Can you put a price on value? That is the age-old question.
Previously, economists believed price is value. But they are now long dead. Today, economists know better. We know decision-making is complex and irrational. We even have behavioral models that embed these quirks into simulated decision-making.
But in healthcare, we seem to hold on to antiquated notions of patient behavior. Beliefs that hearken back to an era where economic utility, or decisions made to maximize benefit, seemed to predict patient behavior, regardless of the context.
Yet time and time again, these notions have proven not to be accurate predictors of patient behavior. Early studies on price transparency and its influence on patient decision-making would suggest as much. As has been proven repeatedly, when patients have the opportunity to make clinical decisions that would save them money, few actually capitalize on it.
A decade old study out of New Hampshire found that when patients were able to locate the lowest cost MRI facility, few actually used it to find the most cost effective location. In certain areas in the study, patients were eligible for up to an 11 percent discount. But few actually made decisions based on saving costs, regardless of the amount. Hardly any patients in the study incorporated cost alone as a factor in clinical decisions.
And when pressed on how patients decide, most inevitably acknowledge that they rely heavily on the recommendations of their physicians. This poses an interesting question.
If costs matter little to patients, then what is the value of price transparency? The answer is as awkward as it is apparent: there is little to no value in price transparency.
Yet policy makers continue to cling onto the belief that price transparency is essential to cost-effective care. But for those who actually understand the patient experience, it is absurd to think as much. Yet the absurdity of it all has done little to stop federal policy wonks from advocating for price transparency, with their efforts being accompanied by high-profile litigation to boot.
The entire ordeal makes for a curious conundrum. Here we have expansive health systems battling federal litigators over health policies that have little to do with actual patient care. The entire argument is contrived nonsense, regardless of which side you find yourself. Hospitals are not greedy conglomerates intent on hoarding the hard-earned dollars of patients. And federal litigators are not heroes evangelizing patient empowerment. Neither argument has any legal basis because neither argument accurately represents the best interests of patients.
Instead, we would be better off focusing on initiatives that empower patients to make decisions in what they believe to be in their best interests. This means educating physicians on making recommendations that are in the best interests of patients.
Such recommendations would be less about cost savings and more about trust. After all, what is a physician’s word if not that of trust?
This implies that empowerment is not an economic cost, based on maximizing utility, but that of trust, an inherently subjective construct. In economic parlance, this means patient decision-making – and by extension, their best interests – is best understood to be qualitative, not quantitative.
Economists are not comfortable with trust because it is not quantifiable. But, perhaps that is the point. Patient value is not something that can be quantified. There is no price on it. Rather, it is a perception that depends on the strength of the physician-patient relationship.
In that vein, policy makers should realize that patient empowerment is not a function of price transparency, but of convincing physicians that pricing correlates with quality of care.
But that first requires the trust of physicians, which is something policy makers have never earned.