Cost Transparency – A Colonoscopy for $400 or $7,000?

November 16th, 2010 by David E. Williams of the Health business blog

This is the transcript of my recent podcast interview with Castlight Health Chief Medical Officer Dr. Dena Bravata.

David E. Williams: This is David Williams, cofounder of MedPharma Partners and author of the Health Business Blog.  I’m speaking today with Dr. Dena Bravata.  She is Chief Medical Officer of Castlight Health.

Dena, thanks for joining me today.

Dr. Dena Bravata:            David, thank you so much.  It’s a pleasure to be here.

Williams:            What is Castlight Health and why is it needed?

Bravata:            Castlight Health is dedicated to making health care cost and quality information publicly available. It’s needed because that kind of information is not readily available today.

One of the things we do that is not publicly available is to personalize cost and quality information.  Rather than showing the average cost of a service, such as seeing a doctor or getting a cholesterol test, we show our users what their personalized cost for that service would be, based on where they are in their plan today.

Williams:            Many people talk about transparency and personalization.  Is there something different that Castlight does that others don’t?

Bravata:            Transparency means different things to different organizations. We’re showing people the full spectrum of where the costs and relevant quality information come from.  For example, your cost for a particular health care service will be a function of what the negotiated rate is, what your employer or insurer pays for that and what your out of pocket cost is. We show all of that to you in a very consumer friendly way. Not everybody is interested in all that information all the time but we enable you to see all of it.

Similarly, many of the quality metrics that we show on our application are publicly available.  These are well validated measures, many of them coming from the federal government. But it’s not transparent unless the data are presented in a way that’s consumer friendly. We show data –for example about hospitals’ clinical outcomes. We show patient satisfaction measures for providers and facilities and we show exactly where those data are coming from. But we have simplified them and show them in a very consumer friendly, easy to understand manner.

We wrap all that up with straightforward educational content so people learn how to use the information.  The ability to see this information  –some of which consumers have never been able to see before, others that they’ve never been able to see in a consumer friendly manner– wrapped in normal language resonates with users and becomes very actionable.

Williams:            Who would be a prototypical user?

Bravata:            Someone on a high deductible plan or who has a high co-pay, because these are people who have to spend their own money on health care; people who have health savings accounts, because they’re really incentivized to shop for health care services.

Those lucky souls who pay five dollar co-pays for everything are not a good fit.

Williams:            Give me a real example of somebody who has been helped by Castlight.

Bravata:            We have “Castlight Guides” who provide full phone support. If you’re in a place where you can’t access your computer you can call in and get the same information you would have if you had a computer in front of you. Our Castlight Guides supply great anecdotes from people calling and getting information that changes their health care behavior.  One notable example was a woman who was 50 years old and was just about to get her first screening colonoscopy.  She had been given the name of a provider and saw that that the colonoscopy was going to cost her in excess of $2,000. She came onto our site, saw that she could get the same exact procedure in her same town for well under $1,000. She called our Castlight Guides just to tell them that we saved her over $1,000 on that one procedure.

It’s particularly poignant when you sit with a user and show them the application for the first time. A woman burst into tears because she said that this was just so unbelievably helpful to her and wondered how she had negotiated the health care system previously without access to this.

Similarly we often get requests to print out the information and take it home to show relatives.  We have now enabled the ability for people to print what they see on the application.

Williams:            Many companies have technologies that look interesting and are able to persuade HR (or whoever the decision maker is) to give it a try. But when it comes right down to it, sure they have a few anecdotes, maybe even like ones you’ve described, but there isn’t a broader uptake and the company doesn’t get the return on investment (ROI) overall.  Any evidence of how that’s working out for Castlight?

Bravata:            It is a little early for us to be able to say our ROI is X or Y.  Our first commercial customer is Safeway. We have three other customers in the pipeline that will launch early next year. Therefore we’re only now beginning to get a sense of user adoption.

Adoption is exceeding some of our expectations. I think much of our ROI is going to come from the fact that the services we support are common outpatient procedures that people can shop for.  We support all kinds of doctor visits and imaging tests of all kinds. We cover conditions –for example urinary tract infections (UTIs)– that can be cared for in a doctor’s office, an urgent care clinic or the emergency room. For many of the services –with that UTI example primary among them– there is gigantic variance in the price for care for that same condition. Our ROI is about showing that variance to our users and helping direct them to high quality but lower cost providers for that same service.

You may be familiar with a recent New York Times article that highlighted, even within the Bay area, that the cost for colonoscopy ranges from $400 to $7,200 for exactly the same service. That high cost location is not gold plated, you don’t get better anesthesia.  There’s nothing better about it.  It’s exactly the same procedure, it’s just that there’s this gigantic price variance.

That’s not to say that everyone should get the lowest cost one, but even if we can help some people to the median, we immediately can show an ROI for the employers who are paying for our service for their employees who are on higher deductible health plans.

Williams:            How does Castlight make money?

Bravata:            We provide our service to employees of large companies who are self insured. Because the employer is self insured, they stand to benefit from reductions in health care costs for their employees and from improvements in health in the long term.

Williams:            Self-insured employers are the main customers, but how do you work with health plans?  Are they customers or partners?

Bravata:            They are partners. We are in increasingly interesting conversations with health plans to develop closer partnerships. We receive health claim information from employers but receive other important information from the health plans.  To date the plans serve as partners.  None of them are direct customers.

Williams:            It sounds like we’re still at the relatively early stage of Castlight’s existence and the movement toward personalized transparency.  How do you foresee the evolution of this service?

Bravata:            We are in the early stage.  We are almost two years into this now and we’re growing in a number of different areas. Our first efforts were to get the prices right for common outpatient services. We’ve done a nice job with that.  Our current effort is to expand the quality information that we show, making that very robust and consumer friendly.  Soon we’ll be enabling our users to provide reviews for both providers and facilities.

Moving forward we’ll tackle increasingly costly, complicated procedures like elective surgeries. These are things many employers have unique benefits around.  Many employers we work with have centers of excellence for particular surgical procedures or medical tourism programs.  Those are things we have plans to support in the upcoming months.  We don’t yet have a mobile application but that’s clearly something that’s on the horizon.

We have a product that’s very useful today and I’m delighted by what we have on the road map for the next six to twelve months.

Williams:            Is there any interaction between the Castlight service and implementation of the Affordable Care Act?

Bravata:            There isn’t direct interaction.  Health care reform only stands to help us. There will be more people on higher deductible plans and other plans where they are at greater financial risk, so those people are our natural users.

It will be interesting to see what might change in health care reform with the recent election, but thus far it really stands to play to Castlight’s advantage.

Williams:            This is an era where the venture capital industry is shrinking and more technology start up’s are raising smaller rounds. Yet Castlight raised a lot of VC money.  What were you thinking?

Bravata:            We have, as you well know, a very charming, dynamic and impressive leader in our CEO Giovanni Colella. Gio has done a great job raising venture capital. The main reason we have raised the impressive amount of money that we have is to have the ability to hire the best and the brightest.  More than half of our 60 employees are engineers who are dedicated to making this product and ensuring that we are the leader in this new space that we’re creating.

It’s a whole new industry, a whole new category we’re trying to develop.  The main reason to raise all that money is to have an office full of computer science PhD’s who are making that happen for us.

Williams:            Tell me a little bit about your personal story.  Why did you decide to join the company?

Bravata:            Before coming to Castlight I was at Stanford for just under 16 years, first as a resident and then I stayed and did a fellowship and a masters degree in health services research. Then I stayed on as a staff researcher in the health policy/health economics group.  At the same time I was a practicing general internist, first at Stanford and then I had a private practice for just under a decade here in San Francisco.

What I bring to Castlight is a background in health policy and analysis with deep experience in general outpatient primary care medicine.

I got involved with Castlight initially as a consultant. Over time the compelling nature of what we do led me to believe that I had a unique opportunity to work for a company that is positioned to radically change the way health care is delivered. I felt I had an opportunity to affect far more lives by trying to be a leader in this amazing new endeavor than I ever could as an academic or practicing clinician.

Williams:            I’ve been speaking today with Dr. Dena Bravata.  She is chief medical officer at Castlight health.  Dena, that’s so much for your time.

Bravata:            Thank you so much David.  It was a pleasure.