Uncategorized

HOSPITALS: The transparency debate

Here’s my editorial from today’s issue of Fiercehealthcare:

We’ve been hearing a great deal about price transparency in health care. California has a new law mandating that hospitals release their chargemaster billing data. The Administration’s advisors are demanding that hospitals and doctors reveal pricing, and one health plan (Aetna) has revealed its negotiated rates with physicians in one market (Cincinnati, OH). The theory is that pricing transparency will increase competition and make it easier for consumers to shop around. Proponents point to the reduction in the advertised price of LASIK surgery as an example of what might happen.

Speaking before Congress, Paul Ginsburg sounded several warnings about this trend. First, health care is in no way prepared to deliver pricing information. Several studies have shown that hospitals and physician groups do not know their costs or prices per service, and hence there is wide variation in what, if anything, they can tell consumers. Secondly, most health care is purchased not by consumers directly but by insurers. Ginsburg gave evidence that where contracted rates of insurers are exposed by regulation, prices tend to rise. Thirdly, there’s still little agreement on what we should be pricing. Each service? Each episode? Care per month? All care per year? Finally, apparently in the LASIK market, there’s less transparency than meets the eye, so to speak, and advertised low prices are in some respects come-ons like those cheap air-fares that aren’t really available. Transparency in health care is needed, but we need to think carefully what that really means in practice.

Livongo’s Post Ad Banner 728*90

Categories: Uncategorized

Tagged as:

21
Leave a Reply

21 Comment threads
0 Thread replies
0 Followers
 
Most reacted comment
Hottest comment thread
6 Comment authors
anonymous2anonymousSteve Beller, Ph.DTom LeithThe Medical Blog Network Recent comment authors
newest oldest most voted
anonymous2
Guest
anonymous2

the pricing of healthcare is more than just hospital stays and physician’s charges. most americans purchase healthcare through a third party: a payer, insurer, call them what you want. healthcare costs roll up to a “premium” – what you and your employer pays for you or your family on a monthly basis. part of the premium includes bottom line/profit. profit is greater when the insurer has leverage to drive expenses (i.e. medical costs) down – not all of which is passed on to the employer/patient. why doesn’t “transparency” cover corporate insurer profit?

anonymous
Guest
anonymous

What would be really good is for someone to compile a list of names when one company (like those outsourced billing and collections companies) changes, but it is the same sleazy clients. A shady CEO can be ousted as a partner from one company, but then go start his own company later on, and then take the corrupt clients with him, only now the company is under a new CEO and new corporate name, although it is the same shady and slippery people who may have been handling a hospital client that had corrupt goings-on internally in the past before… Read more »

Steve Beller, Ph.D
Guest

Price transparency alone is of little value because you don’t know if the care is any good. Price + Effectiveness transparency can be valuable if it helps: • Providers see how their performance stacks up against others, so they are more aware where there are opportunities for improvement • Payers and public programs reward improved cost-effectiveness • Patients make informed decisions about their care. While no doubt important, transparency is only a small part of improving American healthcare and considerable challenges exist, for example: • Knowing prices of healthcare services is of value only if the total cost of caring… Read more »

Tom Leith
Guest
Tom Leith

I have not said that pricing transparency for hospitals is worthless or counter-productive — I have asked about what it means to be ‘transparent’ and what the likely effects might be if some kind of price transparency were imposed (by force) on a market in which it is not a natural feature. I think your beliefs about the likely effects are shaped by a fundamental misunderstanding of the nature of ogolopistic competition. Prices rising faster than inflation might well mean that the demand-curve for medical services is shifting outward, and as this is not an illness, no prescription is required.… Read more »

Barry Carol
Guest
Barry Carol

Tom, I think we are talking past each other. I know what oligopolies are. Whether I am in the market for hospital services, banking services cars, groceries or whatever, I don’t care if there are three competitors in a given market or 23. What I care about is how well the market functions. Do I have enough information about price and quality to make an informed choice, and have prices been rising over time faster, slower or in line with general inflation. The market for hospital services does not provide consumers with adequate information about price and quality to make… Read more »

Tom Leith
Guest
Tom Leith

> Tom, you equate forcing hospitals to embrace pricing
> transparency as “being against the free market.” I
> couldn’t disagree more.
So you think that force is compatible with freedom? Funny kinda freedom. Seem to me you are concerned with your own freedom, but not so concerned with other people’s.
I have never said it is important to preserve the current system. I do say it is important to be clear about what we are doing and why.
> Markets work pretty well when given a chance.
Om.
It is clear to me you haven’t got a clue about markets.
t

Barry Carol
Guest
Barry Carol

Tom, you equate forcing hospitals to embrace pricing transparency as “being against the free market.” I couldn’t disagree more. I am interested in leveling the playing field by giving consumers needed information to make more informed decisions to the extent possible and feasible. Did you know that prior to 1958, in the car business, there was no such thing as a price sticker. A customer went to a dealer to buy a car and the dealer had all the information while the customer had none. The price paid was whatever the customer and dealer negotiated. In 1958, Congress passed legislation… Read more »

Tom Leith
Guest
Tom Leith

> If the hospital industry will not embrace pricing > transparency, I think it should be forced to for > a number of reasons. So long as we are clear you are against “the free market”. Let’s do go on. I publish my charge master because you are holding a gun to my head. Simultaneously, because I am the biggest player in my market, I publish a guarantee “We will not be undersold!” What I am telling my competitor(s) is “Do not even THINK about trying to increase your census by lowering your prices: I’ll lower mine to match; your… Read more »

The Medical Blog Network
Guest

Hey Tom,
My comment on “requiring” a floor for pricing to uninsured was a hypothetical statement on what-if political scenarios.
This is not a political endorsement and not likely to benefit my business in any way. But this is the kind of questions the public will ask next.
Take it easy!

Barry Carol
Guest
Barry Carol

If the hospital industry will not embrace pricing transparency, I think it should be forced to for a number of reasons. First, healthcare now consumes about 16% of GDP in the U.S., the highest percentage in the world by a considerable margin, and hospitals are a significant piece of this. If pricing transparency can contribute to either lower prices overall and/or resources being allocated more efficiently, that is a good thing from an economic point of view, in my opinion. Second, between Medicare and Medicaid, federal taxpayers already pay for approximately 45%-50% of all healthcare delivered in the U.S. I… Read more »

Tom Leith
Guest
Tom Leith

> It can probably be done fairly easily across the board > if the industry embraced pricing transparency instead > of fighting it. I do not disagree. But the “something” might not be very useful. Do not underestimate the difference in complexity of inpatient vs. outpatient services. But 1) Why would the providers want to do this in this kind of market, and 2) should they be forced to? If you say “yes, they should be forced to” I have already asked you how this can be justified in the name of a “free market”. It seems to me you… Read more »

Barry Carol
Guest
Barry Carol

Regarding the difference in prescription prices between what an insured patient and a self-pay patient pay, which I estimated at 15%, comes from Walgreens and CVS, the two largest retail pharmacy chains. Gross margins on their overall pharmacy business, of which over 90% is paid for by third parties, are estimated by knowledgeable outsiders at 20% as compared to 35% for scrip sales to self-pay customers. This could vary somewhat on specific drugs and the industry does earn a considerably higher margin on generics despite a much lower absolute price, in part, because the embedded dispensing fee is a much… Read more »

Tom Leith
Guest
Tom Leith

> It sounds as though some view healthcare as somehow > different and unable to operate within normal market > forces That would be “hippocrates”, not me. He gives himself away entirely away when he says “get our legislators to require that hospitals…” What I think he really means is that he is unable to operate in a market any more complicated than the market for cars, so he wants to impose still more regulations on the healthcare industry and call them “market oriented”. What I will say to you is that price transparency is a characteristic of some markets,… Read more »

The Medical Blog Network
Guest

So funny that you use General Motors as example.
This is a poster child of a corporation that lost its way because of bloat, inability to manage itself and being too slow to compete. For years, instead of reforming itself the company kept pouring money into failing projects and doing excuses.
Auto market is way more transparent than healthcare, so GM gets punished and rightly so. Meanwhile, consumers buy cars that really work.

Barry Carol
Guest
Barry Carol

It sounds as though some view healthcare as somehow different and unable to operate within normal market forces (including pricing transparency) that apply to every other business. I don’t agree. While Medicare may be so big and important that hospitals feel they cannot push back against the prices that Medicare determines that it will pay, hospitals, especially as they consolidate into larger networks that often dominate a given geographic region, should be able to negotiate an overall relationship with large private insurance companies and other payers that allow the hospital to earn a satisfactory return assuming they are efficiently run… Read more »