Shopping for Value in Healthcare - Emerging Nurse Leader

By Rose O. Sherman, EdD, RN, FAAN

Historically, consumers and large employers have not shopped for value in healthcare but this is changing. In a recent article in Hospitals and Health Networks, Joe Flowers writes about healthcare reaching a tipping point and the levers that are taking it there. Value for service is becoming a key element in the selection process and this is only expected to grow over the next decade. Employers, other large purchasers of health care, and consumers alike are finding and inventing multiple ways to actually shop on price and quality, from retail and direct-pay primary care to bundled offerings, to medical tourism.

To make these decisions, transparency of cost is becoming a necessity. Flowers observes, “You can’t be a shopper if there are no price tags. Until just recently the idea of price tags in health care sounded just weird, like camels in a hockey tournament. There was no way to know how much any given procedure or test would actually cost, or how well it would turn out, or whether you really need it. If transparency still seems weird to you, now would be a good time to get over it.”

His point is a good one. One area targeted today are knee and hip replacements. Why- well not only are they among the fastest growing medical treatments in the U.S. but this procedure also has huge variations in cost even in the same geographic area. A study published by Blue Cross in January 2015 illustrated the dramatic differences. The average typical cost (without complications) for a total knee replacement procedure was $31,124 in 64 markets where claims data was reviewed. However, it could cost as little as $11,317 in Montgomery, Alabama, and as much as $69,654 in New York, New York. Within a market, extreme cost variation can also exist. In Dallas, Texas, a total knee replacement could cost between $16,772 and $61,585 (267 percent cost variation) depending on the hospital. It is not surprising that large employers such as Walmart have selected Centers to refer employees to after negotiating fixed costs for the procedure.

Implications for Nurse Leaders

It is often said that without margin, there is no mission. Historically in nursing, the costs of our care have been bundled into the bed costs. Nurse leaders like Dr. John Welton have been very critical about this practice. They understand that if you don’t know your value contribution to care, you will be more vulnerable to cost cuts. As consumers shop for value and the system moves to bundled payments, nurse leaders will be increasingly asked to define and justify their value contribution. A challenge is that we know that not every patient requires the same intensity of nursing services. We reflect these differences in our staffing decisions but they rarely are reflected in the reimbursement that we receive. This will need to change as we move forward into an environment where consumers and employers increasing shop for value in healthcare.