Bringing
Comparison Shopping to the Doctor’s Office
Published: June 10, 2010 - New York Times
SAN FRANCISCO — Americans comparison-shop for items as small as groceries and
as big as cars. But they rarely compare prices on their health care. When a
doctor recommends a test or a procedure, most patients simply go where the
doctor tells them to go.
Even if a patient does want to comparison-shop, there is no easy way to
obtain complete and useful information. It is a hole in the market that some
companies see as an opportunity, especially because many Americans will soon
have to pay more attention to what they are paying for, rather than count on
insurance to cover everything.
But there has been no easy way for consumers to shop for the best deal on a
colonoscopy
or blood test. A start-up financed by prominent venture capitalists and the Cleveland
Clinic, Castlight Health, aims
to change that by building a search engine for health care prices. Patients
using Castlight could search for doctors that offer a service nearby and find
out how much they will charge, depending on their insurance coverage.
A few others are starting to publish health care prices, including Thomson
Reuters, a Tennessee start-up called Change:healthcare, the New
Hampshire government, which created a comparison shopping tool for residents,
and health insurers. Aetna,
for instance, has built tools to help patients
estimate prices and may build more advanced tools, said Lonny Reisman,
Aetna’s chief medical officer.
Price transparency could significantly change the way health care is bought
in the United States. The notion “seems ridiculously simple and obvious, and in
any other industry, you would say, ‘Duh, we already have that.’ But in health
care, it’s revolutionary,” said Alan M. Garber, a professor of medicine and the
director of the center for health policy at Stanford, as well as an investor in
Castlight.
The lack of price information in health care has been a big driver of
ballooning health care costs, analysts say, because costs are opaque to patients
and heavily subsidized by employers. The patient has no incentive or
responsibility to keep costs down. But many employers are switching to health
plans that require patients to pay more out of their own pockets.
“Since Americans started having employer-sponsored health care, people are
paying with someone else’s credit card, so we created a very inefficient
market,” said Giovanni Colella, chief executive and a founder of Castlight.
“Creating the right incentives changes the way people behave, and that’s where
our company comes in.”
Dr. Colella started RelayHealth, which connects patients and doctors over the
Web and was bought by McKesson in 2006. He founded Castlight with Todd Park, a
founder of Athenahealth and chief technology officer of the federal Department
of Health and Human Services.
On Thursday, Castlight announced that it raised $60 million from investors,
in addition to the $21 million it previously raised. Safeway,
the grocery chain, with 200,000 employees, has signed on as its first customer.
Castlight has received money from investment firms including Venrock,
Maverick Capital, Oak Investment Partners and from an unlikely source, the
Cleveland Clinic. Hospitals’
business models could be turned upside-down by price transparency.
Several studies and pilot projects suggest that the more patients know about
prices, the more money they save. A study published last month by Mercer, a
human resources consulting firm, found that people on high-deductible health
plans, with more exposure to the prices of doctor visits, spent less. Indiana
adopted high-deductible health plans, and the average expense in 2009 for
patients on one of these plans was $6,393, compared with $8,570 for patients on
a more traditional health maintenance organization plan.
“A lot of it is to understand the driver of costs and how they can start to
control that, and encouraging that debate to happen while in the physician’s
office,” Dr. Colella said. Castlight is working on a mobile version of the
service to introduce next year so people can access the information from the
exam table.
Health care pricing became part of the national conversation during the
debate over health
care reform. Prices will be important for the 30 million to 40 million
people expected to join exchanges,
which will encourage comparison shopping.
But so far, prices have been very difficult to find because health
insurance providers and doctors negotiate rates and often agree not to
reveal those numbers for competitive reasons. The Cleveland Clinic, for example,
has about a hundred different contracts with insurance carriers, each with a
different rate for a given procedure.
Ideally, transparency in health care pricing could lead to higher-quality,
lower-cost health care, and more patient involvement in buying health care, said
Delos Cosgrove, chief executive of the Cleveland Clinic. “Because they begin to
realize that a trip to the doctor is not free, they might stay home and take the
aspirin instead of getting the neurologic work-up.”
Castlight sells its service to employers and charges by employee per month.
(It plans to eventually introduce a Web site for anyone to use.) Employees log
on to a search portal, where they enter something like “colonoscopy” to find a
list of doctors nearby and how much they charge.
Some insurers have shared pricing with Castlight, but the company gleans most
of the information from the explanation-of-benefits forms that patients receive
after a doctor visit. Castlight developed a way to pull the information from the
millions of forms provided to it by employers.
Anyone who has read an explanation of benefits knows that it often raises
more questions than answers, and Castlight says it wants to provide health
education in addition to price information. The site explains why a patient has
to pay a certain amount and the standard number of tests that a doctor would
order for a particular problem.
Safeway has been experimenting with ways to cut health costs, including by
using Castlight. “I’m a big believer in trying to create market forces wherever
you can and then let personal accountability really drive the result,” said
Steven A. Burd, the chief executive of Safeway.
For instance, Safeway pays up to $1,200 for its employees’ colonoscopies, a
preventative procedure to detect cancer.
If employees wish to go to a doctor who charges more, they must pay the
difference. According to Castlight, colonoscopies in the Bay Area, where Safeway
is based, range from $500 to $3,000, and sometimes a doctor charges different
rates at different hospitals.
Castlight plans to add quality measurements to its price information. There
are already several providers of that information, though there is no standard
set of quality measurements in medicine. But even with quality ratings, there
are many procedures for which Castlight’s service is not applicable. Someone
suffering a heart
attack is not going to check the Web before calling the ambulance, and a
patient who discovers he needs emergency brain
surgery is likely to prioritize quality above all else.
Even for more basic services, pricing is not always cut-and-dried. The
delivery of a baby, for example, includes the hospital stay and the
obstetrician’s fees, but could also include fees for a pediatrician, an
anesthesiologist and specialists if there are complications.
At this stage, Castlight works best for big companies that are self-insured
and for outpatient doctor visits for which quality does not vary greatly.