Health care pricing is like the Wild West and it is only a matter of time before it catches up with us. In July, the Centers for Medicare & Medicaid Services (CMS) confirmed what many consumers, employers and health plans already knew: there is no cost and quality standard in the American health care system.
Improving our system starts with driving payers and consumers to high value providers. But first, we must know who is charging what. Price transparency tools offer that important information, enabling people to actually comparison shop for their health care services.
In early July, CMS released a proposed rule aiming to address price variation by starting with joint replacements. According to CMS, there were more than 400,000 Medicare inpatient joint procedures, resulting in more than $7 billion in hospitalization costs in 2013. The average Medicare expenditure for surgery, hospitalization and recovery ranged from $16,500-$33,000 depending on geography, with widely varying rates of infection and implant failure post-surgery.
To address this variation, CMS outlined a new payment model that would make some hospitals accountable for the costs and quality of care from the time of surgery through 90 days after. Continue reading…
The Government Accountability Office (GAO) recently released a report that cites “substantial variation” in the prices paid for implantable medical devices in the Medicare program, and a lack of robust data needed to properly compare the prices paid for these devices across surveyed hospitals. A key driver of both of these findings is the existence of confidentiality clauses in medical device purchasing contracts that prohibit hospitals from sharing prices with third parties, including physicians, the health plans that pay for these devices, and patients.
It was with a sense of déjà-vu that I read this report; in 2010, UC Berkeley professor James Robinson and I published a series of briefs looking at variation in implantable device prices in California hospitals as part of a joint Value-Based Purchasing of Medical Devices project between the Berkeley Center for Health Technology and the Integrated Healthcare Association (IHA). This project included data collection on device costs, total surgical costs, complications, and length of stay for seven orthopedic and cardiac procedures in 45 California hospitals.
The data, as well as a series of IHA-sponsored roundtable conversations with stakeholders, found the same thing that the GAO report finds: a lack of transparency in device prices, sometimes driven by clauses that prohibit hospitals from disclosing the prices paid for devices, a lack of alignment between hospitals and the physicians practicing within their facilities, and very substantial variation in both the prices paid for devices and the total costs of the procedures used to implant these devices. For example, the average cost hospitals paid for knee implants ranged from $3,408 to $10,830, and the average paid for implantable cardioverter-defibrillators ranged from $19,578 to $35,916. There was also a substantial amount of within-hospital variation in device prices.
A torn meniscus. It did not disable but it impaired, and unpredictably. My stomach learned quickly to tighten at the sound of A’s peculiar whimper in response to a crippling pain that would shoot through her at seemingly innocuous movements of the afflicted leg. We have health insurance of sorts, the type that will help you keep your home if tragedy strikes, but that does not shield you from the brunt of what most of day-to-day health care cost is about. We’re well practiced in deferring and foregoing care. Here however, we reluctantly acknowledged that a hospital would need to be visited and a doctor consulted.
Tests and a physical examination made clear that an operation was unavoidable. The doctor was a thoughtful man who conscientiously went through what the operation would entail. Surgery would take half a day, then back home by afternoon, convalescence over the following few weeks, with complete recovery the usual outcome. While not painless, the procedure seemed reassuringly routine. His tone was caring and his outlook about our case optimistic.
The admirable candor with which medical personnel have learned to speak about difficult topics concerning our bodies and our care did not extend to the costs involved. The question of what the procedure would cost, gently broached, initially baffled the staff, eliciting answer-deflecting counter-questions about the adequacy of our insurance coverage, but resulted in no quotes or estimates. Continue reading…