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WellPoint Launches Hospital Cost Comparison Tool

September 26, 2006
Related Topics: Health and Wellness, Latest News
GM’s September 25 announcement that it was behind the effort by the country’s largest health insurance company to launch an online hospital price-comparison tool is another sign that the automotive giant is focused on reducing health care costs through market-based reforms.

The online tool launched as a pilot on September 25 by WellPoint allows the nation’s largest health insurance company’s 300,000 members in the Dayton, Ohio, area to compare the prices of 40 medical procedures offered at various hospitals in the region. The tool also links up with a separate database that rates hospitals and doctors based on the quality of their care.

While other major insurance carriers–UnitedHealth Group, Aetna and Cigna–have each offered price comparison tools, Samir Shalaby, GM’s director of community health care initiatives, says prices based on claims data will be updated at least every quarter, allowing providers to change their prices to accommodate consumers.

"It’s updated quarterly so you will have timely information coming to consumers," Shalaby says.

If the pilot program is well-received by members, GM would like to see its health insurance carrier launch similar tools for members in the rest of Ohio, Michigan and Indiana, where the bulk of the company’s employees live. Ultimately, GM and WellPoint would like to offer rewards to doctors who are the highest performers.

"A successful program in Dayton would lay the foundation for identifying organizations that are delivering health care in a very efficient way and trying to reward them for their performance," Shalaby says.

The price range for each hospital offered by the online tool will cover the entire cost of a medical procedure rather than showing the a la carte pricing most hospitals normally charge. This will make the tool easier for consumers to use and understand, Shalaby says.

GM is in poor financial health in large part because it is the nation’s largest provider of health insurance, having spent $5.3 billion on health care last year for its 1.1 million employees, retirees and dependents.

Other health insurers have similar cost comparison tools. UnitedHealth Group has a number of cost and quality comparison tools available to its members, but the information in those resources is updated once a year, says Ian Stanton, a UnitedHealth Group spokesman.

GM is one of several dozen large employers, along with Lowe’s, Boeing, Sprint and Northrop Grumman, that has for several years been involved in efforts to bring price and quality transparency to the health care market through an employer-led group called Care Focused Purchasing. Transparency could eventually allow employers and health insurers to offer monetary rewards to hospitals and doctors who provide cost-effective, high-quality care.

But in order for transparency to live up to its billing, patients must have a financial incentive to pick a less expensive doctor, most experts agree. Consumers won’t be sensitive to price unless they are responsible for the cost of their health care.

"If you are not sensitive to cost, what does it matter?" says Paul Fronstin, a health insurance expert at the Employee Benefits Research Institute in Washington, D.C.

Shalaby says most of GM’s salaried employees are on a consumer directed health plan; in Dayton, this adds up to 1,000 people. The remaining employees, about 29,000 of them, are in traditional HMO plans that have pay co-pays and, in some cases, co-insurance. In those cases price won’t have the same impact.

"If people have co-insurance, the impact [of price transparency] is diluted," says Ken Sperling, a Cigna consultant.

To turn patients into health care consumers, employers, including GM, are shifting more of their health care costs to employees.

"Employees have skin in the game because cost sharing is on the rise," Shalaby says.

WellPoint hopes that competition among providers will force them to lower costs, says Shannon Troughton, a WellPoint spokeswoman.

Jeremy Smerd

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