The Mysterious Case of Ohio’s Disappearing Price Transparency Law

When is the last time anyone received an estimate of the cost of a healthcare service upfront?  With premiums and deductibles going up thousands of dollars a year, patients have a need and a right to know the cost of any nonemergent healthcare service to help them make an informed decision.

Meanwhile, the healthcare industry, backed by its powerful lobby and the many politicians it seems to control, obstinately clings to a status quo where we are all kept guessing about the cost of our healthcare.

In June of 2015, a law was passed in Ohio that sought to upend that status quo.  Starting January 1, 2017, the Ohio Healthcare Price Transparency Law requires that patients in Ohio must receive a good-faith estimate of the cost for anticipated healthcare services they are scheduled to receive.  Emergencies are obviously excluded, including hospital admissions for acute issues.  The estimate must provide the amount to be charged, the insurance share and the patient share.  Straight-forward enough one would think. 

Unfortunately, over the year and a half since the Ohio Healthcare Price Transparency Law was passed, the healthcare lobby (led by the Ohio Hospital Association) has vigorously sought to kill the law rather than prepare for its implementation. 

Mirroring honed strategies utilized to defeat transparency laws in multiple states, the healthcare lobby claims it really believes in transparency, but offers disingenuous excuses as to why true transparency is “impossible” to provide.  It offers to support the creation of some difficult-to-navigate and nebulous website, or to provide estimates for only a small number of services or only upon formal request.

The hubris of the healthcare lobby, as displayed by its actions after the law passed unanimously in June, 2015, is unfortunately telling.  The lobbyists who are ostensibly representing Ohio providers failed to even inform their members that this legislation passed, leaving the vast majority in the dark and unprepared to comply with the law.  This failure to inform provider members of legislation that would affect their practices is not surprising given the confidence of the lobby in its ability to reverse the will of the people.  According to the healthcare lobby, it “had the votes” (meaning had enough “friends” in the legislature) to repeal the law.  Thanks to some of my brave fellow-Representatives, however, the legislative session ended with the law still intact.

With the implementation date fast approaching, on December 22, 2016, the Ohio Hospital Association, in conjunction with others in the healthcare lobby, filed a lawsuit against the State of Ohio to block the Healthcare Price Transparency Law.  Besides filing the lawsuit right before Christmas, when it might not attract as much attention, the lobby also filed in one of Ohio’s smallest counties with no online access to case documents and only one judge.

The healthcare lobby’s first argument in the lawsuit is a technical one.  It is important, however, given that it demonstrates the overall strategy that is being used to try to win the case.  The healthcare lobby claims the Healthcare Price Transparency Law was “slipped into an unrelated bill” (the Workers Compensation Budget) at the last minute, leaving no opportunity for the healthcare lobby to weigh-in or react.  The lobby does not exactly lie, for indeed the law was ultimately placed in the Worker’s Compensation Budget.  What the lobby conveniently leaves out, however, is that the Healthcare Price Transparency Law was part of the Main Budget two and half months before the final vote.  The law received nearly eight full committee hearings.  Furthermore, I met with the healthcare lobby multiple times about the law months before it passed.  “Mysteriously,” the law was stripped out of the Main Budget quite literally in the middle of the night before the final vote.  Fortunately, the maneuver was realized, but not before it was too late to add the law back to the Main Budget.  It was then added to the Worker’s Compensation Budget. 

The next argument employed by the healthcare lobby is that hospitals and medical offices don’t have all the necessary insurance information and that it might take days before the insurance company responds to a query.  Fear tactics are utilized to imply that patient care will be delayed.  This is also simply not true.  Business administrators at hospitals and other medical offices know exactly what the insurance payment will be for services because this information is agreed upon during contract negotiations.  So, while individual providers are usually unaware of the contracted prices, the administrative staff knows the exact costs.  These days, computer programs take care of all this making determination of the contracted cost of a service a relatively simple and speedy task. 

The only variable in the equation which provides the final estimate of out-of-pocket cost to the patient is the patient’s deductible information.  By federal law, however, all insurance companies must make this information instantly available electronically.  There are several computer software products currently employed by a few Ohio hospital networks for select, high-cost procedures to help facilitate upfront patient payments.  This software immediately generates estimates that would easily satisfy the requirements of the law. 

It’s hard to argue against price transparency from any rational standpoint.  Healthcare inflation in the United States is rising at an unsustainable rate – one that far outstrips general inflation.  Ethically, it is our right to know where our money is going.  Our governments ask us to be smart shoppers of our healthcare, and yet, the Ohio healthcare lobby fights to preserve price secrecy.  Why?  Because price transparency will result in cost containment by applying sorely needed free market pressures to this industry.  It is the absence of the free market that has allowed the costs of identical procedures to vary by thousands of dollars even within the same regions.  The healthcare lobby claims to be in support of transparency because it knows that it cannot publicly show opposition to a concept of such merit.  Behind closed doors, however, the lobby has been unwilling to accept any of the many offered compromises that would facilitate a smooth implementation of true and full transparency in healthcare costs to the people of Ohio. 

Our healthcare cost spiral cannot continue.  Employers continue to offload more and more coverage costs on employees, and for those who are uninsured, illness can mean bankruptcy.  The healthcare industry is on a precipice.  If we sit idly by and allow the status quo to continue, the healthcare market will follow in the footsteps of the housing market of 2007-08.  It will burst.

Jim Butler is a Republican from Ohio and a member of the Ohio House of Representatives.

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8 replies »

  1. We follow prices carefully, including the cash or selfpay rates. Interestingly, those cash prices just don’t move around that much. Here’s a blog post about some of our data on this topic. https://clearhealthcosts.com/blog/2016/06/changing-data-texas-year-year/

    So the question is: if the cash prices don’t move around that much, why do health costs inexorably rise, along with premiums, deductibles and so on? Of course this is not for the big-ticket items, but … why would big-ticket items not mirror these trends?

  2. From a patient’s perspective, I can think of at least three approaches that would make us more interested in learning what services, tests and procedures cost before the work is done. They are (1) allow providers to quote a transparent cash price that may be at least somewhat lower than what they collect from insurers, including Medicare, on the theory that cash payment results in lower administrative cost for the provider, (2) create an independent organization, perhaps similar to Consumer Reports, than can define and assess healthcare quality which would make it easier for third party payers to try to steer patients to lower cost HIGH QUALITY providers, and (3), if the cost differences are sufficient, offer patients a negative copay (rebate) for choosing a lower cost high quality provider.

    For certain surgical procedures like hip and knee replacement, the bundled pricing a reference pricing approach similar to what CalPERS used in CA could be used more broadly. None of this works for care that must be delivered under emergency conditions so special rules that limit how much providers can charge as a percentage of Medicare should apply to that segment of care.

  3. No, Dr Smith is just really good at marketing. Our surgicenters offer prices competitive with his. Our hospital lists prices transparently, beating some of his prices, and its a hospital. So, while I agree with Mr Butler that transparency is a good thing, I have yet to see the evidence that it actually reduces spending significantly. My guess is that this is either because we will need large cultural changes of this to have an impact*, or it is because of the way our health care dollars are really spent. Most of our spending is for chronic care or for big ticket items like chemo or big surgeries. For the 50% of the people who account for 3% of our spending, meaning pretty much pure primary care spending, I suspect this could help a bit, but on big ticket stuff people aren’t paying cash out of pocket.

    *France has quality health care, lower costs and much, much better transparency with lower administrative costs. People there expect it.



  4. “Our healthcare cost spiral cannot continue. Employers continue to offload more and more coverage costs on employees, and for those who are uninsured, illness can mean bankruptcy. The healthcare industry is on a precipice. If we sit idly by and allow the status quo to continue, the healthcare market will follow in the footsteps of the housing market of 2007-08. It will burst.”

    Sounds like a Democrat. I think you better switch parties Jim.

  5. Dr. Smith at Oklahoma Surgery Center has proven price transparency is cost-effective, efficient, and eliminates the requirement to consult with Big Insurance and American Hospital Association before operating on patients. It would be quite simple to implement in primary care practices across the nation. I have a price list at the front door for those who prefer to pay cash and it works very well. It hands over power to the patients directly so they can engage in decision making themselves, but neither insurance or AHA want patients in charge. It hurts their bottom line. Keep up the good work over there in Ohio, here is one primary care doc who would be thrilled with anything that hands control back to physicians and patients, where it rightly belongs.

  6. It seems that the insurers’ requirement for confidentiality agreements that preclude disclosure of negotiated contract reimbursement rates is a huge factor standing in the way of price transparency for patients. It would also be helpful if all negotiated reimbursement rates between insurers and providers were based on a percentage of Medicare as opposed a discount from some artificially high fictitious list price. That should make it easier for providers to determine the estimated cost of all services, tests and procedures they offer.

  7. Representative Butler: I understand the old school need for confidentiality of fees, but the time has come to move beyond that. It seems that your bill was simple enough, and that the apparent resistance by at least some hospitals is inappropriate. There is no question that providers can give good faith estimates. To get us to some level of consumerism, we need to know prices. At least I am supportive of your legislation, even if I cannot vote in Ohio.

  8. Jim, This has gone on forever. No one knows any prices: the patients, the doctors, the emoloyees, the Boards. Of course, having ICD-10s and CPT-4s and DRG’s and UB-04 billing codes and other codes I can’t remember–and 80 million combinations thereof–cause us to remember prices as we might remember grocery store prices if all foods had some eight digit number. We are lost in a Byzantine maze of–maybe deliberate–complexity.