Comparison shopping has long been a trusted buyer’s strategy in this country. Who amongst us wouldn’t pay less for something if we could get it cheaper? But, can the same be said for medical care? During the past decade, the public’s desire to know about hospital performance and pricing has resulted in an increasingly vocal debate as to whether such transparency actually has had an effect on health outcomes, i.e. improved health care, or cost. In July 2009, Peter Lindenauer, MD, MSC, Director, Center for Quality of Care Research, and Associate Professor at the Tufts School of Medicine, helped answer those questions at a series of meetings by the Institute of Medicine (IOM) of the National Academies entitled The Healthcare Imperative: Lowering Costs and Improving Outcomes, Strategies that Work.

Dr. Lindenauer’s research has largely focused on the quality and safety of hospital care and on the design and evaluation of interventions to improve quality. In his 2007 New England Journal of Medicine Special Article, “Public Reporting and Pay for Performance in Hospital Quality Improvement,” Dr. Lindenauer et al, found that “Hospitals engaged in both public reporting and pay for performance achieved modestly greater improvements in quality than did hospitals engaged only in public reporting.” They went on to state that more research was needed, particularly related to “whether different incentives would stimulate more improvement and whether the benefits of these programs out-weigh their costs.”

Dr. Lindenauer explains that transparency is thought to lead to improvements in care outcomes through two inter-related pathways. The success of the first pathway, called the selection pathway, hinges on the desire of patients, referring physicians and insurers to not only learn about performance data, but to then use such knowledge to seek out those hospitals that have evidence of higher quality or lower costs. The second pathway, the change pathway, counts on hospitals adopting improvement strategies out of a sense of professionalism, as well as out of their desire to, as Dr. Lindenauer says, “preserve or enhance the hospital’s reputation and marketshare.”

While transparency as a strategy to improve care has attracted much interest, Dr. Lindenauer notes that evidence of its actual benefit is limited. He points to a recent systematic review of transparency interventions conducted by RAND Corporation (a partner of Tufts CTSI), that found that most of the studies suffered from methodological shortcomings. In addition, Dr. Lindenauer advised that contrary to a commonly held belief that transparency results in lower prices for customers of electronics or appliances, there is no evidence that hospitals will lower prices to undercut their competitors. Why? Because in the absence of robust measures of the quality of hospital care, doctors and patients tend to view higher prices as a signal for better quality. Moreover, in the setting of third party payment, most people find hospital cost data to be meaningless because their insurance pays the bill. Add to this the problem that, typically, patients who need to be hospitalized are unsure of their diagnosis or are too acutely ill to be searching websites and doing comparison shopping, and therefore rely on their physicians or an ambulance driver to choose the hospital for them.

Yet, some transparency initiatives are more likely to be beneficial than others. As Dr. Lindenauer argues, “Unlike most other transparency initiatives, the public reporting of readmission, complication, and health care associated infection rates offers the promise of simultaneously lowering costs while improving the outcomes of care.” If reporting of rehospitalizations, for example, led to a 10 -20% reduction in readmission rates, we would see a decrease in healthcare costs of $1.2 – 2.4 billion dollars per year. Similar reductions in healthcare associated infections (20% of which the CDC says are preventable) could result in a savings of up to $1.6 billion dollars per year. In total, from these initiatives alone—reporting of rehospitalizations, healthcare associated infections and complications—there could be a savings of 2.5 to 5 billion dollars per year. That savings could begin to look like the golden fleece, given that hospital care currently consumes approximately $700 billion each year and growing in the United States.

“IOM charged us to identify strategies to reduce the growth of healthcare costs while improving outcomes,” Dr. Lindenauer says. “This is not an easy task, but there are reasons to be hopeful that current transparency initiatives can help bend the curve. Yet more research is needed to understand the effects of these programs.”