Consumer Directed Health Plans (CDHPs) are designed to engage consumers more directly in their health care purchases. The primary conceptual model is that CDHPs will make cost and quality information evident to the consumer, usually through the Internet, thus creating a more efficient health care market. To date, however, all empirical research on CDHPs has focused on their impact on cost and utilization. A critical missing element of the research is evidence that CDHPs affect health plan participants by creating incentives for consumers to ‘shop’ for services that give them the best value. A common concern about CDHPs is the lack of information for consumers to engage in retail shopping for health care purchases. Recently, this lack of information has fueled a call for ‘transparency’ in metrics on provider quality and efficiency.
Other than some web sites that provide hypothetical cost impacts from changing a prescription from brand to generic drugs, or switching from a retail pharmacy to mail-order, information on cost and quality transparency is not available. One exception is medical provider rankings based on quality and cost-efficiency metrics. For example, UnitedHealth Group (UHG) has developed a ‘star ranking’ system for their providers where any patient can see the ranking of a provider and determine if they want to stay with their current provider or upgrade to a higher-ranked provider. In a world of CDHPs where the consumer has ‘skin in the game’ through increased cost sharing for medical care, such a provider ranking system has the potential to be used by consumers and possibly to affect their health care cost and utilization.
Working with UHG, we obtained the provider quality and efficiency rankings posted on UHG’s web site since 2006. Using claims data from enrollees representing almost 4,000 covered lives in two firms where UHG was the sole provider of health insurance, we are able to address two research questions:
1) Did patients switch to higher-quality and more-efficient doctors when the provider rankings became available?
2) What is the effect of switching on total expenditures, out-of-pocket expenditures, and use of preventive services?
Addressing these questions identifies the likelihood that transparent provider quality and cost information will have a meaningful impact on the health care system of the United States.