive, more and more people are going to be asked to spend greater amounts out of their own pockets on sick care.  And consumers in greater numbers will begin demanding transparency; a move we believe will help everyone. 

Recent research from the Society of Actuaries have validated our belief that transparency would be a boon to helping patients and consumers make better healthcare purchase decisions and lower healthcare costs in general.  A study of actuaries and a companion study of consumers affirm that more transparency in the healthcare system is critical to lowering costs.  For instance, 86 percent of surveyed healthcare actuaries recommended making prices for treatments more visible and available for patients while two-thirds of consumers felt they could better control their own healthcare costs if healthcare providers, or their insurance company, told them about costs.

Other studies have validated that encouraging more individual responsibility in a person’s healthcare choices results in better medical outcomes and lower prices.  Price sensitivity and having the information in your hands to make rational decisions is the fuel that drives personal involvement in healthcare.

That’s what change:healthcare has tried to do since our 2006 launch.  Our solution has been a web-based tool that helps guide employers, employees and third party administrators in making more informed healthcare consumer purchase decisions that save money.  All without plan design changes or cost shifting.   We help employers and their workers choose the most affordable providers for medical services, treatments and prescriptions by analyzing a company’s medical claims – precisely what people are spending – and continually sending cost-savings alerts to employees when savings opportunities are found. 

It’s been an effective strategy.  Although right now the key question is what effect recent health reforms might have on CDHC’s, cost transparency and our need to move the system toward greater consumerism? 

That aside, the lessons we’ve learned about transparency and healthcare are really quite simple.  When you incentivize people to make value-driven healthcare choices and provide unfettered access to information about those choices, invariably consumers make far more insightful decisions about their care, its cost and its quality.  It’s simple common sense.  I have no doubt that with greater transparency placing more information and control into consumer hands, Americans could realize millions in healthcare cost savings. 

Christopher Parks is Founder and Chief Executive Officer of change:healthcare, inc. (www.changehealthcare.com), a technology company that makes consumer directed healthcare (CDHC) work for employers and their employees.  The company’s real dollar ROI-tracking solution, which offers over 750 highly personalized ways for employees to save on prescriptions and medical services, is available through third party administrators, self-insured employers and health plans interested in helping employees and members better manage their out-of-pocket healthcare expenses. 

A recent story in USA TODAY (9/11/07) said that a study showed that financial incentives can make a difference in employee behavior.

A joint effort by RTI International and the University of North Carolina did a study with more than 200 overweight or obese employees.

According to the article, one third were given no financial incentive for any weight loss achieved after three months. One-third were given $7 for every 1% drop in their body weight, and the remaining third were given $14 for every 1% decrease.

The results are intriguing. Those with no financial incentive lost an average of 2 pounds. Those with the $7 offer lost 3 pounds, on average. And those in the group with the $14 incentive lost 5 pounds!

Just as importantly, employees in the latter group ($14) were reported as five times more likely to lose 5% or more of their weight.

Since it was only a three-month study, the researchers can not say whether any weight loss will be sustained. Still, the initial results seem to suggest the utility of offering a financial incentive to employees to modify their behavior.

Will it pay off for the employer? Potentially, through reduced medical bills, reduced workers comp costs, reduced disability costs, and improved employee presence and productivity. This was not tracked in the study.

And keep in mind that right now the higher costs associated with the health problems and healthcare costs associated with those employees who are overweight are actually being borne by all employees. This is because the cost gets shifted into the premiums for all employees and because other employees often have to pick up the slack for a worker who is home sick or off at a doctor’s visit.

So what do you think: Should employers take the point on this issue and pay employees be (or become) healthier?