In the New York Times, Dr. Elisabeth Rosenthal correctly praises a policy change undertaken by the Trunp Department of Health and Human Services/Center for Medicare and Medicaid Services (HHS/CMS).
administration implemented a new rule that could be a game-changer for health care.
Starting this month, hospitals must publicly reveal the contents of their master price lists — called “chargemasters” — online. These are the prices that most patients never notice because their insurers negotiate them down or they appear buried as line items on hospital bills. What has long been shrouded in darkness is now being thrown into the light.
I think this is an improvement over the status quo but it is not a game changer in my opinion. It is a release of data. It is not a release of actionable information.
Chargemaster prices are are wildly variant with reality of what is paid. Two researchers in Health Affairs (Batty/Ippolito 2017) found that there is a strategic rationale behind chargemaster logic although there is incredible local variance:
Since the 1970s, hospital list prices (which we also refer to as “charges” in this article) have grown much more rapidly than actual payments for those services and now differ from those payments by more than a factor of three; and the list price of a given service at one hospital may be vastly different from that at another hospital, even one nearby….
Although we make no claims about whether list prices are set in a way that maximizes hospital revenue, we found that they did appear to reflect systematic hospital-level pricing decisions and were related to payments (causally in at least some cases), but did not have a systematic relationship to care quality. Overall, these findings are consistent with certain hospitals’ increasing list prices as part of a strategy to generate revenue, and they suggest that list prices do play an important role in some cases and should not be ignored.
There is tremendous between hospital differences in list prices. North Nowhere General will have a different pricing policy than North Nowhere Community Regional Hospital.
So seeing list prices is somewhat useful. But the data is barely information as it is almost completely indecipherable to anyone except a billing expert with plenty of time on their hands.
Transforming this data into meaningful information that lists likely to pay amounts and plain Englishes the billing events is the next useful step. “Likely to pay” amounts will be contingent on insurance status and insurer while the billing event is unpredictable as some procedures will start as one thing, new information will be found mid-way through and the final procedure will be legitimately billed out as something very different. But that will be useful information.
Right now, we have data when we had very little before. Now we need information.
Yep. How is this useful? If I’m in the hospital, am I going to leave if I don’t like the prices?
@Brachiator: It’s a first step. And the theory of change is that price shopping for deferrable events should lead to more competition/lower actual prices once the data turns into information.
When it comes to maintaining or regaining our health, for a lot of us the central question is quality, not price.
For a wild example close to home, I am pretty certain that all of the experts who didn’t diagnose Schlemazel correctly could offer their services for free and no one in Schlemazel’s circles would take them up on it. They can’t trust them.
Now maybe making public the widely differing prices charged for the same procedures helps shine a light on how corrupt and inefficient put health care system is, though it seems to me we already know that.
Don’t insurance companies have this information already? I’m expecting the insurance companies to do the negotiating on my behalf.
If the place where information is given is not at a point where I can reasonably and effectively act on it, it is not of much use to me.
I guess this information is valuable, but I question some of the underlying assumptions about how real world medical decisions are made.
Usual and customary rates are fantasy numbers set by providers to make sure they are never leaving money on the table when it comes time to file a claim knowing full well they are only going to receive the negotiated contractual rate.
Except for the poor bastard who walks in without any insurance.
But I’m sure you already know this.
Another example is GrandmaBear’s family, who chose a hospital an hour from their home, in a different city for their child with (I don’t remember which kind) cancer, even though there is a children’s hospital much nearer their home.
Because it is a better hospital for the treatments needed, despite the inconvenience (which is a sort of price).
I just get grumpy at hand idea that I should be considering price instead of my life.
It’s the whack that starts the wedge. Keep whacking and the log will pop.
This is a start. I’d like to see what they get paid though.
Mom was reviewing recent medical bills yesterday. She had some lab work done. Hospital billed $25 for the blood draw on top of charge for the tests. Her insurance paid .01 and the hospital is happy. But without insurance you’re going to pay 2500 times more.
The next step is to make their best price available to everyone.
I’d figure the “revelation” of how much irrational variation and wish-/vapor-pricing is rampant in the system, the discordance between price asked and money changing hands — where different hands pay different amounts and oh look, how unexpected who’s worse off — won’t necessarily burnish anyone’s (or any system’s) image. Still have the problem that many just aren’t paying attention, but having large scale data available for some easy maps and charts to play with on a slow-news cycle might open a few more. We’re hunting for that proverbial straw in a haystack that will finally overburden the camel.
As I understand it, what is going on with hospital pricing is that there are really two prices charged by most hospitals: (1) the negotiated price which is really the market price that most insurers will pay, and (2) the list price that is a deliberately inflated price for the purpose of writing-off indigent care and not something hospitals generally expect to be compensated for.
Since most people are insured, the negotiated prices are what hospitals generally earn. To make a hypothetical example, a hospital may negotiate $5000 as the payment rate for a given surgical procedure or hospital stay.
The list price is what is written off when uninsured patients don’t pay. These include undocumented, homeless, and just the general poor who don’t have insurance or the means to pay. This care is going to get written off anyway, why not inflate the write-off? So for that $5000 procedure, why not inflate the list price to $20,000 so that they can claim $20,000 in losses every time they treat an uninsured patient? At the end of the year maybe they will run up $10 million in indigent care write-offs or losses instead of $2 million and gain a massive tax break as a result. Of course what happens is that people with some ability to pay get massively screwed.
The answer is not simply to require hospitals to post list prices, but also to prohibit price discrimination. Require that hospitals charge all patients the same price for every drug or procedure regardless of their insurance or ability to pay. We would not tolerate separate prices for black or white patients. That would be outlawed instantly. Yet we tolerate it for poor and wealthy patients.
Years ago I had an urgent CT scan. At the time I had a high deductible plan. These are probably not the exact numbers but IIRC, the ‘charge’ was $5,000 and the negotiated price was $800 and I think I paid about a hundred less than that through some sort of ‘provider responsibility’ or ‘plan contribution’ even though I was not thru the deductible.
The thing that freaked me out was that, had I been uninsured, I presume I’d have been billed $5,000. How would I have known — other than just general awareness that these bills are bullsh*t — what to push for as a discount if I prompt paid? And would the hospital have cared to discount? Maybe not, thats all intentionally shrouded.
I’m not saying that random uninsureds should get the lowest possible price that is granted by contract to a major insurer that does a lot of volume and doesn’t have a high default rate. But there should be some sort of COD or net-30 price for a relatively common urgent item like an abdominal CT scan. A price that is tied to some level of reality (ie: staffing cost + IV and contrast cost + an appropriate allocation of the capital cost of the CT machine spread over 1000s of uses + a reasonable margin).
Is that $1,000? $1,500? Two grand? I dunno. But it shouldn’t be something you find out weeks after the event and then have to fight over if you’re self-paying / uninsured.
As the expert on NPR (*gasp*) said, this information is mostly useless because it gives you line item charges, not charges for complete procedures. Yeah, it’s nice to know how much they are going to overcharge for that medical sponge or dose of anesthetic, but that still doesn’t tell you what the total cost of a gallbladder removal would be. A dedicated person cost add all the necessary line-items, but who has the time?
@Raoul: Why shouldn’t everyone pay the same price? That is how the rest of the economy works. Would you be comfortable with a hospital that charges one rate for black patients and another rate for white patients? Why then do we tolerate a system in which they charge one rate for poor patients (uninsured) and another rate for wealthier patients (insured)?
I’d argue what we have now is a nearly incomprehensible (for anyone outside of the medical field) jumble of super-concentrated jargon, acronyms, and descriptions that are akin to a foreign language. Attached to them are seemingly completely random dollar amounts, so difficult to parse for “good value!” or “Christ, what a rip-off” evaluations that it’s pretty much worthless info. Who the hell shops hospitals when they’re in anaphylatic shock?
Major Major Major Major
Excellent. Progress is progress!
Well, Claude Shannon would disagree.
@Major Major Major Major:
Data starts as information, but then gets stripped of context and definition and usually tortured a bit to get it to say what you need it to.
The focus on what it means for individual decisions — which exact hospital for which person for an exact and real procedure — I don’t think that’s the battlefield where this matters. Everyone’s too rightfully swamped at that point for this sort of firehose to have value. But for beating back yet one more veil of the utter nearly incomprehensible jibberish of the overall system, this could help. All this vapor-pricing means they’re pretty well stomped on any possible link between quality of care (in equipment or staff, etc) and price. Imagine that in a restaurant setting. 300$ meals where it turns out the the meat’s cooked on a steel drum and delivered to the table by the fry cook, but hey! they’re made up for anyone that eats and doesnt have enough change for a propet tip. Demonstrating on a national scale the sheer rampant top-to-bottom nonsense of the world’s best healthcare to people who aren’t actually wrestling with the fact that mom’s dying in realtime (which is when most people are faced with the raw data), well, one can maybe hope. theoretically. People aren’t exactly overjoyed with big pharma and this rhymes.
@Kent: healthcare issues in a nutshell, those that can afford it don’t sweat the prices or have the kind of insurance where it doesn’t matter and those that are so critical yet indigent that there’s nothing the hospital can do but to try and heal them and hope that the taxpayers will offset the cost. Anyone inbetween is toast. The thing is, there’s a boatload of costs built up into the delivery of health care…
i work for a lab software company… think of the costs layered in there… the equipment to run the specimens obtained, the reagents needed to perform the needed tests, the phlebotomists to draw the specimen, gloves, tubes, needles, labels, printers to print the labels, then the bench techs to run the specimens thru the instruments, software to interpret the results and then a mechanism to get the results from the lab instrument into the hands of the nurses and the docs to begin treatment based on those findings… and you need to find a way to ensure that everyone gets paid and that the docs have the means to prescribe an affordable treatment.
@Kent: That isn’t actually how the rest of the economy works. Even what appears to be the retail price of things isn’t as firm as it seems. (One example that comes to mind right away is corporate travel. Any large corp with significant travel pays well below publicly findable retail prices for travel. Those people in the big front seats are not just traveling on expense accounts, they also aren’t paying close to 100% of the published prices. It’s negotiated based on a volume goal that meets the sellers goals.).
Now, is that right or wrong? Great topic for lots of churn. But in the capitalist reality we live in, there are reasons for differentiated pricing.
As post 10 above said (which I hadn’t seen as I was composing my post 11), there is a high write-off percentage for indigent and uninsured care. Pricing some of that into the ‘retail’ price of care is, at least to some people, a reasonable approach. What the differential could/should be between best payer insurances and retail/cash customers is, again, a subject for discussion.
All of this would be obviated if we could get rid of the whole damn way we pay for care in this country. I’d love to see huge reforms that made the above go away. No one in Sweden is fussing about ‘retail’ vs insured prices for CT scans, I’m fairly confident.
@Raoul: Point taken on the travel industry. But then again, you can go online and buy the exact ticket you want at the exact price in advance. No one walks off an airplane not knowing what the flight cost and gets an unexpected $2000 bill three weeks later.
But for most retail services, the prices are pretty much the prices. If you walk into Costco, there aren’t 27 different secret prices for each item depending on who you are and what affiliations you have.
Even something like cars, for which there is a lot of price negotiation, still has prices based on reality. The corporate discount on a $25,000 new auto might be $1000. Toyota doesn’t jack the price on a corolla up to $150,000 after you drive it off the lot because you aren’t part of some big corporate buyer.
Health care is a MASSIVELY subsidized industry in a myriad of ways. There is no particular public benefit for allowing price discrimination between consumers. If all providers were required to charge the exact same price to all consumers then some still would not pay. And those default rates could be built into the price for everyone else. But at least the pricing would be transparent. I fail to see why defaults for indigent care are something that needs to be priced into the retail price for a procedure paid by individuals rather than absorbed across the board. It only happens now because we allow it to happen.
@piratedan: No argument with you at all. Pricing for services is complicated. But that still isn’t an argument for allowing providers to charge an individual $500 for a lab result when they charge an insurance company $75 for the exact same result.
Just waiting for the first antiabortion groups to glom onto these lists and start harassing hospitals for providing abortion and miscarriage services. Most abortions aren’t done in clinics, and complicated ones have to be done in hospitals. But clinics have been easier to identify and harass. The chargemaster list will make those hospital services more visible.
Health care doesn’t have two prices. A service has as many prices as there are insurers, plus one more.
I had a case where I was changing jobs (and was on COBRA in between) where I was supposed to get a CT or MRI and had the option of doing it on my old insurance or my new one, if I did it next week or in two weeks. So I asked: “how much?” The answer was: “What insurance?” I said “well, I have COBRA with X now, but it will be Y later … how much?”
The answer was (approximately) $750 with COBRA and X now, of which they pay $250 and I pay $500. Or, $800 with Y, of which they pay $350 and I pay $450. So I waited and paid the radiology lab more of which less came out of my pocket.