HOSPITAL/PHYSICIANS/POLICY/POLITICS: Hubbard, transparency, clarity, earth & water, mixed

Today, direct your attention over to Spot-on, where I’m up with my summary over Hubbard’s arguments with providers over price transparency—it’s called Clear as Mud.

As ever you can come back here to comment. Somehow this topic tends to get some of you riled up. I, for sure, don’t know why!

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Categories: Physicians

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36 replies »

  1. Competition in Health Care:
    Both Health Insurance and Provider Markets Need to Function Competitively
    As in other markets, the goal for health care markets should be to ensure that consumers benefit from a competitive marketplace where neither the buyers nor sellers unlawfully exercise market power. Policy should focus on ensuring that there is a competitive marketplace where neither health insurance plans nor health care professionals are able to obtain or exercise market power to distort the competitive outcome. Any other result inevitably will lead to governmental regulation of the health care market — an outcome that is not likely to produce desirable results for consumers. We have learned this lesson over time from other industries and we should be sure we continue to apply it to health care markets as well. The injection of competition into quality health care markets over the past decade should have helped hold down increases in health care costs. But not enough.
    1. Consumers/patients should get the cost of services, prior to providing any healthcare services.
    2. Consumers/patients should not be forced due to emergency medical condition pay exorbitant fees and costs. (No price gouging)
    3. Consumers/patients should have a government agency where they can complain when charges are exorbitant and way above the cost of the competition.
    4. Just because the Health Insurance Company pays the bill, it is not permitted for the healthcare service provider to bill exorbitant billing, The consumer/patient pay a percentage of the services, therefore price and costs are important, not to mention that if healthcare costs and billing to the Healthcare Insurance is exorbitant, this will increase the costs of health insurance to the employer and employee.
    5. Uninsured/consumers/patients should not have to pay higher prices for healthcare services than insured consumers/patients.
    6. How do you treat a healthcare provider who were found to abuse and charge exorbitant prices for its service, were fined by the government and now continues to charge exorbitant charges for its services? The penalty should be that the consumer/patient bill should be nullified. (plus other appropriate penalties).
    7. Any provider found to be over-billing, inflating billing, gouging prices and billing, or billing for services not rendered – should have severe civil and criminal penalties.
    8. Much more to come (can you justify $1000 for insulin shot)
    By: Yehuda Draiman, Billing auditor

  2. Sorry for the late post.
    I agree that ranking PCPs can be tough in cases where a patient is referred to a specialist and the outcomes have more to do with the specialists’ competency, than with the PCP’s actions. The PCP, however, can be evaluated in terms of making appropriate diagnoses and referrals, effectively coordinating patient care when multiple specialists are involved, doing the correct screenings and order the right blood work, following-up with patients in a timely manner, communicating with patients about diet/lifestyle changes and maintenance for chronic conditions, etc.
    There are several challenges, however. One is figuring out what performance data to collect and how to collect it. Another problem is that the current low-fidelity healthcare system rewards docs for “assembly-line” care. Being overburdened and time-crunched, they make errors they wouldn’t otherwise make. So, I give the system a poor grade.
    I would like to see a system in which outcomes data are collected from every provider AND a healthcare economics model is used that enables providers to have the resources needed (time, materials, equipment, staff, etc.) to do thorough diagnostic assessments, receive computerized decision-support, contribute in the continuous development and implementation of evidence-based practice guidelines, and use outcomes in a non-punitive way that gives them useful feedback so their performance continually improves. Only when a provider demonstrates statistically significant incompetence (sigma-six?) and refuses or is unable to improve, should the performance data be made public.

  3. Dr. Hinson,
    Congratulations! I think you’ve finally convinced me of the difficulty in determining quality ratings, at least for primary care physicians.
    I would just like to make a couple of final points, however. If it were possible to determine credible ratings, it is conceivable (and possibly even likely) that all four of the doctors in your small town would score the college equivalent of an A or A- in which case, patients would be in good hands with any of you.
    I do think, however, that if there were a strong consensus among knowledgeable doctors and nurses that a given doctor is “bad,” it would be useful to make that information available to the community. Conversely, if a given doctor was so good that many doctors and nurses go to him or her for their own care, a “professional’s choice” designation might also be useful information for the community to be aware of.

  4. I am not advocating it, and I said I am not defending it. I am saying how I think it came to be.
    > The “care managers” of all stripes ought to
    > be ashamed of advocating opacity.
    Does this go for doctors and patients as well?

  5. “One way to avoid this is to keep changing the rules.”
    This is called fraud and one that puts people’s lives and finances in danger. The “care managers” of all stripes ought to be ashamed of advocating opacity.
    Patients and physicians deserve to know what coverage they can rely on. And everybody who was ranting about United’s CEO comp package should not be railing against market-based healthcare.
    Health system is failing because the market is not transparent, especially insurers.

  6. > Medical practices are just like any other business…
    Well, I had asked about pricing, and you talked about planning, so you’re not going to say how your pricing behavior would change?
    > Who benefits by concealing reimbursement policies?
    > It surely isn’t the patients.
    I think it was supposed to be the patients, albeit indirectly. As Matthew has said, physicians (and hospital managers) will figure out how to game any FFS system. One way to avoid this is to keep changing the rules. So to the extent health plans compete for premium dollars, members benefit by preventing this by slowing down price inflation in premiums.
    Again, not defending anything.

  7. “I am not defending the opaque reimbursement practices of payers, but can you tell us how your pricing behavior would change if reimbursement practices became utterly transparent?”
    Medical practices are just like any other business in that they have to cover their costs, and they have to be able to anticipate their revenues in order to hire employees, etc. If you have absolutely no idea what you will be reimbursed you cannot operate like a business.
    It’s rather ironic, don’t you think, that there is so much pressure on physicians to behave more like business people, yet they are deprived of the most basic information that every other business takes for granted?
    I’d ask you a different, but related question? Who benefits by concealing reimbursement policies? It surely isn’t the patients.

  8. Believe it or not, I am in general with Greg here. I think that we somehow have to get a financing system that gets these decisions down to a physician level, and encourages them to get into professional organizations (a la Mayo clinic) that have continuous improvement as part of their DNA, but insulate them from the risks of exposing pure price/unsophisticated quality measures to an open market which has no real way of judging them.
    That’s where the current system is heading, and it cannot work.

  9. Barry,
    I agree with the sentiment. Patients ought to have a way to better determine the quality of the physician they are seeing. But doctors are not like Consumer Reports cars. With a car, you can easily judge its quality by how often it breaks down and how much service it needs. Further, you can calculate the total cost of ownership. You cannot point to objective data points like this with physicians (or other professionals). I just cannot see it.
    Let me give you another problem. I live in a town of 10,000 people. Our town is quite isolated and the residents do not have easy access to physicians other than the four in town. Lets say that there was a way to score the quality of the care the four of us provide. Lets say that I score the highest (because that certainly would be the case, whom amongst us would not think like this). Everyone would want to see me. But I could not see everyone. We have a shortage of physicians here and one of the doctors would rate the lowest. No one would want to see this doctor, but a fourth of the patients would HAVE TO, because there is no way I could see them all (and still have a life). Who is going to decide who has to see the lowest scoring physician? First come first served? Then everyone who sees the published results and has to see this doctor will go in to the exam room already lacking trust in the doctor’s skills and will, therefore, not get better! This doctor will get sued for anything short of a perfect outcome. This doctor will quit. And now a fourth of our residents will have to get their primary care from the ER.
    Ours is an isolated example, but anything that ranks physicians will cause some physicians, even if they rank much higher than the national average, to lose income, which will cause more and more physicians to give up medicine, which will add to our burgeoning shortage of primary care physicians.
    Ranking will only work in the case of super-specialized care. If I decide to get a gastric bypass surgery, I want full access to data on cost, morbidity, and mortality. And that data is something that can (should) be obtainable. But you cannot do this with primary care.

  10. > Providers do not know how to price their services
    > because insurers will not make reimbursement rates
    > public.
    I am not defending the opaque reimbursement practices of payers, but can you tell us how your pricing behavior would change if reimbursement practices became utterly transparent?

  11. Peter:
    “I find it hard to believe that under the contract with the insurer the wording states, “we will determine how much to pay you only after the procedure is performed and on our whim.”
    I’m not making this up. Providers do not know how to price their services because insurers will not make reimbursement rates public. If a doctor asks an insurer what the reimbursement rate for a particular procedure is, she will be told “it depends”.

  12. Dr. Hinson,
    First, I really appreciate your willingness to take the time and effort to respond to some of my comments with such detail and clarity and to illustrate some of the complexities inherent in the doctor scoring and quality assessment issue.
    However, it seems that it should be possible to significantly improve upon what we have now which is not very much. I was struck, for example, by a comment that Amy Tuteur made in response to one of my earlier posts on this issue. She made the point that a bad doctor will have no doctors or nurses as patients. So, even though that doctor is licensed to practice medicine, knowledgeable doctors and nurses made a collective and unanimous judgment that he will not be treating any of them. How did they arrive at that judgment?
    While the analogies may not be completely appropriate, Consumer Reports is able to rate cars within each category for reliability as below average, average, above average, etc., and the National Institute for Highway Safety can rate crash worthiness as poor, marginal, acceptable, good, etc. Hotels and restaurants are rated for quality, amenities, service and the like and then separately rated on cost.
    With respect to family doctors, the most important factors to me would be clinical / diagnostic skills, communications skills, and cost-effectiveness. Affability and availability would have some relevance but would get very little weight. On the other hand, for a heart surgeon, I would be more interested in experience, how frequently he performs the procedure, and outcome data including mortality rates as well as, perhaps, the quality of the hospital (up to date equipment, capable nurses, etc.) that he is affiliated with.
    I’m not really interested in absolute perfection or precision. I’m just interested in tools that will help me make an informed choice under most circumstances most of the time. As they often say in politics and business, don’t let the perfect be the enemy of the good. I’m sure we can do better.

  13. Amy, first I find it hard to believe that under the contract with the insurer the wording states, “we will determine how much to pay you only after the procedure is performed and on our whim.” Who would sign such a contract? Anyway you just gave a good reason for a single pay government run system where the insurance companies are cut out of the system (they’re scum anyway) and where providers know exactly what they are going to be paid, and so will the patient know what their costs are as welland the guvmt will be the one to control costs. I find an industry that contains such a large concentration of so called “smart” people that say they can’t do anything else but make a fist, point each index finger, and cross their arms in the blame game salute. That’s why I got out of the game and will get my healthcare anywhere else but in the U.S.

  14. Barry writes: “In my perfect world, I would like to see it translated to a scoring system, akin to credit scores but reduced to a 10 point scale, with the key variables and weights determined by what doctors think are the most important factors.”
    Barry, you have to give this up. There is no feasible or fair way to create such a scoring system. Quality transparency would be nice, but there is a such a huge variation in how things are done, size of practices, patient populations, etc., that we are more likely to get a Bush to agree to a flat tax to replace our current tax code than to ever see such a system.
    Let me give you an example. You come to see me (your family doc) for a small, malignant but not especially worrisome skin cancer on your forehead (basal cell carcinoma). I’ll talk to you about treatment options including excision, cryotherapy, and referral for dermatologic management and maybe we, together, elect to try and freeze the lesion. Doing this is going to leave you with some risk of reccurence, but generally results in a fine cosmetic result and only costs $85.
    Flip the coin. Same lesion. You go see a big city dermatologist. They tell you that the most reliable way to remove this basal cell tumor is to remove it via something called Mohs surgery, which involves excising a small layer of the lesion, flash-freezing it, sending it for intra-operative pathology evaluation, removing more and repeating the process as necessary until it is determined that all of the margins are clear. This should be curative and result in the smallest possible excision. Very little chance of recurrence. Yet this results in three hours of operative care, and a bill of $1,000 for the first stage of the surgery, $500 for each additional stage, pathology fees, and fees for any reconstructive surgery needed after removal of the lesion.
    How do you judge these two scenarios for quality. If the first doctor has a 15% recurrence rate (for a small tumor that does not metastasize) does this mean that the first doctor would only score a 4 on your scale of 1 to 10, and the second doctor, with the extremely effective, but debatably-cost-effective procedure that costs 15-20 times as much, scores a 10?
    And what would the average consumer do with published information that said, Basal Cell Skin Cancer–Dr. A., score 4, cost $85; Dr. B., score 10, cost $2,800. How would even an educated consumer be able to take all of the factors I have mentioned into consideration and decide what would be best for them?

  15. Amy, do you (or anyone else, for that matter) know why insurers do business this way — not telling doctors what they will be paid before contracts are executed? I’m not sure what it is they are afraid of, and I can’t imagine that they think this would be a fair way to do business if they were in the doctor’s shoes. Some information is starting to become available to consumers regarding what insurers pay specific doctors and hospitals for specific procedures. Perhaps at least one enlightened insurer will wake up and start to make the same information available to doctors before services are rendered.
    With so much apparent incompetence and lack of common sense in the insurance industry about how to treat both providers and policyholders, there should be a significant business opportunity for an insurer willing to treat customers and suppliers the way they would expect to be treated.

  16. Peter:
    “You speak about patients needing to know costs, how many docs know costs of care?”
    Doctors CAN’T know the cost of anything because the cost is whatever the insurance company feels like paying on any particular day. Doctors don’t know how to price their own services because the insurance companies refuse to tell them what the reimbursement rates are.
    Furthermore, doctors have an ETHICAL obligation to the patient above all else. They are MORALLY required to give each patient their best judgment on what is good for that patient. They should not be swayed by considerations of society as a whole, or the fear of financial penalties. No doubt it would be a lot less expensive, and a lot better for society if we refused services to drug abusers and drunk drivers and just let them die, but that’s not how we do it in an ethical system.
    Doctors are the gatekeepers by default, because the insurance companies refuse to take on the responsibility and the liability that is entailed. They’d rather dump it on doctors. If an insurance company thinks that a test or procedure is unnecessary, they can inform the patient in advance that they will not pay, and that they will take legal responsibility for their decision if it turns out to be the wrong one. Penalizing the doctor for doing her job and telling patients all their options is the worst sort of cop out.
    “Your suggestion to vary the co-pays depending on procedure seems like an ethical dilema in itself.”
    I am suggesting is varying the percentage of cost based on the TYPE of service. As I said above, while 5% might be an acceptable patient portion for drugs, it is not going to be acceptable for cancer care; perhaps 2% might be a better patient share for that type of service.

  17. Amy, I agree the patient needs to know price, but what difference would price awarness make when the deductible and co-pay is the same no matter what the usage? People look at insurance as, “I paid my premiums, I deserve to get something back.” Your suggestion to vary the co-pays depending on procedure seems like an ethical dilema in itself. Why would the patient be more on the hook for tests and usage the doc prescribes. Or would we make it disease specific? Docs are the gate keepers and if they had more influence on care than income then that would go a long way to lower costs. You speak about patients needing to know costs, how many docs know costs or care? Where is the downside for the docs on over utilzation? Everybody in the system, insurers, docs, drug companies, devices manufacturers all say “I’m not to blame.”, well someone’s to blame. So you think it’s the patients that are to blame. Your right, if they would not get so sick and needed care we would not have this problem now. Damn those patients.

  18. Peter:
    “I think a better solution would be for the provder to pay a 20% co-pay, then they will have a better handle on unnessessary utilization.”
    That is unethical (and it won’t work, either). We are currently discussing the ethics of penalizing physicians over on my blog.
    “Amy, don’t we have price awareness now with co-pays and deductibles? Before I dropped my coverage I had a 20% co-pay and $2500 deductible, how high do you think the co-pays should go, maybe 50%?”
    First of all, there is no “price”. There is only what the insurer feels like paying on any particular day. So how can consumers possibly be price aware if they can’t find out the price? Second, if the co-pay or deductible is the same, regardless of what treatment or tests you choose, how can that promote price awareness?
    As for the amount of the percentage, it can be determined in part by what amount of coverage you are willing to buy. Higher premiums would make you responsible for a smaller percentage of the price of your care, but you would always be reponsible for a percentage of it.
    Finally, I know that one of the most cherished assumptions of healthcare administration is that doctors are “wasting resources”. The last 20 years of attempts at controlling healthcare costs have been predicated on limiting this “waste” and yet the cost of healthcare has soared. That’s because physician “waste” is not the problem; it’s time to change that paradigm.

  19. Related to the discussion of pricing transparency, deductibles, co-pays, etc., I would like to offer a couple of comments about a highly critical article that Matthew posted a few weeks back related to the so-called “skin in the game” argument made by HSA advocates.
    First, I think the argument that the high deductible is much more painful for a low income person is obviously valid. Even setting aside HSA’s for a moment (which I think are a distraction to the overall debate), I think this criticism could easily be addressed in the following way which would be easiest to implement for large employers who self-insure: Set both the required employee contribution toward the premium and the size of the deductible at a slightly graduated percentage of income subject to a modest minimum and sensible maximum.
    For example, a low wage employee earning $20,000 per year or $10 per hour (2000 hour year) might have to pay 1% of income ($200 per year or $0.10 per hour) toward the premium with a minimum deductible of $200 and out of pocket maximum of $1,000. A mid-level employee earning $50,000 or $25 per hour might have his contribution set at 2% of income or $1,000 per year ($0.50) per hour with a deductible of $1,000 and an out of pocket max of $2,500. A highly compensated employee earning $200,000 ($100 per hour) could have his contribution set at 3% of income or $6,000 ($3.00 per hour) with a deductible of $2,500 and an out of pocket max of $5,000. If the total cost of the policy is less than $6,000, then the highly paid employee would only pay the full cost. If there are regulatory changes that would be required to allow this, we should pass them. If an employer has only so many dollars that can be spent for employee health insurance and still stay in business, we should structure the package to do the greatest good for the greatest number of employees while spreading the pain of employee contributions as fairly as possible.
    This is nothing more than cross subsidy via progressive taxation which I think is fair and is largely how single payer systems are financed. It is certainly far preferable to cross subsidy based on whether or not one has insurance.

  20. Jody, as I said in some other posts I belive the MA plan will fail, at least for the patients, because there is no cost control for the providers; insurers and medical. I also think it will fail because politicians will take bribes from the insurer/provider lobbys to make sure their income stream does not suffer, what will happen then is what we have now, double digit compounded premium hikes. The announced rate of $200-$300 monthly premium is a teaser rate to make this plan easier politically. Once a new government in MA is in place then watch the rates climb. It did not take long for Romney to veto the requirement of employer contributions, an indication of the direction. As our low wage driven economy grows and we build toward greater reliance on illegal/guest worker labor who can’t afford any premium, the premiums for the rest of us will grow even more.
    Amy, don’t we have price awareness now with co-pays and deductibles? Before I dropped my coverage I had a 20% co-pay and $2500 deductible, how high do you think the co-pays should go, maybe 50%? And what will that do to access, which now is rationed through price. Are people going to care providers because their not sick, just for fun? I think a better solution would be for the provder to pay a 20% co-pay, then they will have a better handle on unnessessary utilization.

  21. Stevie, the message I take from your post is that doctors and hospitals have a long, long way to go in providing truly useful quality, cost and outcome information (including variance among specific doctors) to consumers. However, especially with modern technology, vast improvements are possible if hospitals, in particular, made it a priority rather than resisting it.
    With respect to hospital charges, I’ve said this before, but I think it would be very helpful if Medicare rates were made public by hospital and by DRG code, since, as Tom has pointed out, Medicare is setting the price expectation in the market now. Insurers are finally starting,in a very limited way so far, to disclose what they actually pay specific providers for specific services, tests and procedures to their policyholders. I understand Aetna was going to begin this in Cincinnati and then, hopefully, roll it out from there.

  22. 1. Physician payments for hospital care ARE based on time. They are called E&M codes.
    2. The issue of outcomes is still a hot issue since no one has the perfect formula. Nevertheless, there are many surrogate measures that can be used to distinguish one physician’s practice from another. For example, currently hospitals track hospital-acquired infections (nosocomial infections) in the aggregate – that is, hospital infection rate. But I want to know each physician’s infection rate. Same thing for complication rates – I want doctor compared to doctor. These hospital reports cards have some value – but hospitals don’t provide care – people do. And in the hospital, the doctor – by virtue of his pen – directs the quality and cost of medical interventions. Which leads to another quality/cost issue: Using available hospital data, the amount and scope of medical interventions that a physician orders for a specific procedure or diagnosis is available. That data can be ‘scrubbed’ with very sophisticated risk-adjusting software to put each diagnostic category or procedural category on a level playing field. Then I want to look at the numbers and find a correlation between what a physician is spending in services/tretments compared with his peers taking care of similar groups of patients.
    3. Every hospital has a ‘list price’ on its CDM (Charge description master). Depending upon payer (or not) that list price is discounted. It’s a starting point for comparisons. If I walk into a Chevie dealer and see a model with an MSRP of $35,000 vs an MSRP of $25,000, I’ll have a good idea of what I’m going to buy even tho I don’t know what the ‘final’ price will be. Same thing in the hospital. At least, hospitals can begin posting their MSRP for the more frequent diagnostics. I called 17 area hospitals here in Ft Lauderdale for the price of a mammogram. I specifically said, I’ll accept their ‘list price.’ NOT ONE, could oblige. NOT ONE.

  23. Your explanation makes good sense to me. For medical services, I think a 20% co-pay subject to a $500 maximum for something like a hospital stay might be fair with the annual out of pocket maximum set at some reasonable level.
    For prescription drugs, more employers are gradually shifting to percentage of cost from flat dollar (usually tiered) co-pays. My own employer’s retail pharmacy co-pay for drugs is 50% which certainly gets our attention, though mail order co-pays for chronic medications are only $20 for generics and $40 for brands for a 90 day supply — a relative pittance, I think. I occasionally ask Walgreens’ management why many more employers haven’t shifted to percentage of cost for the employee share of prescriptions. The two answers I get are: (1) the flat dollar co-pay is easier to understand and (2) employees don’t want pecentage of cost. Both pretty feeble answers, I think.

  24. I think that having to pay a percentage of the cost would make consumers much more conscious of the cost than a co-payment ever could. I used 5% as an example, but it could be higher or lower based on the type of coverage and based on the type of service. Paying 5% of prescription costs might be reasonable, but paying 5% of hospitalization costs for an auto accident would not.
    At the very least, because consumers would receive a bill, they would know the cost and be motivated to make some choice in regard to cost. When you consider that people take the time to clip 25 cent coupons and bring them to the grocery store, it’s not a stretch to imagine that they would care about the price of even one medication or test.
    Doctors certainly can be intimidating, but they can’t intimidate people into spending large amounts of money. When a patient goes to the doctor to investigate a symptom like headache, he is often told that there is a tiny chance that he might have a brain tumor and an MRI could rule that out. Since an MRI is going to cost nothing for an insured patient, there’s no reason not to have it. Imagine, however, if the MRI is going to cost $150. The patient is much more likely to weigh the benefits against the costs, than if it doesn’t cost anything.
    Also, doctors are not heartless creatures. I wouldn’t be surprised if they placing more emphasis in cost benefit calculations when making recommendations, if they know that some recommendations will cause patient hardship. Certainly, patients would be more motivated to seek out doctors who kept these factors in mind.

  25. Amy,
    I agree with you 100% on there being no downside for consumers to have price transparency. I am not sure, however, if having to pay 5% of the cost would be enough to make consumers more price sensitive. The other issue I wonder about, which perhaps you could speak to, is that many patients are intimidated about challenging a doctor’s advice or recommendations, and quite a few doctors do not appreciate being challenged, to put it mildly. I would love to hear you tell me that I’m wrong on this, but, if not, how can we change this dynamic?

  26. It seems to me that there is no down side to transparency for consumers and there could be real advantages for cost control. Right now we operate in a world of fictitious prices, absurd wheeling and dealing, and uninsured patients being charged more than everyone else.
    One of the best and fairest ways to make consumers appreciate the cost of healthcare would be for them to pay a percentage of its price. So if a consumer had to pay 5% for any tests, the consumer would make sure the tests were necessary before he decided to have them. He would discuss with his doctor the most cost-effective plan for evaluating his symptoms and he might be inclined to shop around for providers who offered lower costs tests.
    This isn’t possible in the current healthcare environment because there are no specific prices. If no one (consumer or doctor) knows what something is going to cost, they cannot weigh various alternatives.
    What could possibly be the down side to truth in pricing?

  27. Peter,
    Can you say more about why the MA plan will not work; I did not understand your reason – maybe a word was missing? Thanks-Jody

  28. Peter,
    You are correct in that I do believe in the power of free market forces to allocate resources more efficiently than government can with certain exceptions like defense and setting environmental standards. To do this, however, buyers of products and services need good price and quality information.
    You might want to check out the article: “Healthcare Direct LLC” and the references within it at:

  29. Barry I see you have a lot more faith in “free market” forces for healthcare than I do. Would your insurance provider be able to have you go out for three quotes before approving payment? And I guess if the present healthcare mess is a creation of no government control then legislated free market forces will save us? But isn’t government free market forces a contradiction? The real force working here is healthcare lobbists bribing politicians to enact laws that provide no level playing field for the consumer. I predict the MA plan will ultimately fail for the patient as no one really wants their income stream to be restricted.

  30. Peter,
    I think we are in agreement with respect to information about doctors’ qualifications, success rates, performance, etc. In my perfect world, I would like to see it translated to a scoring system, akin to credit scores but reduced to a 10 point scale, with the key variables and weights determined by what doctors think are the most important factors.
    We are clearly on opposite sides regarding the single payer system. On the pricing aspect of the equation, first collusion is illegal in the U.S. People can, and have gone, to jail when caught doing it. Second, regarding trying to negotiate price in a retail store, there are clear price differences for the same item even among similar retailers like supermarkets, department stores, etc. People can see the price clearly up front and compare one to another by shopping around. Regarding cars, yes, negotiation is still part of the equation, but the the margin between dealer cost and MSRP is several percentage points lower than it used to be, and sites like Kelly’s Blue Book and Edmunds give consumers a lot more information regarding dealer cost than they ever had in the past. Organizations like Consumers Union could be extremely helpful in assisting consumers in assessing value and quality of doctors, hospitals, etc. Finally, some competitors in the same business are more efficient, have lower costs, and can give the customer better quality and/or lower prices for similar goods and services than less efficient competitors.
    Back to healthcare, I am intrigued by the potential for doctors to price their services based on the amount of time they spend with their patients rather than by CPT-4 code (FFS model). A time based model would mean that anything related to using the doctor’s expertise or routine tests like EKG’s, standard stress test, etc. would be priced by time with the patient. Things like lab tests, equipment for the patient to use at home, and, of course, prescription drugs would be extra. In the end, I think good doctors should be among the highest paid people in our society which should reflect what we expect from them and the high cost in time and money to acquire the training to do the job — medical school, intern, resident, and, for specialties, a fellowship. At the same time, doctors who are incompetent or otherwise not up to the job (drug impaired, mentally ill, etc.) should be weeded out quickly and not protected by a “white wall of silence.”
    Time based pricing could kill three birds with one stone. First, it would solve most of the pricing transparency issue. The doctor’s hourly rate is $….
    Presumably, a young doctor just starting out would charge less than one at the top of his specialty in the same geography. Second, it would reduce the administrative burden related to billing for the office staff, or, if third party firms are used for this, their rates would be lower. Finally, life would be much simpler for Medicare and Medicaid auditors trying to combat fraud. If a typical doctor could bill, say, 1,800 hours per year, and Medicare or Medicaid sees one billing 5,000 hours, it should raise a big red flag.
    With single payer (Medicare model), once in place, it’s too easy for politicians to just squeeze provider payments every time there is a budget crisis or costs are running higher than projected. While I strongly support explicit rationing with QALY metrics for end of life care, I think that could easily be implemented under our current system once the political consensus were there to do it.

  31. Barry, I don’t think we want the car purchase situation in which your ability to get a good price depends on your negotiating ability. Would the doc take your offer and disappear into a backroom office to get so-called “approval” from his manager? As you said how would you negotiate in the ER unconscience? Would the doc in this situation say here’s a good opportunity to goug? I think having info on docs performance, success rates, number of procedures done, difficulty of the successful procedures done, etc is great and I would welcome that kind of info. I would also welcome AMA re-testing from time to time. Pilots do it. We certainely want to know the skills we are getting and need. I just don’t think the pricing is something the patient and doctor should be involved in on a one on one. Docs will have the ability to band together and set pricing especially in small markets. If you look at the retail world you see “manufacturers suggested list price” used on most products as retailers want and need price stability and really only want to compete on service and location. Next time you’re in a store try to negotiate the price off suggested retail of a candy bar. Even car makers operate on a manufacturers sugggested price as a way to get around the law to have manufacturers set price, the word “suggested” is the loophole and levels the playing field for retailers. For furniture and cars list price is never really expected to be the one the product is sold for but allows the buyer to jump at those 30%-50% discounts, when in fact the list price has no relationship to cost, just sales tactics. I want docs to be concentrating on my treatment and I want their incomes to be predetermined by a professional single payer system that’s fair to both sides. Again I want docs to have good salaries as any employee would. Other professionals like engineers have salaries negotiated with employers, why not health providers? The other point is if this thing gets to be a state-by-state “solution” then you will get docs going to the higher paying states and then your medical cost will depend on which state you live in. Divide and conquer.

  32. Peter, a couple of points. First, I think you underestimate the ability of lower income, less educated people to make these kinds of choices if reasonably robust information were available to them in a user friendly, easily accessible format. Perhaps, like buying a car with help from Consumer Reports magazine and pricing sites like Kellys Blue Book and Edwards.
    Regarding patients in rural areas, many of these locations are characterized by relatively few well paying jobs which means most of the population has modest income, though there may be some very successful farmers. Doctors practicing in such areas probably recognize that their patient base is generally low to moderate income, and they price their services to reflect that fact.

  33. Quote: Barry Carol
    “The consumer then finds that two equally qualified doctors within the same specialty in the same area are 30% apart on the price per hour for their services. Wouldn’t this be useful information?”
    I don’t think most consumers have the capacity to really delve into the price/qualification area. What about those patients in rural areas that don’t have much choice. What about the people who need price/quality comparisons the most but can afford healthcare the least and probably have the least educational capacity to understand what they should do or what questions to ask? If the AMA was really doing its job I think we could all rest at night with our decisions, as well I don’t really want individual docs trying to calculate their performance/pay. Don’t we all think we are the best at what we do? I would hope they would assess their own skills and if they can’t perform would just refer you to someone who can. Leave it to the professionals then let the rest of us just get the best care at a resonable price.

  34. Barry and RW, you’re opening up a really interesting public policy question. If the Federal and state governments decided to foster the growth of large multi-specialty physician practices, leading with world-historical inevitability to new Kaiser-like integrated insurers, how would they do it?
    One could argue that too much ink has been spilled over America’s decentralized financing system and not enough over our decentralized delivery system.

  35. A very nice and clear summary of the problems the “transparency” movement is facing Matthew. And in particular pointing out that the way medicine is organized has as much or more to do with cost/quality/access as the way it is financed.
    While there are obvious problems with this movement I think the debate and the increased awareness about how healthcare really works (or doesn’t) will help to illuminate a better answer down the road. At least it seems to me people are finally talking about things a layer deeper than in the past with regard to cost/quality.
    I happen to be a big fan of Kaiser from personal experience. As far as why the Kaiser model hasn’t worked in other markets – well that would be an interesting discussion in itself. Kaiser itself has tried to spread in the past, but largely failed because of their strategy with physicians and their overall strategy for moving into new markets – given that the public has a bad impression of Kaiser as a holdover from managed care days and some of the horrible parts of the learning curve Kaiser went through particularly in Northern California. In my opinion, the reason the model won’t replicate very well is because of the difficulty in starting a “Permanente” type group from scratch, which I think is necessary. For instance, Kaiser’s strategy was to work with existing physician practices in a new market with the idea of transitioning to a tighter group. It just doesn’t work.
    The great multispecialty groups started with a core group of physicians who saw the value in having cooperative multi-specialty groups of physicians who would put the patient first. Can anyone name a large physician group started in the last 10 years that was led by physicians, that is multi-specialty, let alone aligned with a hospital? There are too many oxes to be gored.

  36. Matthew,
    I know I’m just a finance guy and not a healthcare expert, but could you explain why Kaiser Permenente, which I keep hearing so many nice things about, hasn’t had its business model replicated all over the country by now? Furthermore, during the 1990’s, didn’t Pacificare try to do business under the capitation model and fail miserably because neither they nor the provider groups with whom they contracted could forecast their costs accurately? Since a relatively small number of high cost cases beyond what they estimated blows profitability out of the water, they had trouble pricing it properly on a consistent basis.
    I agree with your points about individuals trying to bargain with multiple providers and the whole concept being silly at the individual level under emergency conditions. However, suppose a credible scoring system (sorry, Amy) for doctors could be developed and they went to a time based pricing model for their services vs pricing by CPT-4 code. The consumer then finds that two equally qualified doctors within the same specialty in the same area are 30% apart on the price per hour for their services. Wouldn’t this be useful information? Or suppose an organization like Consumers Union could determine that one community hospital was higher priced on virtually every service or procedure than another of comparble quality nearby. Even doctors interested in providing cost-effective care for their patients might be interested in knowing this. I think price and quality transparency have enormous potential for improving the efficiency of resource allocation, but I also think the Bush Administration’s approach to the issue is misguided.

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