The (dis)incentives of transparency

Paul Levy (CEO of Beth Israel Deaconess Medical Center in Boston and health care transparency champion and CEO blogger): “Shouldn’t there be some correlation between what you get paid for doing something and the quality of what you do?”

That quote from an intriguing exposé of sorts in The Boston Globe (a fair presentation of the situation in my opinion).  The bottom line: Partners Healthcare in Boston (generally) makes quite a bit more (around 30 percent) than other hospitals in the state (Massachusetts has lots of good hospitals, especially in Boston).  So the question is: why?  Here’s the secret: it’s less about quality and more about market control.  What’s more is that it is happening in nearly every corner of this country.

Okay, so the free market is the United States of America.  Economists have a list of conditions in order for markets to be “perfectly competitive;” they include: large numbers of anonymous buyers and sellers, easy mobility of resources, homogeneous goods, and perfect access to information.  Health care, more or less, fails on every condition.

It is very difficult to efficiently, effectively, and equitably distribute resources when a market fails.  What that translates to is that health care costs more than it needs to (for a multitude of reasons).  But the argument here is that more information would prevent such wide disparities in payment (especially when a requisite increase in quality is not the reason for a higher price).  If insurers knew what hospitals collected from other insurers; if hospitals knew what insurers paid other hospitals; if patients and payers could effectively compare quality; if hospitals could benchmark quality against other hospitals; a more efficient, effective, and equitable distribution of health care dollars would occur.

All of that above summed up in one word: transparency.  We need: complete financial and quality of care transparency.  Watch health care costs fall and quality improve as hospitals start competing on outcomes and cost effectiveness instead of on market share and perceived notoriety.

Ross Dawson at Trends in the Living Networks writes:

Secrecy has its place in business, but it is highly over-rated. In most cases there is no valid reason not to share information, just a disinclination to give away things. We are going to see transparent models increasingly favored moving forward.

A disinclication indeed.  Transparency is the future.  It’s how we’re going to improve our health care system.