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Medicare Officials Post Hospital Prices; A Step in the Right Direction

Posted Jun 11 2013 12:00am

I am a supporter of greater transparency in hospital pricing. Unfortunately, the way hospitals price their services is so out of kilter that this will be a difficult goal to achieve (see: Why Medical Bills Are Killing Us ). Nevertheless, we need to be encouraged by some small steps in the right direction. A recent article reported that Medicare officials have now posted prices for 3,000 hospitals on the web to raise consumer awareness (see: Medicare Officials Post Prices of 3,000 Hospitals in Effort to Raise Consumer Awareness of Arbitrary Hospital Pricing ). Below is an excerpt from the article:

For the first time ever, a federal agency has posted on the Internet the prices hospitals charge for healthcare services specifically to help consumers price shop when they select a hospital see: Medicare Provider Charge Data ). This is a major development and has direct implications for clinical laboratories and pathology groups that are based in hospitals and health systems.....This is the latest step forward on the march toward full transparency in the prices and outcomes of individual hospitals, physicians, and other providers, including medical laboratories. It is also another early warning to pathologists and clinical laboratory managers that they would be well-served to prepare for the day when the majority of consumers will expect labs and pathology groups to make lab test prices easy to find and understand....Some healthcare experts were quick to point out that this hospital price data has little value for consumers already covered by a health insurance policy. That’s because the prices posted on the Internet by HSS are largely the maximum price point from which hospitals negotiate discounts with government health programs and private health insurers....However, for patients who may need to pay cash and for patients with high-deductible health plans, access to hospital prices in advance of treatment is expected to help them negotiate more favorable rates. In turn, this would help to hold down the cost of healthcare.

....[O]ver time, pricing transparency may also have a “shaming” effect on providers, who are finding it increasingly tougher to answer questions from consumers about pricing disparities. Studies show that when consumers are exposed to data on higher prices, they reduce their use of medical care by about 40%....Even when patients do require emergency care, there is often room for negotiating price with hospitals and other providers,....[Emergency department] patients always ask for an itemized bill and try to negotiate charges, because they just might succeed. Healthcare experts predict a coming era of consumer-driven healthcare that will result in more competitive pricing for medical services. This trend is emerging due to growth in lower-cost health plans with higher copays and deductibles, along with an array of inexpensive wireless medical technologies entering the marketplace that are capable of performing accurate clinical laboratory and imaging tests. ....Clinical laboratory managers and pathologists can expect that there will be Medicare program officials who will want to post the prices of individual physicians and ancillary providers, including radiology groups, pathology groups, and clinical laboratories....Since Medicare officials have established the principle of putting provider price data on the Internet, it is likely they will continue to release the prices charged by other types of healthcare providers.

I think that the takeaway lesson from all of this is that the principle of hospital pricing transparency is slowly being established. The need to negotiate prices with hospital officials is most relevant currently for self-pay patients and for those with high-deductible health policies (see: High Deductible Health Insurance Plans Becoming the Norm in Large CompaniesHigh Deductible Health Insurance Plans; Discount on Initial Services?Hospitals in California Offer Steep Discounts to Uninsured Patients ).

I think that it's possible that increased transparency in the cost of lab testing may also give a boost to direct access testing (DAT) -- the ordering of lab tests on-line by consumers themselves. This can be accomplished in about half the states without a physician test order. The cost of such tests is only a fraction of what is charged in most hospitals, clinics, and physician offices.

For me, the most important reform in hospital pricing transparency would be for hospitals to forced to provide an itemized, understandable bill for their services, which is the norm in every other service industry in the country. Imagine, for example, if a waiter in a restaurant provided a customer only with the total amount owed at the end of a meal with no itemization of the individual dishes that were consumed. Such a restaurant would be out of business in short order. The same thing needs to happen for hospitals.

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