POLICY/HOSPITALS: THCB agrees with Tenet, shock horror probe

 In a WSJ article about Glen Alan Hubbard, Bush’s man on transparency, the following little exchange occurred.

In addition, doctors and hospitals are wary of Mr. Hubbard’s push to publicize their prices. Providers’ skepticism was obvious at a meeting last month of hospital executives. After calling for increased openness on provider prices, Mr. Hubbard got into a testy exchange with Daniel Waldmann, vice president for government relations at the Dallas hospital company Tenet Healthcare Corp. Mr. Waldmann said insurance plans, rather than hospitals, were the best source of price information for most people. Hospital prices, many hospital officials say, have little relevance for people with insurance, because their health plans typically negotiate reduced rates and the patients pay only part of that cost.Mr. Hubbard didn’t buy the argument. His voice rising, he called providers’ reluctance to hand out prices “absolutely indefensible,” and asked, “How can you look at yourselves in the mirror?”In an interview later, Mr. Hubbard said he was shocked by Mr. Waldmann’s comments and said it was “un-American to not make price and quality information available if the customer wants access to it.”Mr. Waldmann, responding to those comments in an email, said Tenet has been a “pioneer in embracing transparency in all aspects of health care,” but it must be “relevant to helping consumers make informed decisions.”

Painful though it is for me to agree with something from perhaps the most scummy of all the for-profit chains (although apparently their CEO says that all that naughtiness is behind Tenet even if veteran NME watchers feel they’re stuck in Groundhog Day), but perhaps we should at least try to be accurate. Painful though it may be for the right-wing free-market crowd to hear this but no patient actually has the hospital “price” that is on the chargemaster paid for their care. Either the hospital is paid a discounted rate organized by the patient’s insurer (e.g. the DRG case-rate Medicare pays), or the uninsured pay some fraction that they can—which is the subject of a contentious but separate debate. The relevant number for Hubbard and the consumer payment crowd is, what does the consumer actually pay out-of-pocket for hospital care?  And the answer is, even with a high deductible plan, if they go near a hospital they pay pretty much their max out-of-pocket, and then not too much beyond that. And so the hospital’s pricing schema is irrelevant to them. Which is why hospitals don’t care about what their consumer pricing is and why they find it impossible to explain it.

The only way to change that is to get rid of insurance all together and have everyone pay out of their pocket for hospital care. That is a brilliant idea which I’m sure every hospital CFO in the country will be flocking to Washington to defend!

So not that I am often found defending Tenet, but their man is quite right and Hubbard—despite hanging out with luminaries like McClellan and loony Rooney from Golden Rule—doesn’t seem to understand how this works back in the real world.

Of course, there might be some good reasons for formularized pricing for physician office care — i.e. the bit of spending below the deductible, but for the gazillionth time, the 80/20 rule means that that’s a small fraction of health care spending. However, even that is in doubt. A couple of weeks back Paul Ginsburg showed that the commonly used example of Lasik being the perfect cash market was not exactly as true as the gung-ho marketers believed. That of course hasn’t stopped Hubbard trotting it out in the NY Times again today! Amazing that he gets in both the WSJ and the NY Times to spout this stuff on one day.

And of course that doesn’t even start on what Hubbard and his buddy Rooney want to do to the risk pool, but there’s no need to go into that all again—I’ve explained it ad nauseum over the last three years, but take another look here if you must. And to be fair his pals in the insurance industry are destroying that risk pool dead quick anyway. The major insurer Hubbard was on the board of seems to be doing it ex-post facto these days!

Finally, it has to be said that there is a problem with the absence of price transparency, and it’s a problem at the level at which we ought to be concerned about price. That level is not the nickel and diming of fee-for-service at the delivery level but the monthly/annual average insurance premium (or pre-payment cost) for a population. Most employees are insulated from that price and have no idea what it costs—and have no choice between different plans anyway so no ability to shop around on price at that level. Meanwhile no one in the individual market is exposed to that average price because they access (or often cannot access) insurance policies that are aggressively underwritten and therefore are not reflective of an average population cost.

The solution, as Alain Enthoven showed over 20 years ago, is to make people conscious of the cost of their insurance premium and to have clearly defined standardized benefit packages on a community rated basis, so that it’s possible to make an apples to apples choice between different plans. But we’ve know that for a long time, and if we had gone down that path in the early 1990s, then Golden Rule wouldn’t have been able to make so much money, and Hubbard, Reggie Herzlinger et al wouldn’t have done so well on the lecture circuit spouting their half-thought gobbledygook.

CODA: Funnily enough I’ll be talking to fellow “free marketer” Grace-Marie Turner tomorrow. Perhaps she’ll set me straight?

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