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November 21, 2017

Is health care's 'retail revolution' here? Depends what you mean.

Daily Briefing

By Rachel Schulze, senior staff writer

Consumers have more choices than ever about where to seek care, but experts say a true "retail revolution," in which patients regularly shop around for the best prices, has yet to reach the health care industry.

Learn how progressive organizations are "retailizing" their service lines

More convenient options

Ateev Mehrotra, an associate professor of health care policy and medicine at Harvard Medical School and a hospitalist at Beth Israel Deaconess Medical Center, said, "[W]e've had a real shift in terms of what options people have to get care."

According to Mehrotra, in the past, patients' options were more or less limited to the doctor's office or the ED. Now, there's "a whole plethora of different options that are available to patients," such as retail clinics, telemedicine providers, urgent care centers, providers that come to the home, kiosks, and freestanding EDs, Mehrotra explained. "(Patients') motivation for those options—at least what I hear from people we've interviewed—is convenience, convenience, and convenience," he said.

Retail clinics, typically located in pharmacies or grocery stores, are one of the most visible examples of these relatively new, convenience-focused medical options. The first retail clinics opened shop in 2000, according to a 2016 RAND Corporation research brief. By 2010, the ranks of retail clinics reached 1,200, and the RAND researchers estimated there would be more than 2,800 retail clinics.

Convenience matters not only for individuals in need of urgent care but also for patients who need ongoing treatment—such as physical therapy or outpatient substance misuse follow-up care, according to Bill Stinneford, SVP at Buxton, a consumer analytics firm. Substance use disorder patients, for instance, Stinneford explained, may not complete follow-up care—or choose a certain provider in the first place—if they face a long commute for post-discharge care. "[I]f I have to go back to that inpatient facility ... and I'm trying to start working again and I'm trying—just the adoption of that, it falls apart ... because of something as simple as convenience," he said.

But are patients 'shopping?'

But experts say the United States has not yet revolutionized how U.S. residents shop for health care—though payers are increasingly adopting policies to encourage comparison shopping.

According to Stinneford, payers are starting to adopt "stringent" coverage requirements for health plans, which force consumers to be more conscious about where they get care. As an example, he noted Anthem's decision earlier this year not to pay for outpatient MRIs and CT scans at hospitals.

Separately, Mehrotra cited reference pricing—through which an insurer requires enrollees to pay the excess price for services from a provider who charges above a certain threshold—as a way to incentivize patients to shift to lower-priced providers.

"We're seeing increased use of reference pricing for orthopedic surgery, for colonoscopies, for MRIs, for labs, and for drugs," Mehrotra said. He added, "There, the research has demonstrated that people switch quickly and abruptly to lower-priced providers who are below the reference that they gave you."

In addition, Stinneford noted smartphone applications have given consumers convenient access to new forms of information. He said, "You didn't know where to get all this [information] before, and you didn't even think about asking because it was just sort of taken care of."

However, Sean Nicholson, a professor in the Department of Policy Analysis and Management at Cornell University, said he doesn't think the developments to date qualify as "revolutionary."

"I think of [a retail revolution] as patients/consumers who are in high-deductible health plans (HDHP) who have a lot of skin in the game … finally behaving in health care the way they behave in other markets," Nicholson said. "And that is to demand that prices be posted, those prices are real, there might be quality measures posted, associated with the provider's price, they consider those before they choose a physician/hospital, and then they respond to provide information for the next person who's making that choice."

While U.S. residents have more "skin in the game"—CDC data show nearly 40 percent of U.S. residents were in an HDHP in 2016, up from about 26 percent in 2011—a study published last year in JAMA suggests HDHP enrollees don't price shop any more than their counterparts in traditional plans.

In addition, a 2015 paper published by the National Bureau of Economic Research stated, "We find no evidence of consumers learning to price shop after two years in high-deductible coverage." Instead, the paper found, "Consumers reduce quantities across the spectrum of health care services, including potentially valuable care (e.g. preventive services) and potentially wasteful care (e.g. imaging services)."

Further, Mehrotra said, "To the degree that 'retail revolution' means consumerism and that people are using cost and quality data to choose providers, there is relatively little evidence that that's happening on a large scale."

The outlook

While experts say insurer reference pricing and bonus-rewards programs have encouraged patients to shop around for care, price transparency remains a key obstacle to the retail revolution.

Nicholson noted that price transparency has increased for services that are typically not covered by insurance—such as Lasik, in vitro fertilization [IVF], and plastic surgery. He said those services operate like a "well-functioning retail revolution markets." He continued, "Where insurance hasn't intruded itself between the physician, the hospital, and the patient, you get posted prices, IVF success rates, specials on Lasik surgery. You get those things that you'd expect to see."

However, the market remains opaque for services commonly covered by insurance. Mehrotra noted that "there's been a lot of talk but relatively little action" when it comes to providers displaying prices. One possible explanation, according to Mehrotra, is the hassle and amount of work required—especially when a provider accepts several health insurance plan products, as the "price might be different (for patients with) each of those products."

Those challenges will take some time to overcome, and Nicholson said he doesn't expect to see a health care retail revolution for at least five years. "I don't see anything driving that," he said.

Learn how progressive organizations are "retailizing" their service lines

With patients increasingly self-referring and influencing their specialty care referrals, primary care physicians are no longer the sole players in directing specialty care volumes.

Learn how progressive organizations are "retailizing" their service lines by engaging potential patients through symptom-focused messaging, cultivating a word of mouth strategy, and providing fast access for select parts of the care pathway.

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