TechCrunch first met Additive Analytics when the health data startup launched Maternity Compare, a site that helps parents find trustworthy obstetricians. Now Additive Analytics’ founder Laura Hamilton has created two new products to help patients compare the costs of non-emergency surgical procedures at different hospitals, which can potentially save them a huge amount of money.
One is a price comparison tool that lets patients see what surgical procedures cost at different providers, while the other is a map that illustrates how dramatically Medicare payments can vary from state to state. Hamilton built both sites while participating in the Health 2.0 Make-A-Thon earlier this month, which focused on new opportunities for tech innovation presented by the Affordable Care Act.
Hamilton’s goal was to make the government data about Medicare payments accessible to patients, employers, payers, and providers.
“I believe that improved price transparency can drive meaningful conversations about how to provide quality care at lower costs,” she explains. Data on Medicare payments to physicians and healthcare organizations is available for download on cms.gov, but the full dataset clocks in at a whopping nine million rows. Hamilton’s price comparison tool makes the information much easier to parse.
The site shows prices paid by Medicare providers after deductible and co-insurance amounts. In the future, hospitals will be required to publish their standard charges, which will potentially give Hamilton new data sets to work with.
“One weakness of this tool is that it only reports the price that Medicare paid. Medicare prices are often quite different from the prices that an insurance company or a patient would pay. But I think this is a good place to start the conversation about what a surgery should cost,” says Hamilton.
“With this tool, a patient can get a good sense for what is a reasonable charge for a particular surgery in his area. It provides a sanity check on what a surgery ought to cost,” she adds. “If a patient is being charged eight times as much as the average Medicare payment for the same surgery, then that might be a signal to do some price shopping.”
Additive Analytics’ new tools don’t just benefit patients. They can also help employers save money. For example, Hamilton notes that in 2010, the California Public Employees’ Retirement System (Calpers) discovered that it had paid between $20,000 and $120,000 for the same surgery across the state, even though there was no difference in the outcome of patients.
So Calpers set a $30,000 reference price limit on what it would pay and compiled a list of 41 hospitals that charged less than that amount while still maintaining high scores for quality of care. Calpers then encouraged employees to use those facilities and made them responsible for charges in excess of the reference price.
In response, half of the higher-priced hospitals cut their rates to try to hit the $30,000 limit set by Calpers. In turn, this initiative saved Calpers $3 million per year.
“My hope is that facilities that offer high-quality surgeries at competitive prices will see more patients and higher revenues as a result of increased price transparency,” says Hamilton.
Other potential uses include people who travel within the U.S. to find the most inexpensive prices for a medical procedure. One example Hamilton cites is a 22-year-old Californian athlete who was quoted $30,000 for a surgery on his torn patella tendon, but received the procedure for just $5,700 at the Surgery Center of Oklahoma.
Other startups that want to give patients more insight into how much procedures cost at different hospitals include a Dallas-based startup called I Need A Surgery, where patients can get an upfront, all-inclusive price for surgery. Castlight Health, which recently held its initial public offering, includes several tools for employers to compare the cost and quality for several tests and procedures. A Portland-based startup called CoPatient reviews medical bills after the fact, checks for errors, and negotiates for patients.
Hamilton’s next plan is to look for hospitals and Accountable Care Organizations (ACO) to join Additive Analytics’ readmissions-reduction pilot program.
“Surgery is expensive,” she says. “I believe that patients and employers have a right to know how much the government pay for various surgeries, so that they can determine a fair price.”