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Why would price transparency be a good thing for health consumers?

February 14th, 2007 by Dr. Val Jones in Opinion

One of my readers recently asked for some examples of how price transparency might improve his lot. A great question! The people who stand to benefit the most from price transparency are the uninsured and those with high deductible health savings accounts. Price transparency is globally valuable because it allows people to understand the true cost of healthcare, making them more informed consumers. It also promotes accountability of hospitals, healthcare providers, and insurance companies.

Naughty Hospitals

Arbitrary fees:

“The cost for a total hip replacement in the greater Seattle area varied between $13,996 at one local hospital and $46,758 at another. Furthermore, there wasn’t necessarily any correlation between the cost of the procedure and the hospital’s quality or experience doing it. …Why would anyone pay a higher price for lower quality and potentially more complications, especially when it concerns your health?”

Where does a non-profit put its profits?  Dr. Feld knows where:

“We are unable to know the hospital’s actual overhead. If we did, we could to find out what the hospital’s actual costs are. We could then calculate the hospital’s profit. These numbers are totally opaque.

Most hospitals are non profit hospitals. They can not post a profit at the end of the year. Therefore, they have to pour the extra money into something. Executive salaries and capital expenditures are a prime avenue for getting rid of their profit. A key question is how is the hospital’s overhead calculated? Maybe reducing costs to the consumer would be a good idea?”

“Predatory hospital billing:”

Over the past year, aggressive billing practices have been exposed at a number of hospitals in the United States. Despite the fact that a widower had paid $16,000 of his late wife’s bill of $18,740, some 20 years after the incurrence of the bill a teaching hospital held a lien on his home for $40,000 in interest. Many years earlier the hospital had seized his bank account, and now the 77-year-old man was destitute. Only tremendous publicity caused the hospital to back down. In California, a patient was forced into bankruptcy in 2000 by a for-profit hospital from a day-and-a-half stay in the hospital that did not include any surgery but totaled $48,000 in hospital bills. These have become common stories as hospitals aggressively market, bill, collect, and foreclose, just like any other corporation. The uninsured are facing the brunt of the hospital industry’s billing practices.

Naughty Outpatient Facilities

“Mr. Smith needs to get an MRI. He has a high deductible HSA, with a $2000 deductible, much of which he has not yet spent. So he will likely have to pay for 100% of this service himself. Without access to cost information by facility, he would simply go to a convenient, local facility and might pay up to $1300 for this single test. If he had access to health care cost information on the web, he could look up the cost of his service across different facilities and choose to go to the one that only charges $450 – a very meaningful difference for Mr. Smith.”

“More than 3 million people have already signed up for HSAs, and 29 million are projected to do so by 2010. Forty percent of the people who bought HSAs have family incomes below $50,000. More than a third of those who bought HSAs on their own had previously been uninsured.”

Naughty Doctors

What happens when 2 procedures have been shown (through careful research) to have equal efficacy, but one is reimbursed at a much higher rate? Docs will choose to perform the more expensive one, of course.

“Prostate cancer patients’ biggest concerns — after cure — are the possible side effects of surgery, including urinary incontinence and sexual impotency. Data on these side effects from robotically assisted prostatectomy were sketchy at best, and no evidence was available to indicate that any surgical method emerged as better than another for these side effects… Open radical prostatectomy costs $487 less a case than non-robotic laparoscopy and $1,726 less than robot-assisted prostatectomy.”

Naughty Insurance Companies

Insurance companies don’t want to make their pricing public because they don’t want their competition to know how much (or how little) they’re compensating physicians. Therefore, consumers are prevented from seeing costs as well – which can hinder their ability to make informed decisions about their care.

I bet others can think of some excellent reasons why price transparency is beneficial to consumers. Care to contribute?

This post originally appeared on Dr. Val’s blog at RevolutionHealth.com.

Tags: Cancer, Finance, Hospitals, News, Research, Surgery