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Can a GOOD Company Cut the Cost of Health Care? Can a GOOD Company Cut the Cost of Health Care?

Can a GOOD Company Cut the Cost of Health Care?

by Tim Fernholz
October 7, 2011


Why is health care in this country so expensive? David Cutler, a health care economist at Harvard University, offers a partial answer: People don’t know enough about which physicians and hospitals provide quality care at a good price.

“Within a market, lack of good quality data means that consumers have a difficult time determining which providers are better and worse,” Cutler wrote in a 2010 paper. If consumers can’t figure out whether they’re getting good care, providers don’t have much incentive to compete—one reason why there’s no correlation between the price of care and its quality.

Imagine if you were trying to buy a car, but had no idea whether different models provided more or less fuel efficiency, and the cost of the car was unrelated to its quality—a really expensive car could be worse than a cheap one! It would be hard to make the right choice, but that’s exactly how we approach health care today.

In an effort to fix this, Castlight Health, a GOOD Company finalist, has developed a software platform that allows people to make smarter choices in the health care arena.

“We want to make comparison shopping for health care online as easy as comparison shopping for other services, like travel or books,” says Ethan Prater, Castlight's vice president for product marketing. "When [employers] find out that cost and quality don’t correlate in health care, they find out, 'wow, I can also get my employees better health care at lower cost.'"

Castlight is currently working with Safeway grocery stores, which provides health insurance directly to its employees, and several other large, self-insuring businesses, to develop its model. Their software allows companies to choose insurance options that share more costs with employees, but also gives them the tools to find lower cost care.

“You might type 'cholesterol' test or 'John Muir Hospital' or 'kid with fever,'" Prater says,"and we’ll show you providers who can treat that condition or who match what you’re looking for, the cost of that provider, the quality of that provider, [and] how many procedures of this type they’ve done compared to others in the network or others in the state."

That comparison can make a real difference: In the San Francisco Bay Area, where Castlight is headquartered, the cost of a colonoscopy can range from $650 to $5,250. The service is most effective at these “commodity procedures”—highly standardized tests and examinations, rather than emergency treatment or long-term management of diseases—although the company is developing tools to help manage complex conditions like diabetes, including medication, outpatient visits, and even inpatient surgeries.

Castlight hopes to put its tools to work for companies that don’t handle their own insurance and to integrate its systems into major health care plans, in an effort to reduce the amount of money everyone—businesses, individuals, and the government—spends on care while encouraging innovation.

“Consumerism tends to lead to good things in certain industries, it tends to make prices go down and quality go up,” Prater says. “Saving money on health care is an awesome way to have a great business, but what drives the company is the mission of getting information in the hands of consumers.”

Photo via (cc) Flickr user Images_of_Money

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