Price Transparency In Healthcare Now Mandated
Written by John A. Anderson
A very important step towards truly transforming the healthcare quagmire goes into effect January 1, 2019. Every hospital in the nation is required to make all charges available online to the public. Every item and service a hospital provides will now be available for review and comparison, allowing the public to make more informed decisions about their healthcare purchases.
The average premium in America has increased by 69 percent in the past decade, according to the Kaiser Family Foundation. With premiums increasing, families have to make more educated purchasing decisions in the health marketplace to save money, especially those families with higher deductibles. But accurate price information is hard to come by.
Price transparency in healthcare has been bandied about for decades, and has existed in various forms, but never to the point that it is now required. This is monumental in changing healthcare towards a more commoditized purchase, subject to market forces and demand. It should do a lot towards controlling the costs of healthcare. Critical access hospitals, psychiatric hospitals, and rehabilitation facilities will be required to list the prices of the procedures, surgeries, and medical supplies they offer, including drugs and anesthesia. Most people in American want greater price transparency and would compare health care prices if given the option, according to Public Agenda.
Vagueness In Healthcare
Americans have questioned, but generally accepted the vagueness of healthcare pricing. Why? Well, if you request a procedure’s price, you are generally met with a shrug and a verbal, “it depends.” Ask after a procedure and you are generally advised to wait until the bills arrive. When they do, they might as well be written in Sanskrit where “costs” minus “discounts” with “insurance” deducted, followed by an abstruse “patient may owe” amount that may or may not be what the patient owes. Today’s pricing obscurity deprives patients of the usual benefits of competitive markets — including pressure for providers to push prices down.
What will be meaningful is comparing the prices of everything from medications to medical procedures. What will be motivating is observing the price evolution from same procedures performed at different types of facilities. Currently, the same doctor can perform the same procedure in a different hospital/facility, and the prices swing wildly between those facilities. What will be revealed is how differently insurance companies reimburse the same procedures based on affiliated facilities.
The Affordable Care Act of 2010 originally introduced the concept of posted prices. The Trump Administration has now activated that policy. And the new federal rule goes a step further, requiring this information to be available online. The move reflects the Trump administration’s ongoing efforts to encourage patients to become better-educated decision makers in their own care.
Seema Verma, head of the Centers for Medicare and Medicaid Services, says, “We are just beginning on price transparency. We know that hospitals have this information and we’re asking them to post what they have online.”
Making public a master price list, or chargemaster, has been requested before. Yet insurance companies and hospitals have generally skirted the issue, citing proprietary information that might confuse patients. Ironically, confusion is exactly what we have today when it comes to understanding the pricing and paying for healthcare services. There is not a more obfuscated, confusing GDP entity than healthcare, as most have absolutely no idea before a procedure what they can expect to pay, and then only find out after weeks and months of insurance dialogue what their expected payment will be.
To be fair, there have been hospitals and healthcare systems who have willingly published basic pricing information online, or they’ve shared that information with healthcare associations to offer some light to potential patients and physicians. But it has been general practice for a healthcare facility to refer price seeking patients to their insurance providers or to a billing department to try and obtain that information via a very involved process that keeps most uninformed until their EOB (explanation of benefits) arrives.
According to the U.S. Department of Health and Human Services (HHS), the federal rule requires hospitals to post the information in a “machine-readable” format, allowing consumers to download it into a spreadsheet. Hospitals are required to update these price lists at least annually.
While the move towards more public healthcare pricing sounds promising, there is good reason to believe that published prices and actual prices will vary widely. To be sure, healthcare is complex by its very nature, and there can be and should be variations based on actual, in-real-time procedures. But a lot of this variation hinges on the negotiations between insurance companies, provider panels, and healthcare facilities. To this end, HHS is encouraging hospitals to provide more information to consumers to put prices in context in an effort to inform patients what they are predicted to pay.
Not Everybody Agrees
And, while price transparency in its purest form is a big part of transforming the healthcare landscape, not everyone agrees it is good for Americans. Robert Graboyes, a health care scholar at George Mason University, gave three reasons we need to be wary of the move towards a more public chargemaster.
“First, it’s beneficial to let brokers negotiate better, exclusive pricing for certain groups. There are reasons why the car market has dealers whose obscure prices are subject to haggling and others, like CarMax, where the price you see is the price you get. Some customers are better off haggling or meticulously researching costs, while others benefit more from certainty.
“Second, as antitrust law recognizes, public pricing can sometimes lead to collusion — another way for providers to resist downward pressure.
“Third, the transparency mandate itself can serve to exclude competitors. A large, politically connected hospital chain might lobby the government to mandate transparency in a way that upstarts find excessively expensive or impossible to meet. Some good things are best left to the willing.”
However, price transparency does not only serve an educational purpose—it actually lowers the cost of health care. According to an article in Health Affairs, both price transparency and reference pricing—the cost consumers can anticipate paying for a given procedure or health service—have helped reduce costs in the long run.
“The historical opacity of health care prices is widely believed to be a major factor inhibiting the more efficient functioning of the delivery system,” according to the Robert Wood Johnson Foundation. “Health economists and other experts are convinced that significant cost containment cannot occur without widespread and sustained transparency in provider prices.”
The goal is an informed public, a simplified healthcare system, and an overall, more cost-effective transaction based on knowledge and good-will. The idea is to facilitate and streamline a ridiculously complex industry. Imagine not making 20+ phone calls to determine the out-of-pocket costs for an MRI or emergency visit. Shopping for an appropriate facility for an important procedure has often required exhaustive calls to multiple medical facilities plus one’s healthcare provider—not to mention the patience needed to weather all the transfers and time spent on hold.
Health care spending will total nearly 20 percent of the country’s gross domestic product (GDP) in the next five years. Price transparency does not only serve an educational purpose—it actually lowers the cost of health care. Ultimately, the new federal rule aspires to make healthcare information easier to find so we can make better, more informed, more cost-effective healthcare decisions. It may take some time and iteration to get this into a truly informative, comparable format, but this new transparency when it comes to health care costs is a welcome change.