For The Record with Marek Ciolko, Co-Founder and COO, Gravie

October 27  

Marek Ciolko is the co-founder and COO at Gravie – a health insurance marketplace that has been at the forefront of providing better, more affordable health benefits for employers and their teams. Marek’s role at Gravie includes developing and deploying operational strategies and technology frameworks, and overseeing the finance, legal and compliance functions of the company. He has a rich background in the health care industry including leadership roles at Bloom Health and RedBrick Health.

How do you define price transparency? 

In its simplest form, price transparency is consumers’ ability to understand the cost of a product or service prior to purchase. In healthcare, this concept is complicated by the inherent uncertainty around the scope of services being purchased and by the fact that different customers pay different prices for the same services depending on the confidential agreements between the provider and their insurance carrier.

What problem does price transparency address most directly?

As in any other industry, prices serve several key purposes. One is signaling: In an efficient market, within a specific category of product or service like cars or legal services, prices communicate information regarding relative quality, experience, prestige, etc. That is why BMW’s prices differ from Hyundai’s even for comparable vehicles, and why you’re likely to see different hourly rates for an attorney at a top national firm vs. a no-name lawyer you found in the yellow pages. A second purpose is transaction certainty: Once the consumer makes a purchasing decision, they need to be able to rely on the expectation that they can receive the product or service once the agreed-upon price is paid to the seller.

In healthcare today, neither of the two mechanisms work properly. Without transparent pricing, consumers do not have an efficient way to assess quality and, in most cases, they don’t have any certainty around the expected cost once they engage with the provider.

Does price transparency help usher in value-based care or does it function independently?

Value-based care is one of the key mechanisms by which the purchasing process in healthcare can begin to more closely resemble the way we purchase other goods and services, and as such, will usher in price transparency, not vice versa. Value-based care essentially serves as the means of transferring the pricing risk from the payer and consumer to the provider. Once the provider settles on the price, the consumer and payer can, with certainty, expect to receive the health outcome — which is essentially the “product” that the consumer is shopping for — regardless of the set of services that may be required to achieve it. Due to the risk involved in value-based care, it is likely — at least initially — to be more relevant for routine conditions as opposed to more complex care.

Value-based care is an evolution in thinking centered around the individual consumer: Their wants and needs related to health outcomes and experiences must drive the way our industry operates. It involves taking on greater risk and responsibility as providers, changing our perspective on what the consumer is and should be paying for, and what promises providers can and should deliver on. It also involves putting consumers more in the driver seat, with critical information — including pricing — to make better decisions about their health, driving demand and healthy competition that will advance the industry forward and better meet individuals’ needs.

Can healthcare ever be fully price transparent?

It can, to an extent, but the concept of price transparency will mean different things based on the context and may require providers and payers to assume different roles than they play today. There are certain types of healthcare that will never behave like other types of products and services and are therefore unlikely to provide price transparency in the classic sense. I would classify these in two broad categories:

Emergency care: The buyer (patient) is unlikely to be in a position to assess the price and quality before making the purchasing decision. Similarly, the seller (healthcare providers) are in no position to communicate the price, since they might not even know what services will be needed. For these types of services, only payers can provide the price transparency to the patient by fixing the cost ahead of time, regardless of which provider is involved. Government intervention will likely be required to curtail the pricing power of emergency care providers. One challenge is the potential for overuse by patients for non-emergency care, but this can be addressed by thoughtful insurance plan design and patient engagement by payers, and by providers’ willingness to steer such patients to non-emergency settings.

Complex and life-threatening conditions: With some exceptions, the buyer (patient) is unlikely to use price as a proxy, because of the complexity of treatment and because their life might be at stake, and will likely rely on the advice of their primary physician or another medical professional helping them navigate the condition. In this case, payers are the only entity that can provide price certainty via plan designs that give the patient some degree of choice, while encouraging the use of centers of excellence with the best combination of price and quality for the specific condition.

Outside of these two categories, the scope for price transparency increases significantly; there is no reason why well-defined services such as treatments for chronic conditions, elective procedures, or primary care visits should not be transparently priced just like other products and services. For example, providers of Lasik surgery — which is typically not covered by insurance and paid by patients out of pocket — offer upfront pricing and the result is a healthy, competitive market across wide range of prices. Healthcare providers should be able to use their expertise to assume the pricing risk and to differentiate their services by the quality of facilities, wait times, and other factors that are important to consumers. Payers can utilize value-based care or well-designed, reference-based approaches without distorting the signaling power of prices and allow consumers to buy up or down based on their preferences. However, it is also important to recognize that physicians will continue to wield outsized influence on consumer choices. Studies consistently show that patients tend to follow their primary physician’s referral recommendations regardless of the cost. Once healthcare prices are transparent, physicians will need to understand that they have a responsibility to their patients to consider the cost in making referrals. And patients, now equipped with transparent pricing information, will begin to increasingly hold their primary care providers to account for their advice.

Who benefits most from transparent pricing? For whom will it be most disruptive?

The main beneficiaries of price transparency are consumers and innovative healthcare service providers. Consumers will be able to make better purchasing choices when it comes to healthcare services, without fear of surprises and with better gauge for quality. Innovative healthcare providers will be able to fine-tune their business models to attract different segments of consumers, and to compete on quality of service, including the patient experience.

It will be most disruptive to the large, non-specialized provider systems that built their business models on using their negotiating leverage against payers to maintain high profit margins on routine healthcare services.

What’s most exciting to me and my colleagues at Gravie, is how these conversations around price transparency and value-based care are creating greater awareness and understanding of how the consumer can be better served and better involved in their healthcare decisions. We know from consumer behavior that individuals want expert advice, but that they also want choices and more control of their decisions and experiences. With individuals at the center of the ecosystem, it’s critical that we design plans, care models, shopping experiences, and modes of delivery that meet their needs across the spectrum to improve outcomes, increase efficiency, reduce waste and drive costs down for all.

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