November 30, 2015

Transparent Pricing May Help Prick the Balloon of Inflated Health-Care Costs

Mary MahoneyBY Mary Mahoney

J. Robinson Group Blog
balloon is about to be pricked

Recent reports about exorbitant drug price hikes and outrageous hospital bills once again are shining a light on the hidden, often nonsensical and out-of-control cost of health care in America.

In a recent investigation, The New York Times discovered a practice called “drive-by doctoring,” in which attending physicians invite their colleagues to made unneeded “consultations” on hospitalized patients without their knowledge or consent. These “experts” often charge hefty fees and sometimes split the proceeds with the doctors who call them in.

In a case detailed in The Times, a hospital patient was charged $117,000 for an unwanted, unrequested “consultation” by a doctor who was not covered by the patient’s insurance coverage. That fee was nearly 20 times the $6,200 fee charged by his primary surgeon.

Whether you blame Obamacare, a long-broken system, insurance companies, the pharmaceutical industry, health-care providers or all of the above, it’s clear that more needs to be done to control costs.

Although the policy issues are among the most complex and politically sensitive of our era, there is one way doctors and health-care providers can help: by promoting and practicing transparent pricing.

It’s not just the right thing to do; it’s a good way to win patient trust – and market share. And if trends continue, everyone may be required to do more in this arena anyway.

A law that took effect in New York this year attempts to offer some protection against such surprise charges by requiring advance disclosure on what is covered by insurance. It also says that patients cannot be required to pay unforeseen charges beyond what would have paid by their policies.

In California, hospitals are required to advertise their charges for the 25 most common outpatient procedures. And in Massachusetts, physicians and hospitals are now required by law to provide cost information for procedures and services when patients request it.

Still, there are few such laws nationally. But there is a growing movement to rein in costs through more transparency. And the private and nonprofit sectors are responding.

FAIR Health, for instance, a nonprofit organization devoted to bringing transparency to health-care costs and health insurance, has a website where consumers can check going rates for everything from a root canal to a mastectomy. The site uses a database of billions of billed medical and dental services and returns average prices based on zip code.

Research shows that providing cost and other information before treatment can reduce those costs and improve outcomes.

For example, a study published last October in the Journal of the American Medical Association found that health insurance policyholders who used a pricing website spent 14 percent less for laboratory tests and 13 percent less for CT and MRI scans than patients who didn’t shop online.

A recent study in the journal Health Affairs found that the cost of an MRI fell by $95 over two years in five cities when patients were given information about cost and not penalized if they chose a more expensive option. At the same time, the cost went up $124 in nine cities where prices were not provided.

According to Castlight Health, a company that helps enterprises manage health care costs, $300 billion is wasted in the U.S. every year in avoidable health-care costs. Castlight Health says providing information before treatment lowers costs and improves outcome. And the more accurate, personalized and relevant that data is, the better the system works.

Latest Blogs