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It Cost What? Crowdsourcing Costs In An Evolving Healthcare System

flying cadeuciiCrowdsourcing is engaging a lot of news organizations today. While some journalists are nervous about crowdsourcing — “Yikes, we’d rather talk than listen, and what if they tell us something we don’t want to hear? Or something that we know isn’t true?” — we here at clearhealthcosts.com love crowdsourcing. We find, as journalists, that our communities are smart, energized, truthful and engaged, and happy to join hands in thinking, reporting and helping us make something that’s bigger than the sum of its parts. We learn great things by listening, so … now we’re going to to an experiment crowdsourcing coverage for our blog.

Our current project crowdsourcing health care prices in California, with KQED public radio in San Francisco and KPCC/Southern California public radio in Los Angeles, has been a great success, as was our previous project with WNYC public radio, and we’re looking forward to launching similar projects with other partners.Continue reading…

How Much Is My Colonoscopy Going to Cost? $600? $5,400?

How much does a colonoscopy cost? Well, that depends.

If you’re uninsured, this is a big question. We’ve learned that cash or self-pay prices can range from $600 to over $5,400, so it pays to ask.

If you’re insured, you may think it doesn’t matter. Routine, preventive screening colonoscopies are to be covered free with no co-insurance or co-payment under the Affordable Care Act.

However, we’re learning that with colonoscopies, as with mammograms, people are being asked to pay sometimes. It’s not clear to us in every case that they should pay, and since we don’t know all the details of these events, we can only offer some general thoughts. We’ve also heard from Medicare enrollees without supplemental Medicare policies that they think they’re responsible for 20 percent of the charged price — so 20 percent of $600 vs. 20 percent of $5,400 is a big deal.

If you’re on a high-deductible plan and the charge to you will be, say, $3,600, you can probably ask around and find a lower rate.

A thorough view of some colonoscopy billing issues is in this article in The New York Times by Libby Rosenthal, who has been covering health costs for the paper. We’ve heard also about in-network providers using out-of-network anesthesiologists, so it pays to pay attention.

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Is Health Industry Price Inflation Really At a Historical Low?

One hesitates to make too much of a single report, but the Altarum Institute’s July Report, “Health Care Price Growth at 20+ Year Low,” certainly commands one’s attention.  According to Altarum’s analysis, the health sector pricing trend ran at a 1.0 percent annual rate in May 2013, lowest since January of 1990.  What is striking about Altarum’s health care pricing trendline is that it has declined for the last three years in spite of an alleged economic recovery.

It also runs parallel to a subsiding utilization trend, suggesting that the health sector has been unable to offset reduced utilization with price increases.  Since the beginning of the recession, pricing has subsided from double the rate of the GDP deflator to parity, and it has closely tracked the deflator with only two deviations for more than eight years. Clearly, something more than the recession is at work here.

These trendlines confirm what this observer sees from his contacts in multiple sectors of the health industry:  a widespread and durable “top line flu”.  The growth in enterprise revenue for most health providers and manufacturers has been static (e.g. very low single digits or actually declining) over the last two years.  Most investor-owned hospitals, pharmaceutical companies, device manufacturers, and physician practices (pretty much everyone except the consultants and IT vendors) have reported both revenue stasis and earnings compression.

My economist friends point to rising consumer copayments as inhibiting price increases.  The Kaiser Family Foundation has reported almost a quadrupling of the number of covered workers in high deductible health plans (from 5 percent to 19 percent) since the end of the recession.  It is also possible that a disinflationary mindset has inhibited providers and suppliers from seeking outsized price increases to compensate for lost sales volume.  For suppliers, the marked decline of “physician preference” marketing has also hurt both sales and margins.

Hospital pricing. Performance of hospital prices will provide more fodder for those concerned about hospital consolidation pushing prices up.  On the one hand, overall hospital prices rose an annualized 1.8 percent for May 2013, fractionally higher than the consumer price index (CPI) at 1.4 percent.  However, when one strips out the “administered price” portion (Medicaid and Medicare), hospital prices to privately insured patients rose 4.8 percent annualized in May, nearly five times rate of health prices as a whole.  Altarum suggests that cost shifting might explain this significant disparity.  However, even this increase to private patients was not enough to raise overall health costs significantly.

Government payment to hospitals has trended lower for multiple reasons.   Many state Medicaid plans have cut hospital rates in the past several years to help balance state budgets.  And in addition to the ACA’s mandated reductions in hospitals’ disproportionate share payments and DRG updates, the sequester took a significant further bite out of DRG payments during the winter.

Since most hospital contracts with private insurers are multi-year, it’s difficult to argue that compensating upward revisions in private health insurance contract rates would yet be reflected in national economic statistics.  Moreover, not all hospitals are part of systems capable of exerting pricing power on private health plans.  Have-not hospitals have had their prices constrained by payer contracts, compensating for the effect of leverage by market hegemons.  We’ll have more evidence in a year to confirm or disconfirm the cost shifting/pricing power hypothesis.

There’s another indicator of a tougher hospital pricing environment.  According to the Advisory Board’s Dan Diamond, hospital employment has actually contracted in one-quarter of the monthly jobs reports from the Bureau of Labor Statistics since January 2009, including a 6000 person force reduction in May, 2013.  On balance, hospital executives would much rather raise rates than lay off staff, so the fact that the nearly unbroken decades-long expansion of hospital headcounts is faltering suggests a very difficult pricing environment for hospital services.

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