Making Hospital Prices Matter


I recently learned about a company called OpsCost, which has a very user-friendly website designed to help people figure out how much different hospitals charge for a wide range of treatments and procedures. The company makes use of the data that the Medicare program has recently made available to the general public, and then presents those data more elegantly than many other sites I have seen. You can go here to look at the company website, and you will quickly find yourself looking up prices for hospitals in your region.  (Disclosure: I have not received any money from any price transparency companies, nor entered into any business relationships.)

For example, I told the website that I wanted to look at hospital prices near Durham, North Carolina, for “Hip & Femur Procedures Except Major Joint Without Complications And Comorbities/Major Complications And Comorbities,” and the program showed me a list of hospitals and prices, with a Google map on the right-hand side showing where each hospital was located. Pretty nifty.

But is it useful?

Consider the information it provided me about the three hospitals closest to Durham North Carolina:

Hospital Billed Reimbursed Distance
1 Duke University Hospital
2301 Erwin Rd
Durham, NC 27710
$40,294 $14,037 2.48 mi
2 University Of North Carolina Hospital
101 Manning Dr
Chapel Hill, NC 27514
$25,457 $14,860 10.80 mi
3 Rex Hospital
4420 Lake Boone Trl
Raleigh, NC 27607
$33,850 $8,426 16.44 mi

If I was a Medicare enrollee, something that won’t be true for another 14 years, I would know how much the federal government would have to pay if I needed a treatment like this. But I wouldn’t know how much Peter Ubel would have to pay. The amount I would have to pay would depend upon what kind of Medicare supplemental insurance I had purchased. For example, if I were required to cover a standard hospital co-pay, for instance, then these three hospitals would cost me the same amount, and therefore Medicare reimbursement – what the government pays to these hospitals – would be irrelevant to me. If anything, this information might make me more interested in going to Duke University Hospital, because I could see that they normally charge a lot more for this procedure, and might therefore conclude that I am getting a real bargain by going there. People, as I have written in an earlier post, might take the billing price as a signal of hospital quality.

If I had private insurance, then these prices would again be irrelevant to me, because there would not necessarily be any tight connection between what a hospital bills Medicare for, and what they bill specific insurance companies for.

On the other hand, if I was uninsured, I could see this kind of information making me very wary of both Duke University Hospital and Rex Hospital. But should I be wary? Remember, what I would really want to know here is not the amount these hospitals each bill to Medicare, but the amount they bill to uninsured patients and, much more importantly, the amount they typically settle for when receiving payment from people who lack health insurance.

So what is the point of a system like the one developed by OpsCost? I think this type of system will become very useful, to a very large number of people, once a wider range of price data become available. In North Carolina, for example, the state legislature recently passed a law requiring hospitals to make several kinds of price information available, including the average amount they settle for when billing uninsured patients, and the average amount they charge to the largest insurers in the state. Massachusetts and New Hampshire have passed price transparency legislation of their own, legislation that was given a grade of A by The Healthcare Incentives Improvement Institute. I expect more states to pass similar legislation, meaning companies like OpsCost will soon have a larger number of numbers to plug into their user-friendly websites.

Will this improve consumer decision-making? That remains to be seen. With an increasing number of consumers signing up for high deductible health insurance plans, it’s easy to imagine a large number of people going to websites like this before deciding where to receive their care. And it may not take much of a shift in consumer behavior to force high cost hospitals to lower their prices, or to make sure to explain to consumers why their higher prices are justified.

For better or worse, mainly for better in my opinion, we are entering into a new world, where American hospitals can no longer expect to hide their prices behind a veil of secrecy.


4 replies »

  1. It’s a start — but we need the same type of transparency about outcomes for these procedures in order to so make informed decisions about what sort of trade-offs we are willing to make when it comes to our health care.

  2. After the veil is lifted we should close down 1/3rd of US Hospitals within 5 years. There are too many and too geographically concentrated. Reward efficient ones who don’t horribly gouge/rape the system.

    Dr. Rick Lippin

  3. Competition at work! This works very well for elective surgeries, MRIs and the like. Unfortunately, if it’s an emergency, you will go to the closest place. However, that’s not to say you can’t negotiate after the fact with these statistics in mind.

  4. Well at least it shows how hospitals screw the self pay uninsured, I this case especially Duke.