The New York Times
June 10, 2010
Bringing Comparison Shopping to the Doctor's Office
By Claire Cain Miller
The lack of price information in health care has been a big driver of ballooning health care costs, analysts say, because costs are opaque to patients and heavily subsidized by employers. The patient has no incentive or responsibility to keep costs down. But many employers are switching to health plans that require patients to pay more out of their own pockets.
A start-up financed by prominent venture capitalists and the Cleveland Clinic, Castlight Health, aims to change that by building a search engine for health care prices. Patients using Castlight could search for doctors that offer a service nearby and find out how much they will charge, depending on their insurance coverage.
Castlight has received money from investment firms including Venrock, Maverick Capital, Oak Investment Partners and from an unlikely source, the Cleveland Clinic.
Ideally, transparency in health care pricing could lead to higher-quality, lower-cost health care, and more patient involvement in buying health care, said Delos Cosgrove, chief executive of the Cleveland Clinic. "Because they begin to realize that a trip to the doctor is not free, they might stay home and take the aspirin instead of getting the neurologic work-up."
Castlight sells its service to employers and charges by employee per month.
Safeway, the grocery chain, with 200,000 employees, has signed on as its first customer.
Safeway has been experimenting with ways to cut health costs, including by using Castlight. "I'm a big believer in trying to create market forces wherever you can and then let personal accountability really drive the result," said Steven A. Burd, the chief executive of Safeway.
Castlight is working on a mobile version of the service to introduce next year so people can access the information from the exam table.
Price transparency could significantly change the way health care is bought in the United States. The notion "seems ridiculously simple and obvious, and in any other industry, you would say, 'Duh, we already have that.' But in health care, it's revolutionary," said Alan M. Garber, a professor of medicine and the director of the center for health policy at Stanford, as well as an investor in Castlight.
Comment: Our highly dysfunctional, fragmented health care financing system has opened innumerable opportunities for entrepreneurs to glom onto funds that should be going for health care, especially by diverting them to profoundly wasteful administrative services. One of the latest iterations is Castlight, an entity that is capitalizing on the perverse notion, promoted by the right-wing element in the policy community, that we can control health care costs by making patients more sensitive to prices.
The fact that there is much more money to be made in wasteful administrative services is supported by the faith that the venture capitalists have expressed in Castlight. They have put up the financing because they believe that creating a price shoppers portal can suck up more funds out of our health care system. Our entrepreneurs are there to be sure that the United States remains the world's leader in blowing up health care budgets through administrative waste.
Castlight's model begins with the flawed theory that price sensitivity will control health care costs. About four-fifths of health care is provided to the one-fifth of individuals who have the greatest health care needs. Price awareness by these individuals does not influence spending much since most of their care is provided after their deductibles and maximums are met. For the other one-fifth of individuals, only a small portion of their care would be amenable to price shopping, and the discounts that they would receive would have a negligible impact on our total national health expenditures.
Of more concern, requiring out-of-pocket spending as a consequence of accessing health care has been proven to cause individuals to forgo beneficial health care services. A policy that disincentivizes beneficial care should be rejected, especially when it is a policy that wouldn't help much in our efforts to control spending anyway.
Prices are important. The two most significant reasons that we spend much more on health care in the United States than do other nations are our profound administrative waste, and our prices that are much higher than in all other countries. Did other nations price their health care more appropriately by exposing patients to prices? Of course not. They did it by using the monopsonistic power of their governments in setting prices that were fair for patients and yet adequate to ensure that the health care delivery system receives the funds it needs to function. For controlling administrative costs, they simply adopted sane methods of financing health care.
Perhaps the greatest concern over the Castlight start-up involves ethical issues. Let's look at Delos Cosgrove, Steven Burd, and Alan Garber.
Although Cleveland Clinic is often touted as an efficient health delivery model, it seems appropriate to criticize it for investing in an entity that is going to profit by providing more excessive administrative services that would expand application of the flawed policy of shifting more costs to patients in need. Of particular concern is the position of their chief executive, Delos Cosgrove, who glibly suggests that price sensitivity could cause a patient to decline a neurological work-up and to go home and take an aspirin instead. Such an important decision should hardly be made on the basis of price shopping.
Steven Burd, chief executive of Safeway, has a track record of touting savings through "personal accountability." He glosses over the fact that his savings resulted from switching his employees to high-deductible health plans. Now he is becoming a customer of Castlight thereby solidifying the policy that his employees may not receive care that they should have because they have a price barrier between them and health care.
But what about the ethics of Alan Garber, a professor of medicine and the director of the center for health policy at Stanford? Although very knowledgeable about the impacts of health policy, he is personally investing in a company that wastes more resources on excess administration and that he says is "revolutionary" in bringing transparency in support of the inappropriate price barriers that are being erected on the path to health care. Is that an ethical compromise for a health policy expert? As he says, "Duh."