Ask a random selection of people about whether they’d appreciate more up-front knowledge about the prices they pay for healthcare, and you’d be hard-pressed to find anyone that’s happy flailing around in the dark. As the public becomes more aware of inflated costs, the drumbeat for price transparency grows louder.
But even so, practicality issues abound in transitioning a market whose prices have long sat largely beyond consumer view.
As a result, the Centers for Medicare and Medicaid Services have proposed a rule that would force hospitals to post their lists of standard charges on their websites. At a minimum, the proposed rule reflects the seriousness with which the powerful agency is approaching the topic of price transparency. But it’s also generated skepticism about how posting the standard charges would actually benefit consumers.
For consumers and even for physicians, simply understanding how to think about the price of a specific healthcare service poses a problem. Hospital systems assign dollar amounts—standard charges—to specific services. ABC Healthcare, for instance, might say an MRI is worth $12,000. But then, ABC Healthcare and XYZ Insurance Inc. agree to a deal that “discounts” that MRI to, say, 50 percent of the “charge.” Of course, even $6,000 doesn’t get to the out-of-pocket costs for which Tom Consumer (an XYZ customer getting an MRI from ABC) would be on the hook.
Some experts say that all of this renders the $12,000 figure essentially meaningless—a first offer at the negotiating table. Maybe that’s why, as Modern Healthcare points out, CMS has asked for public comments about whether it should rethink the going definition for “standard charges.” The agency asks whether it should be defined by “the average discount off the charge master amount across all payers.” Public comment is due soon, on June 25.
That MH piece does a nice job laying out the logistical issues of a push for transparency. I was curious where local players stood. The hospital systems that responded to my questions each said they are, broadly speaking, proponents of price transparency. “Of course,” says Mike Malaise, SVP for communications and external affairs at Parkland Health & Hospital System, in an emailed statement, “getting to prices can be complicated within the current U.S. healthcare system and we are still waiting for specifics from CMS regarding how they would like to do that.”
In a statement provided through a spokesperson, Baylor Scott & White Health was more direct in its skepticism.
“We believe that pricing transparency needs to be meaningful to patients and are concerned whether CMS’ proposed guidelines meet this objective,” the statement reads. “CMS proposes that hospitals make public a list of hospital charges. This approach is not a comprehensive solution and will likely lead to greater confusion for patients seeking information about actual out-of-pocket costs.”
BSWH says it recognizes the importance of sharing anticipated out-of-pocket costs with patients prior to service, and urged CMS to allow providers like itself, as well as insurance carriers, to “proceed with developing pricing transparency solutions to better address patient concerns about out-of-pocket payment responsibility.” (A spokesperson for Blue Cross Blue Shield of Texas declined to comment on the CMS proposal, but pointed to transparency tools such as its “benefits value advisors,” which the company says can provide cost estimates for some services over the phone.)
Not all are as confident in the willingness of providers and payers to adapt. Chris Crow, who heads the Plano-based primary care network Catalyst Health Network, says insurance companies “fight tooth and nail” to keep the discounted prices they negotiate with providers under wraps, seeing it as their intellectual property.
The always-outspoken Crow says larger transparency goals should revolve around not only providing consumers with a price, but providing consumers with a price that is connected to value. Standard charges amount to “monopoly money,” in his view. Still, he favors the CMS rule, calling it “directionally” on course.
“I don’t see a move available where you flip a switch and you’ve got transparent pricing connected to value and everybody understands it,” Crow says. “So, to me, anything we can do to chip away at that is progress.”
For Jim Walton, CEO of independent physician network Genesis Physicians Group, the goal is to aim for “functional transparency,” which puts an onus on getting down to the level of out-of-pocket costs. He think about transparency less as a listing of standard charges and more as a table, which would include not only the hospital’s charge for a given service but also agreed upon prices with Medicare, Medicaid, and commercial insurers.
“Once that functional transparency takes place, you really unleash the free market to develop tools for consumers—apps—for them to do their calculation,” Walton says.
Methodist Health System CEO Stephen Mansfield, in an email, pulled together a few additional challenges. For one, he says, prices for a single procedure aren’t necessarily uniform from one patient to the next. He used gallbladder surgery as an example. For a relatively healthy patient, the price will indeed be predictable. But for someone who is frail and has additional diseases or conditions, up-front pricing will be more difficult.
Mansfield also points out how physicians who work inside the hospital but are not employed by it can impact costs. Doctors in that category can include ER physicians, anesthesiologists, and radiologists.
“That reality could mean that a person comparison shopping based only on hospital prices displayed could select what they think to be the lower-priced hospital, only to end up paying far more out of pocket in total than they might have paid had they chosen what seemed like a higher-priced hospital,” Mansfield says.
Ultimately, he adds, delivering “meaningful comparative cost data” to consumers is an undertaking that could mean a “dramatic shift in the way Medicare, Medicaid, and commercial payers contract with and pay hospitals, physicians, and others in the healthcare space.”