Healthcare Price Transparency

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clando
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Healthcare Price Transparency

Post #1 by clando » November 6th, 2013, 10:46 am

There has been lots of media attention with regards to hospital "charges" and demands for increased price transparency. The Bitter Pill thread I created in the outlines some of these concerns. I've read dozen of stories within the last year examining "charges" and/or demanding increased price transparency. The problem is they are constantly comparing apples and oranges and looking at the problem completely backward.

The way our healthcare financing system is currently designed there is no way to achieve price transparency. A hospital is like a market stand where everyone barters over the price. Hospitals barter with insurers, which creates a multitude of different reimbursement rates. Hospitals then often have to also barter with the insured patients regarding any out of pocket expenses (co-pays, deductibles, etc). Hospitals even barter with uninsured patients over what they can and can't possibly pay. When you put all this together there is no "actual price," the hospital is left bartering for whatever it can get with hundreds or even thousands of different parties. (i.e. the market stand analogy)

Even if hospitals provided a "price" it wouldn't provide price transparency. Approximately 85% of people have insurance, with that number expected to increase under ACA. The hospital price wouldn't tell you anything about what your insurer is going to reimburse at. If you want to "price" shop you would need to know your insurance reimbursement rates for various hospitals, not the hospital prices. That is the price being paid, and thus the actual cost. What is being demanded (hospital pricing) doesn't provide the information need, and still makes for poor consumer choices. Here is an example of what I'm explaining:

Example: Hospital A could post a price of $100, while Hospital B posts a price of $110. Consumer would assume that Hospital A is cheaper. However their insurer may reimburse Hospital A $105, while Hospital B is only reimbursed $100. At which point the consumer would be actually costing more.

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clando
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Re: Healthcare Price Transparency

Post #2 by clando » November 6th, 2013, 11:17 am

I can even provide a real life example of how "posted prices" can be misleading and doesn't lead to a more cost conscious consumer.

There is a surgery center in Oklahoma that posts its prices. They have been covered all over the national and local media with regards to how great their business model is. You can see multiple news reports on the website under the Media Tab. They were covered in the NY Times and here is a local media story about the surgery center.

The posted surgery prices can be found here: http://www.surgerycenterok.com/pricing/

However if you look through the page closely and scroll to the very bottom you will notice their is a "price disclaimer."
Surgery Center of Oklahoma wrote:Pricing Disclaimer

NOTE: If you are scheduled for surgery at our facility and we are filing insurance for you, the prices listed on this website do not apply to you.

http://www.surgerycenterok.com/pricing-disclaimer/
So if you have insurance these prices do not apply to you. Meanwhile the surgery center is advertising these prices and the media is pushing the concept of them having these cheaper just as the article linked above who states:

The difference in price is staggering. News Channel 4′s Ali Meyer obtained bills from the metro’s three largest medical centers: Mercy Medical Center, Integris Baptist Medical Center and OU Medical Center.

  • Mercy Hospital charged $16,244 for a breast biopsy; the procedure will cost $3,500 at Surgery Center of Oklahoma.
  • OU Medical Center billed $20,456 for the open repair of a fracture; the procedure will cost $4,855 at Surgery Center of Oklahoma.
  • OU Medical Center billed $21,556 for a gall bladder removal surgery; the procedure will cost $5,865 at Surgery Center of Oklahoma.
  • OU Medical Center billed $23,934 for an ankle arthroscopy; the procedure will cost $3,740 at Surgery Center of Oklahoma.
  • Integris Baptist billed $37,174 for a hysterectomy; the surgery costs $8,000 at Surgery Center of Oklahoma.

This price comparison while quite shocking doesn't actually tell you anything with regards to being a more informed consumer. If you have insurance NEITHER of these prices are applicable. You are being provided information with regards to two prices, and yet neither is applicable to what is ultimately going to be paid for the procedure.

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clando
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Re: Healthcare Price Transparency

Post #3 by clando » November 6th, 2013, 11:22 am

Just in case you thought the idea of this surgery center was fantastic and could actually revolutionize healthcare pricing, there are lots of people even in healthcare that think this is a terrific idea as demonstrated in a Linkedin discussion on the topic. Here however are some facts concerning the surgery center and it's business model, and things that need to be considered if you think this will work.

The prices listed only apply to uninsured; insured rates are different from what is published and the center doesn't accept Medicare or Medicaid. Which means these prices are only applicable to the 17% of the population in Oklahoma who are uninsured. You would expect not all the uninsured would be able to afford these prices. In fact only 4.4% of Oklahoma's population is uninsured and earns above 300% of the Federal Poverty level...representing those that realistically could afford these prices. This means these prices aren't applicable to 95.6% of Oklahoma's population.

I'm sure the surgery center is very successful marketing these prices to the wealthy uninsured. That doesn't mean it is something replicable as it targets a very small niche population, and one that is theoretically decreasing with the implementation of ACA.

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JeffDeWitt
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Re: Healthcare Price Transparency

Post #4 by JeffDeWitt » November 6th, 2013, 12:28 pm

The prices don't apply to the insured because it's expensive to handle the insurance claims.

It's like gas stations charging more for credit than cash, but of course the difference in cost is FAR more than the 3% or so the credit card companies charge.

And it's yet another argument for a common sense plan where we would be coverage for catastrophic care but use an FSA account that we own for everything else.

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clando
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Re: Healthcare Price Transparency

Post #5 by clando » November 6th, 2013, 2:58 pm

JeffDeWitt wrote:The prices don't apply to the insured because it's expensive to handle the insurance claims.
Processing insurance claims is a fixed cost, not a transactional cost. If you process insurance claims then you have staff dedicated to that task (fixed cost). The transactional costs are miniscule as most all are handled electronically. This surgery center clearly still process insurance claims and therefore have not eliminated the fixed costs associated with the claim processing. The prices don't apply to insured because I guarantee some, if not most, of the insurances reimburse higher then his advertised prices. Because if he billed them his advertised prices, they would gladly pay him less. Have you ever since a medical bill where the insurer paid more than what was billed?

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clando
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Re: Healthcare Price Transparency

Post #6 by clando » February 28th, 2014, 10:12 am

Here is a very good article concerning the difficulties and attempts to determine the true cost of healthcare. I've tried to explain the difficulties within this thread, but I understand it's a hard to accept the fact that we have no way of really determining what it costs.

Wall Street Journal wrote:Searching for the True Cost of Health Care
Providers Look to Cut Waste With Detailed Cost Tracking

Most doctors and hospitals have only a vague idea what it costs them to deliver care, experts say. Prices are generally based on what payers will pay, with little relation to cost.

Several leading health systems aim to replace that chaotic pricing system with one based on the true cost of delivering care. Armed with that information, they believe they can reduce health-care costs from the inside, by identifying inefficiencies, rather than accepting arbitrary payment cuts.

The philosophy is: If you can measure it, you can manage it.

[tab=30]Step by Step
M.D. Anderson Cancer Center, the Cleveland Clinic, the Mayo Clinic and other top hospitals have embraced a process, advanced by two Harvard Business School professors, called time-driven activity-based costing. TDABC involves mapping out every step involved in delivering a medical service, from a simple blood draw to a complex surgery. Researchers determine what personnel and equipment are needed, what their costs are per minute and how many minutes are involved. They tally the costs for all the steps, allocate a share of overhead expenses and add in a profit margin to determine the true cost.

[tab=30]One Size Doesn't Fit All
Indeed, integrating that approach into the current health-care payment system with all its price negotiation and cost shifting won't be easy. Critics argue that hospital overhead costs are too complex to allocate accurately and that patients are too varied in their needs to fit neatly into standardized units of time and care.

For now, such projects aren't practical for many hospitals. "Cost-accounting systems are exceedingly complex and expensive for hospitals to perform," says Rich Umbdenstock, president of the American Hospital Association. "But eventually that's the only way you'll be able to price things on a realistic basis."

http://online.wsj.com/news/articles/SB10001424052702304888404579379122507671850

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Bill Bryan
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Re: Healthcare Price Transparency

Post #7 by Bill Bryan » February 28th, 2014, 1:03 pm

I'm glad to see WSJ doing a little bit of honest reporting, to be honest. After Murdoch took it over, it's become ... factually challenged on some things.
"My presidency is entering the fourth quarter. Interesting stuff happens in the fourth quarter."
- President Barack Obama

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clando
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Re: Healthcare Price Transparency

Post #8 by clando » February 28th, 2014, 2:18 pm

Foggy wrote:I'm glad to see WSJ doing a little bit of honest reporting, to be honest. After Murdoch took it over, it's become ... factually challenged on some things.
I was surprised to see it was a WSJ article too. Someone posted in one of the Linkedin groups I belong to.

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clando
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Re: Healthcare Price Transparency

Post #9 by clando » May 20th, 2014, 9:18 am

Since this thread is about transparency, I thought I would share this article. Even though it doesn't portray Healthcare Executives in a good light, I thought it was sharing.

NY Times wrote:Medicine’s Top Earners Are Not the M.D.s

THOUGH the recent release of Medicare’s physician payments cast a spotlight on the millions of dollars paid to some specialists, there is a startling secret behind America’s health care hierarchy: Physicians, the most highly trained members in the industry’s work force, are on average right in the middle of the compensation pack.

That is because the biggest bucks are currently earned not through the delivery of care, but from overseeing the business of medicine.

The base pay of insurance executives, hospital executives and even hospital administrators often far outstrips doctors’ salaries, according to an analysis performed for The New York Times by Compdata Surveys: $584,000 on average for an insurance chief executive officer, $386,000 for a hospital C.E.O. and $237,000 for a hospital administrator, compared with $306,000 for a surgeon and $185,000 for a general doctor.

http://www.nytimes.com/2014/05/18/sunday-review/doctors-salaries-are-not-the-big-cost.html?src=rechp&_r=0


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