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Using Price Transparency Data Within the Hospital

Last week, CMS unilaterally released chargemaster data from 300 hospitals around the country. As David Dranove summed up well in his recent piece, this is an old hat. Yes, there are big variations in hospitals’ chargemasters. And yes, there is a lot of buzz around consumer price shopping.

A Kayak for hospitals is all well and good, but hospitals are cash-strapped as it is and there is only so much money to be saved by driving down the costs the hospital charges the health care plan unless the waste within the hospital is addressed. I would like to highlight perhaps one of the most exciting things going on under the radar in US healthcare today: using price transparency data within the hospital.

Hospitals are now reimbursed a capitated amount according to each patient’s diagnostic-related group. Capitated payment means, essentially, that the hospital receives a set amount of dollars for each patient that walks through its doors with a given diagnosis — say, $X for a patient with pneumonia or $Y for a patient with MI. Regardless of how many drugs, tests, or scans the hospital uses for the patient, it will still get the same compensation from the insurance company.

Yet, the physician up until now still acts as a kid in a candy store, running up a bill without awareness of cost or value. This is largely because the doctor is ordering from a menu without prices. I have talked to many physicians, in both out-patient and in-patient settings across seven health care systems around the country — they want a menu with prices.

I have seen firsthand the motivation for this, as pay-for-performance model is beginning to take over with my own practice. Gone are the days where doctors’ salaries are unhitched to the cost-effectiveness of care. Everyone is now in the same boat.As a neurologist, I want to share a few examples regarding stroke care that illustrate the potential savings available from educating physicians regarding cost, and also some pitfalls to avoid that could compromise patient care.

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