Compass Healthcare Aims to Navigate NH Healthcare Shopping Business to New Regions

[Correction—11 am ET on 12/20/10. See below.] We’re still unable to go online and shop for a medical procedure like we would for a plane ticket. At least for some people in New Hampshire, however, Compass Healthcare Advisers has made it easier to go online or call an 800 number to choose certain healthcare services such as MRIs and colonoscopies based on cost. And now the Bedford, NH-based startup is aiming to bring its service beyond the borders of the Granite State, CEO Rob Graybill says. [Editor’s note: Graybill was misidentified as a co-founder in the original version of this story.]

The company introduced its service in January when it activated its first customer, the City of Manchester, NH. The firm has since brought on the city’s teachers, New Hampshire state employees, and seven other employers in the state. Though most people aren’t accustomed to comparison shopping for their healthcare, the firm says that some 50,000 people who are eligible for its service are already saving their employers more than $100,000 this year in medical costs. For their efforts, people who use the service and elect to get their service from a certified provider are given an incentive payment of $25 to $100, according to Compass.

Graybill says that next year the firm, founded in 2009, is targeting growth in other parts of the Northeast as well as the Midwest and the mid-Atlantic.

Compass is among a growing number of firms that is offering services to shed more light on the costs of healthcare—including Castlight Health and Change:healthcare. They aim to add a dose of transparency that many believe is needed in the system. For now, Compass is focusing on about 36 elective diagnostic tests and procedures such as hernia repairs, CT scans, mammograms, colonoscopies, and MRIs. Its customers can use its service and qualify for rewards if they chose from a list of providers that qualify. In addition to the reward payment, choosing a lower-cost provider can save their employer money and, if they have a high-deductible health plan, lessen their own financial burden.

“Nobody today understands that it costs significantly different amounts for the same procedure, but once people start using our program and shopping for services, you see peoples’ eyes start lighting up when they realize that they can get an MRI for $750 instead of $2,000,” Graybill says.

To be clear, Compass’s SmartShopper service does not yet offer its customers an exact dollar cost of procedures. It focuses on letting them choose from a list of certified providers whose prices are known to be low to the firm based historical claims data. As of today, all those are also in-network providers of Anthem Blue Cross Blue Shield of New Hampshire, the health insurer with which the company has partnered to gain access to claims data. The company applies its algorithms to that data to gain a better understanding of difference in costs among providers, Graybill says. (Graybill held multiple management posts at Anthem before he joined Compass.)

For now, Compass relies on claims data from employers and Anthem to provide its service in New Hampshire. Yet the firm wants to expand its service into other parts of the Northeast and is also planning to land in new markets in the Midwest and mid-Atlantic next year, Graybill says. The company has not sought venture capital to fund its expansion of services, but the CEO said that the firm is in talks with investors.

To raise money from venture backers, the company will likely face some tough questions about how well its service will compete with other contenders in the marketplace such as San Francisco-based Castlight and Change:healthcare in Brentwood, TN.

“It’s a good idea to have transparent pricing information out there at least as a guide if not as a director,” said Lisa Suennen, a managing member of Psilos Group, a venture firm. She’s seen companies who have tried to do this come and go. “Is it a good investment? I’m not sure it’s not a commodity.”

Castlight, which has raised $81 million from investors, says it has analyzed pricing data from millions of explanations of benefits, or EOBs, from insurers in order to provide people with a portal that they can use to compare what they paid for healthcare services or products with state averages. In October, Castlight CEO Giovanni Colella and the company unveiled the firm’s system at a meeting in Washington, D.C. Colella showed how consumers could use its web browser to find cost and quality information on healthcare providers.

State and federal agencies are also getting into making healthcare prices more transparent to consumers. In Compass Health’s own backyard, the New Hampshire Insurance Department and other state entities have begun publishing likely healthcare costs that citizens can expect to pay through different insurance plans. Also, Castlight co-founder Todd Park, now the chief technology officer of the U.S. Department of Health and Human Services, had led a charge at the agency to make health insurance plan costs from different carriers freely searchable on the Internet.

“One of the biggest problems in our healthcare system is the lack of a market economy that drives it,” Suennen says. Unlike almost everything else we buy, we tend to consume healthcare without knowing what it actually costs. “It’s a terrible set of incentives and they are totally misaligned. If you could align the incentives, you’d probably save billions.”

While it faces lots of competition, Compass has found a way to give healthcare consumers incentives to make informed purchases. Now we’ll have to see how well the firm can take its service to customers outside of its home state. [Editor’s note: Compass was mistakenly referred to as Castlight in the original version of this story.]

Trending on Xconomy