INFORMED CONSENT : Business, Consumers Are Getting Savvier About Choosing Health Plans

As President Clinton’s ambitious health reform plan died a slow death in Congress, a long-slumbering giant awakened across the country: the health care consumer.

Employers were preparing “report cards” to better compare the cost and quality of health insurers. State agencies were demanding information from hospitals about surgical outcomes. And individual consumers were asking more questions of their doctors and health plans.

In response, the medical industry has stepped up its efforts to supply accurate information about doctors, prescription drugs, hospitals and health plans. The goal of these efforts: better-informed and emboldened consumers who can comparison-shop for health care much as they would for cars or long-distance telephone service.

Employers, who have been driving much of this change, are gaining access to previously unavailable data on medical care. And entrepreneurs have sprung up to supply this information for them and others. A San Mateo firm is collecting and analyzing hospital data for a group of Cincinnati employers, for example, and a small New York company has begun publishing slick consumer guides to medical care in several U.S. cities.

“It’s long overdue that health providers share some information about what really goes on at the physician or hospital level,” says Tom Elkin, chief of health care for the California Public Employees Retirement System, one of the nation’s largest purchasers of medical care, representing 950,000 government employees, dependents and retirees.

Examples of the type of questions such data could answer include:

* Which hospitals in a city have the best outcomes--and the best prices--for heart surgery?

* How do members of Acme Health Plan rate its doctors and hospitals?

* Which hospitals have the lowest and highest rates of Cesarean-section births?

Experts say it will be several years before reliable medical information for health care shoppers is widely available. But in the meantime, projects are popping up in California and across the country to compile such information and get it into the hands of consumers.

The Bay Area Business Group on Health, a health care purchasing cooperative that includes 21 major California employers--including Bank of America, Lockheed Corp., Safeway Stores and Pacific Telesis Group--just completed a “satisfaction” survey of 40,000 workers enrolled in 55 health plans. The findings will be given to employees during open-enrollment periods that are starting at many companies this month or next.

“Right now, people are making decisions based on how much my plan costs, is my doctor in the network and what my neighbor tells me,” says Patricia Powers, executive director of the Bay Area group. The survey, however, “will tell employees how their colleagues rank health plans, how long they have to wait in doctors’ offices, how long it takes to get an appointment,” among other things, she says.

When American Express Co. wanted to find out how well its health care dollars were being spent, it surveyed 18,000 workers nationwide and asked them to rate their medical plans.

After using those results to create a satisfaction index that ranked 52 health maintenance organizations from best to worst, American Express did something more: It discounted the cost to employees who joined the best plans and increased it for those who joined plans low on the index.

The New York-based financial and travel services firm is already seeing results: One highly rated HMO saw its enrollment among American Express employees jump 30%, even though it was more expensive than rival plans in its area.

“We found that oftentimes there is a big difference between what our employees say about the quality of an HMO and what the HMO says,” says LouAnne Cash, an American Express vice president.

California, New York and Pennsylvania are among a growing number of states that have enacted laws requiring public disclosure about the medical outcomes and costs of certain hospital surgical procedures. Last year, for example, California’s Office of Statewide Health Planning and Development released its first study of the outcomes of back surgeries and the treatment of heart attack victims at the state’s hospitals.

Not surprisingly, such studies have not always been popular with the health care industry. California hospitals sharply criticized the state report last year, saying its data was flawed.

For many years, the health care industry resisted efforts to make information on medical prices and quality available to the public.

During the 1980s, for example, hospitals opposed government efforts to disclose medical data because “the information coming out was just terrible and gave misleading impressions,” says David Langness, spokesman for the Hospital Council of Southern California. Some early data on hospital mortality rates were not “risk-adjusted,” meaning they did not ac count for differences in the patient populations at various hospitals.

“We found out that many of the hospitals on the ‘bad’ list were some of the best hospitals in the country,” Langness says. “When other hospitals couldn’t deal with these very sick patients, they would send them to the best hospitals, and they would often die.” The industry now supports efforts to develop accurate yardsticks for measuring medical quality, he says.

One key effort to measure medical data and make it understandable to consumers is being led by the National Committee for Quality Assurance, a Washington-based nonprofit group set up by managed-care companies to accredit health plans and develop report-card standards for the industry.

“Health plans in recent years have been inundated with requests from purchasers and government groups for performance information,” says Janet Corrigan, an NCQA vice president. “It used to be the only way a purchaser and consumer could make a decision about a health plan was cost, whether the premium was paid or what the member’s out-of-pocket costs were. But that can hurt the better-quality health plans, because it keeps driving people to the lowest-cost plans.”

Some medical experts question whether consumers really have the sophistication to use comparative information on doctors, hospitals and health plans to shop for medical care.

Dr. David Goldstein, chief of general internal medicine at USC’s School of Medicine, says consumers can easily digest information about doctor office waiting times, patient satisfaction studies or an HMO’s policy on referrals to specialists.

“But if consumers are given mortality statistics or success rates on certain operations, it becomes a much more complicated issue,” he says.

Still, Goldstein notes that most health care shopping will be done by big companies, state agencies, unions or employer groups, which are better equipped to make a sophisticated analysis of medical data.

Some experts note that at the same time consumers are getting the information they need to make better choices about health care, many employers are restricting choice by offering only one or two health plans, often an HMO, which also restrict choice of physicians.

“I clearly believe people should have the information,” says Alexander M. Capron, a USC professor of law and medicine and, with Goldstein, co-director of USC’s Pacific Center for Health Policy and Ethics. “But we’re in a funny stage now where people will have less choice of the providers than they used to, but may have a chance to make better-informed decisions about those providers.”

While many employers are getting more sophisticated about evaluating health care, the vast majority of workers still have little information on which to make a choice. The typical company sends employees a chart listing health plan options, the benefits each offers and the cost.

Jeanne Finberg, senior staff attorney for the Consumers Union, said people need much more than financial information to make an informed choice about health care.

“People need to know what are the waiting times for getting an appointment, are there translation services or Spanish-speaking providers, and can you get a nurse practitioner on the phone if you can’t get the doctor?” Also, a woman might want to know if she can choose an obstetrician-gynecologist as her primary-care physician, and parents might want to know if there is an evening telephone help line to call when they have a sick child, she adds.

Even without sophisticated data on medical outcomes, many experts say, consumers are getting more vocal about health care. Some say that all the attention focused on the issue over the past year is creating significant changes in behavior.

Many consumers who once were content to accept the recommendations--and charges--of anyone wearing a stethoscope are now more skeptical, questioning bills and the necessity of certain tests and treatments. Some savvy individuals are also actively shopping around, recognizing that the cost of different procedures can vary widely even when the quality of care is the same.

Gary Dickman of Los Angeles is one of these new consumers.

When a short visit to the emergency room spurred a raft of triple-digit bills from the hospital, doctors and a lab, Dickman didn’t just throw up his hands. He took action.

“I was outraged,” Dickman says. “The hospital visit alone was $500, and then every other day I was getting another bill.”

Dickman called the hospital and demanded an explanation of the charges and whether the procedures were necessary. In the end, the hospital slashed the bill 20%, he says.

Then there’s Barry Boscoe, a benefits consultant from Tarzana. His health insurance pays 100% of the cost of accident-related injuries. But when he injured his knee skiing last year, he interviewed four doctors and their billing departments about the services that would be rendered and the amount his insurance company would be charged.

In the end, he chose a doctor who was willing to negotiate away some fees.

“I told the insurer what I had done and they couldn’t believe it,” says Boscoe. “People need to be more proactive in what they spend. It may not seem like it’s your money, because the insurance company is paying the bills. But you are paying the premium--so it is your own money.”

GAUGING THE COSTS

Consider the yearly health care needs of a hypothetical family: John and Juanita Johnson and their two children, George and Nikki. All four get annual checkups, billed at $150 each. Between them, the children required three $50 office visits--and three $25 prescriptions--for ailments. The portion of the costs covered by insurance and the amount the family must pay out-of-pocket vary based on the health plan. Here’s how the annual costs stack up in some faily standard plans: INDEMNITY PLAN

Traditional option allows free choice of providers. Insurance pays a portion after deductible.

Premiums: $1,464

Deductible: $450

20% co-payment for doctor visits: $60

20% co-payment for prescriptions: $15

TOTAL: $1,989.00

HEALTH MAINTENANCE ORGANIZATION

Care is provided and directed by a selected group of doctors.

Premiums: $1,308

Deductible: $0

$4 / doctor visit co-payment: $28

$3.50 / prescription co-payment: $10.50

TOTAL: $1,346.50

PREFERRED PROVIDER ORGANIZATION

Insured pays more to go outside a network of doctors.

Premiums: $1,344

Deductible: $0 *

$5 / doctor visit co-payment: $35 **

$5 / prescription co-payment: $15 **

TOTAL: $1,394.00

* Would pay $400 deductible for care outside PPO network

** Would pay 50% for out-of-network care or prescriptions

POINT-OF-SERVICE PLAN

Insured pays flat rates for in-network providers, who guide care; more for visits out-of-network.

Premiums: $1,392

Deductible: $0 *

$10 / doctor visit co-payment: $70 **

$10 / prescription copayment: $30 **

TOTAL: $1,492.00

* Would pay $400 deductible for care outside network

** Would pay 30% for out-of-network care or prescriptions

Another Scenario

The HMO option is clearly the least expensive for the Johnsons. But what if the family wants to keep seeing a certain pediatrician who isn’t an HMO member--and the children get sick a lot? In that case, the Johnsons may be better off with the point-of-service plan, because it pays a substantial portion of their expenses when they go outside the system.

Assuming total doctor and hospital visits for George and Nikki cost $1,000, while the family’s other expenses stay constant:

The point-of-service plan would cost a total of $2,203 annually--$1,792 in premiums and deductible, $60 for in-system visits and pharmacy plus a $180 co-payment for out-of-system visits.

By contrast, the PPO would cost $2,059 and the indemnity plan would cost $2,099. In this case, the HMO would be the costliest plan: out-of-network expenses and $18.50 in co-payments.

Note: While the Johnson family is hypothetical, the examples have been designed to accurately represent a typical family’s medical expenses. The figures and plan parameters draw on studies and information from several sources, including the U.S. Department of Labor, the Group Health Assn. of America, the Health Insurance Assn. of America and Foster & Higgins benefits consultants.