POLICY: If You Can’t Beat Them, Beat Them Back By Thomas Leith

The Wall Street Journal reported in a June 13th article,
  Page D1
that several major insurers (Aetna, Cigna, Humana, UnitedHealth)
  as well as Medicare are disclosing the prices they have negotiated with doctors
  and hospitals for a number of common procedures. Some are beginning to include
  quality indicators with the pricing information. This is an apparently-growing
  trend that may spell doom for companies like HealthGrades,
  but this wasn’t noted in the article. One interesting thing: apparently at least
  a few insured people have used the system, even though they’ll be well past
  the deductible. Maybe some few will note a link between the premiums they pay  and the Medical Loss Ratio their insurer experiences. On the other hand, the
  article notes that in the absence of any other quality indicator, people may
  think that more expensive implies higher quality and choose the
  high-cost provider.

The insurer’s tools are restricted to their own plan members: this means if
  you’re covered through Cigna you can’t tell what out-of-pocket costs might be
  for somebody covered by (say) United. The article goes on to detail several
  of the limitations inherent in these disclosures, well-known to readers of The
  Healthcare Blog. Tools like these might actually be useful to those with HDHP
  coverage, or the uninsured.

But there’s more. The article says states are beginning to mandate that hospitals
  disclose their charges. Charges amount to the "list price" that almost
  nobody pays, so this isn’t very helpful to prospective patients. The list includes
  South Dakota, Minnesota, and Florida. I wonder who got the states to mandate
  that instead of something useful. Some state hospital associations are evidently
  taking proactive measures, and have created their own websites to disclose hospital
  charges before being told they must. But why would they do this?

Look at this from the New Hampshire Hospital
  Association PricePoint system

How much do government programs pay compared to other payment
In many cases, Medicare & Medicaid reimburse hospitals at rates that do not
cover the costs they incur to provide care. Payments from privately insured
patients generally subsidize the shortfalls created by Medicare and Medicaid
and therefore represent a “hidden tax” on individuals and families not
covered by government programs.

Where have we heard this before?

When you ask for prices, you get median and mean charges with no promise that
  your bill will bear any resemblance to either figure, and this editorial.
  Apparently, they expect they’ll be forced to disclose someday, and this way
  they can control the content of the disclosure. If the legislature gets involved
  the hospitals might not be allowed to put their own "spin" on things. This actually
  is brilliant strategy. They’re not disclosing very much, but they can claim
  they’re being as transparent as they can be, given the vagaries of medical treatment.
  They can lobby commercially-insured patients to lobby congress to increase Medicare
  reimbursements with an implication that the amount they pay in "hidden taxes"
  will go down. But of course it won’t. They do not mention that there are many
  cases for which Medicare & Medicaid reimburse hospitals at rates that exceed
  the costs they incur to provide care. Imagine! Finally, they offer no assurances
  that the costs they incur to provide care are reasonable.

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Tom Leith
Tom Leith

Barry asks about hospital revenue by admission source. The California Healthcare Foundation published a report on this very topic in July 2003. One of their findings is that non-trauma ED admissions account for half of all admissions, and 20% of the margins. They estimate that closing the ED will lose about 1/3 of all admissions for a hospital. This sounds about right. On the basis of this, let’s say that about 2/3 of admissions are elective (meaning “scheduled in advance”) and 1/3 are through the ED which implies a certain urgency, but not necessarily a life-and-death-by-the-minute trauma situation. The way… Read more »

Barry Carol
Barry Carol

As I’ve said before, the biggest potential benefit from pricing transparency relates to hospital procedures and services. While medical care rendered under emergency conditions does not lend itself to price shopping, of course, surgeries and other tests and procedures that need to be scheduled well in advance certainly do. Perhaps Tom could provide some data as to how much of the typical hospital’s revenue is attributable to surgeries and related tests that were scheduled in advance (as opposed to performed on patients admitted through the ER). While I agree that hospital charges are not terribly useful in helping an insured… Read more »


I’m on the side of the insurers on this one, as long as they publish the actual reimbursement rates. Charges alone would be darn near useless, as Thomas points out. Providers really have no cause to squawk about this since the EOBs we all receive after every episode of care contains both the charges and the reimbursement. What’s the diff in publishing this information before the episode of care? That said, I don’t think people will use this information in the way the optimists hope they will. People won’t switch the family doctor they like to save $1 on a… Read more »