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Innovation in Medical Pricing

Innovation in Medical Pricing

HealthEngine lets patients compare costs of procedures


By Tom Mullaney

Healthcare accounts for 18 percent of the gross national product in the United States, a number that is more than two-and-a-half times that of most other developed nations. As Americans shoulder greater healthcare costs, they are hungry for more transparency and better price information.

A local company is helping consumers pry open the black box of medical pricing. HealthEngine, a graduate of the MATTER healthcare incubator at the Merchandise Mart, launched an innovative platform that enables consumers to comparison shop for diagnostics and procedures.

HealthEngine features a searchable database of 1.2 million physicians across the country and costs for 300 of the most common medical procedures such as MRIs, hip replacements and angioplasties.

It pays to investigate costs before having a procedure. A 2015 Blue Cross Blue Shield study of major metropolitan areas found a greater-than 500 percent price variation among some services in Los Angeles and a nearly 400 percent variation in southwest Illinois.

HealthEngine co-founders Jonathan Weiss, MD, and Amitabh Chandra, PhD, an economist and director of Health Policy Research at Harvard’s Kennedy School of Government, launched the platform in 2012. Weiss holds medical and business degrees from the University of Chicago and a law degree from Oxford University. Living abroad in the early 2000s, he created a precursor to HealthEngine that was used by the United Kingdom’s National Health System. It grew to $200 million in annual revenue before he sold it to Goldman Sachs and other investors.

Weiss says his platform is a win-win for consumers and physicians. “Consumers wield the power of choice. They are truly in the driver’s seat to demand and receive the very best quality and price,” he says.

HealthEngine anticipates being in a position to potentially save patients, their health plans and/or their employers significant sums. “Healthcare is a $3.1 trillion industry. We think $1.2 trillion of that amount is due to inefficiencies. We want part of [those inefficiencies] cut,” Weiss says.

When consumers enter a procedure on HealthEngine, along with their location and a provider’s desired distance from their home, they see a list of doctors who perform that procedure, with prices displayed in either gray or green.

Gray figures are estimates based on public medical data, such as from the Centers for Medicare and Medicaid Services, self-funded employers, patients and facilities. Green quotes represent discount prices. Some 1.2 million doctors and facilities are searchable through the platform; roughly 40,000 providers use HealthEngine to offer rates below their insurance rate.

As a test, I searched “hip replacement.” Up popped 359 physicians in the Chicago area, with prices ranging from $24,633 to $58,780 for the procedure. I chose a doctor with a Northwestern Medicine affiliation. By choosing this physician and facility, HealthEngine calculated that I would save $9,074 over the price charged to non-HealthEngine patients.

After choosing a provider or facility, a consumer links to one of HealthEngine’s Care Concierge representatives who arranges the appointment and confirms that the provider is in the consumer’s insurance network.

Joe La Margo is assistant village manager of Orland Park, Illinois, a self-insured entity that joined HealthEngine in 2014. A year earlier, he had an MRI taken with an out-of-pocket cost of $1,500. While a HealthEngine client, he needed another MRI, and the cost was only $368.

“I have a high deductible and need to make smart choices,” he says. “They assisted me in being a smart consumer.”

The company introduced an enhancement a year ago that’s as dramatic as the platform itself. HealthEngine will pay the patient a refund of 60 percent of any savings created. The savings is the difference between the facility’s insurance rate for a particular procedure and the discount that same facility offers on that same procedure. Patients pay as they normally would with their existing insurance (though HealthEngine doesn’t work with HMOs or Medicare/Medicaid), and HealthEngine sends patients refund checks after the claim is fully processed. In the earlier example with the $9,074 difference, the consumer would pocket a $5,445 refund.

A cash incentive policy is also offered by Vitals, a similar health-technology company based in New Jersey that uses a comparison shopping model. Consumers sign up through their employer or health plan and get cash incentives for choosing the most cost-effective care. Employers last year reportedly saved $12 million while consumers pocketed $1.5 million in rewards.

“Vitals is like a scale, and HealthEngine is like a treadmill,” says Stephanie Kowalski, HealthEngine’s chief marketing officer. “Vitals lets you know how much things cost. But just like a scale can’t help you lose weight, Vitals can’t do anything to reduce costs. You need a treadmill to change your weight. HealthEngine gives facilities a way to reduce their pricing on a dynamic basis.”

Originally published in the Fall 2016 print edition

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