<i>The Doctor Shopper:</I> Informing Healthcare Consumers

The Doctor Shopper
Informing Consumers

The Reference Pricing + Rebates article describes how consumers currently have little incentive to search out the best healthcare values, a major problem if consumers are somehow to power competitive healthcare markets. Reference Pricing + Rebates provides that incentive. However, markets still do not function well if consumers remain poorly informed. The Doctor Shopper [Side 1; Side 2] corrects this deficiency by making consumers the smartest healthcare shoppers in the world.

The Doctor Shopper is divided into four sections. The first section reports the latest prices of several providers who offer the treatments required by the patient. The second section presents several quality measures. The price and quality information are combined in the third section into a powerful chart that enables the patient to readily identify the providers offering her the best treatment values. Finally, credentials of the listed doctors are presented in the fourth section, as is a prescription drug shopper. Each of these sections is discussed in the links below.

On the first page of The Doctor Shopper at the upper left, the patient's diagnosis is reported: 550.90 Repair, Init, Inguinal, Hernia, Reducible. The number 550.90 is the ICD (International Classification of Diseases) code for a hernia repair. The rest of the information in The Doctor Shopper is discussed in the following sections:

The Value Chart is more than just another pretty chart. We believe it has the power to truly revolutionize the way healthcare is delivered. Because both Diagnosticians and patients will be scrutinizing the Value Charts, downstream doctors have a strong incentive to lower their prices and improve their performance—and to pressure hospitals to do the same—just to remain competitive with their fellow doctors. In a word, providers will have to compete to maintain a thriving practice.

One of the most powerful results of the RE·MEDI system is that it eliminates or significantly mitigates virtually every major healthcare cost driver. The article on RE·MEDI Cost Savings sketches out the proof of this result. The nearby table shows the impact of RE·MEDI on 19 of the major factors that make our healthcare system so costly. The first 12 impacts are the direct consequence of the vigorous competition in healthcare markets created by RE·MEDI. Most of these cost drivers are mitigated simply because patients will tend to choose doctors who are on the the Best-Value Boundary. The next impact relates to the many ways that the RE·MEDI system reduces recovery and liability risks. The next five drivers are the result of the RE·MEDI system's unique operating efficiencies, which are described in the article on FAHPA, our fully automated health plan administrator. Finally, the last impact is the result of eliminating "defensive medicine."

                                    COST DRIVER
  1.   DEMAND: Reference Pricing + Rebates motivates shopping,
         thereby solving the third-party payer problem
  2.   SUPPLY: Value Chart creates intense competition,
         causing prices to fall
  3.   Eliminates virtually all unnecessary and inappropriate
         medical treatments
  4.   Eliminates technologies and techniques that are not
  5.   Eliminates cost-shifting
  6.   Curtails/shuts down the practice of providers with
         excessive malpractice
  7.   Eliminates external utilization review
  8.   Outperforms virtually any regulation whose aim is
         to moderate prices or improve quality
  9.   Compels the rapid penetration of new, cost-saving
         technologies and techniques
10.  Aging of the population: extends life spans, but the
         extended years are healthier years
11.  Reduces the cost of healthcare subsidies by reducing
         medical prices
12.  Motivates physicians to prescribe the most cost-
         effective pharmaceuticals
13.  Reduces medical risks and the costs associated
         with them
14.  Reduces administrative costs of providers
15.  Slashes costs of third-party administrators
16.  Makes fraud difficult to perpetrate
17.  Unifies a fragmented healthcare system
18.  Eliminates the miscoding of treatments by providers
         attempting to maximize reimbursements
19.  Eliminates "defensive medicine"

Considering all of the quality-related information in The Doctor Shopper, which is the most valuable? We believe that the RE·MEDI Outcomes Index and the related Value Charts are clearly the best. Indeed, we know of no better measure of healthcare quality. However, within each local healthcare market, it could take a year or more to develop the database for the Outcomes Index with respect to a particular illness, especially for rarer illnesses. In the meantime, the consumer will be more dependent on other information in The Doctor Shopper. We believe the Nurses Index, even if it is based just on surveys of nurses, is probably the next best guide. The relative value of the other information can be determined statistically, once the database for the Outcomes Index is well-established.

Is The Doctor Shopper too sophisticated to be of practical use? It is our belief that virtually everyone will be able to use it effectively. The theoretical underpinnings of the Referral Satisfaction Index and the Best-Value Boundary may be beyond the interest of many healthcare consumers, but they should have no trouble learning how to use these concepts to their advantage. The price information is straightforward, and even the relatively sophisticated RE·MEDI Outcomes Index requires no more of the consumer than comparing numbers. The use of the Value Chart is simplicity itself: simply choose a doctor on or near the the Best-Value Boundary. A racing form is a sophisticated document to help racetrack denizens assess the opportunities that various horses offer for financial gain. A large share of racing form readers do not enjoy the benefits of higher education, but they've become adroit users of the form simply because they have their own money on the line.

The financial incentives of Reference Pricing + Rebates virtually guarantee that consumers will make whatever effort is necessary to understand how the RE·MEDI system works; but consumers will also be motivated to learn about it because it provides a reliable guide to quality healthcare, and because it can offer peace of mind in knowing that a loved one is under the care of a highly capable doctor.

There is abundant evidence that people respond well to incentives. Two examples are automobile rebates and frequent flyer awards. Since the energy crisis of the early 1970s, when automobile rebates were first introduced, American automobile manufacturers have found that rebates make it much easier to sell cars. Indeed, the use of rebates as a marketing device has spread to many other products. The same is true for frequent flyer miles, which are now offered not only by the airlines, but by several other businesses, including credit card companies. We expect the high-value rebates from Reference Pricing + Rebates to spark at least this much interest.

Notwithstanding the strong incentives for consumers to learn how to use The Doctor Shopper and other features of the RE·MEDI system, a solid educational program also is provided to members. Those enrolling in the system through their employer's plan will be able to participate in employer-sponsored workshops. Instruction on the RE·MEDI system will also be available to those enrolling as individuals. In addition, most questions about The Doctor Shopper and other aspects of the RE·MEDI system can be answered by staff in the Diagnostician's office, by our customer service representatives, through this Web site and via e-mail.

The Doctor Shopper is the instrument for producing intense competition among doctors. Once the RE·MEDI system accounts for about 7% or more of a local healthcare market, it becomes too costly for most doctors to remain outside of the system. Doctors simply cannot afford to stand by as 7% of their business goes away. With the strong incentive of Ca$hback Coverage, healthcare consumers will want price information on doctors, and they will want performance information as well. Once available, the information will be closely scrutinized by them, and they will compel doctors to compete by lowering prices and by raising the quality of the healthcare they deliver.

While the current healthcare system has improved in its willingness to provide consumers with information about doctors, up until now doctor performance has been difficult to measure reliably. The uncertainty about quality has resulted in the best doctors being insufficiently rewarded. Because most health plans reimburse providers at "reasonable and customary" rates, which have little to do with the quality of care delivered, prices do not vary substantially among doctors for a given procedure.

All of this changes under the RE·MEDI system, largely because of Reference Pricing + Rebates and The Doctor Shopper. Patients are now able to differentiate quality much more accurately. Once these differences become apparent, they will be reflected in prices. Hence, we can expect prices to show a much wider spread than they do now. These greater spreads will give healthcare consumers significant choices to evaluate whenever they select a doctor, and exercising choice is what produces vigorous competition. With the RE·MEDI performance measures, the abilities of the best doctors will become more apparent, enabling them to charge higher prices and raise their incomes. However, doctors with more modest abilities will likely see their incomes fall as a result of the competition.

To comprehend the market dynamics created by RE·MEDI, consider what would happen if both Dr. Saenz, with his exceptional credentials, and the lesser-qualified Dr. Williams charged the same prices. Dr. Saenz's waiting room would overflow with patients, while Dr. Williams' would be nearly empty. To reduce his patient load, Dr. Saenz would raise his prices, while Dr. Williams would be forced to lower her prices to increase her practice.

The dynamics of this marketplace will have significant ripple effects. Falling prices will put doctors' profits under considerable pressure. As a result, doctors will look more aggressively for ways to reduce their costs. One way is to pressure the hospitals they are affiliated with to reduce their costs, since hospital prices are shown explicitly in The Doctor Shopper. For example, hospitals with excess bed capacity will find themselves less competitive if they try to recover the cost of maintaining this capacity, compared with hospitals that have no excess capacity or that do not charge for it. This is because excess bed-capacity does not add to healthcare quality, so patients will not be willing to pay for it, and as long as hospitals must compete, RE·MEDI patients will remain unwilling to pay for it.

Doctors will also stimulate competition among their suppliers. Suppliers, in turn, will quickly recognize the profit opportunities for those who can supply less costly goods, cost-saving technologies, and more efficient services to doctors. The first doctors to receive these cost-reducing products and services will gain an edge on their competitors, but as these products and services become more widely adopted, their advantage is eroded away. The benefits will ultimately accrue to healthcare consumers, either directly in the lower prices they pay, or through improved compensation packages from their employers as healthcare costs decline.

We have looked at the many features of The Doctor Shopper in some detail. A natural question is whether a guide like The Doctor Shopper can be produced for providers other than doctors. The answer is clearly yes. A "Shopper" for dentists, psychologists, psychiatrists, ophthalmologists, optometrists, chiropractors, and just about any other provider group would be beneficial to consumers.