Industry Trends: Site of Service Competition via Consumerism

Industry Trends: Site of Service Competition via Consumerism

  • On October 13, 2017

In most sectors of the American economy, products and services are bought and sold in a free marketplace of competition. It is the ‘American way’ and makes sellers accountable to buyers demand.   Our economy has been driven by this fair and competitive dynamic for many years. But this competitive dynamic has not existed in our health care system. Pricing and competition has not existed in the same way as the rest of our economy. However, it is beginning to enter the sector as High Deductible Health Plans and cost transparency has taken hold in the health insurance market. This allows the patient, hence the consumer, to actually see the cost of health services being provided.

Site-of-service in the health insurance arena refers to the varying price differential that frequently exists for the same service delivered at different locations. As price transparency and consumer responsibility for higher first dollar coverage plans becomes more prevalent, consumers have realized that there are significant differences in health care service costs that can affect their bottom line. Nationwide, studies show that fees for imaging services at non-hospital owned free-standing facilities are often one-half to one-third the cost of the same services performed at hospitals. A number of other health care services show similar differences, stressing how site-of-service is an important health cost issue to all of us.

Some carriers have taken matters into their own hands to help control costs. Anthem, one of the larger Blue Cross Blue Shield organizations in the US recently announced that in several states, it will no longer pay for MRIs and CT scans performed in hospital outpatient settings. Instead, as a cost reduction measure, Anthem is directing its members to free-standing contracted imaging centers that are not owned by the hospitals. As with many cost-cutting measures, this is not popular with some, but Anthem, in a leadership position, has decided that reducing costs associated for these ‘same’ services is too important in addressing the critical problem of spiraling premiums.

Closer to home, other insurers such as UnitedHealthcare, have embedded cost incentives for using freestanding facilities, or as some would consider ‘penalties’ for choosing hospital based imaging services. Increased out of pocket costs for consumers are built into the plan when choosing hospital based complex imaging versus freestanding imaging facilities in the network that provide the same service.

The ultimate goal to provide the most cost effective health care coverage while maintaining a high level of quality care.

As the national conversation continues about how health care costs continue to head toward an unsustainable position, we will continue to see similar measures taken to create an ‘accountability’ and free market between providers which create a competitive marketplace.

By Chris Elvidge, Director of Account Management

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