The Patient Protection and Affordable Care Act (ACA) requires that each hospital operating within the U.S. establish (and update) a publicly available list of the hospital’s standard charges for items and services provided by the hospital. Although this mandate only applies to hospitals, there is talk in Washington about extending this mandate to physician office practices.
What is driving this effort?
A variety of forces are coalescing around the issue of price transparency. Some economists have long argued that one reason the cost of health care has risen at a rate far faster than most other services is the lack of price transparency and the inability of consumers to “shop around” for health care.
Opponents of price transparency argue that health care is a service that does not lend itself to “shopping” because of the emergent nature of most health care services. For example, they argue, it is unrealistic to expect a patient to do a google search for “best price” while they are in the ambulance on their way to the emergency room.
In addition to the federal efforts aimed at increased price transparency, many states have been pushing price transparency with a particular emphasis on those services that are considered “shoppable”. For instance, a patient experiencing anaphylaxis isn’t going to search for the lowest cost emergency room, while a patient interested in allergy/immunotherapy (A/I) could shop around for the lowest cost allergist.
New Hampshire (NH) has been in the forefront of the price transparency initiative. The NH Insurance Department created the NH Health Cost website nearly 10 years ago. It allows consumers to compare providers based on both cost and quality for a range of services.
- Basic Office Visits
- Office Visits Established Patient
- Office Visits New Patient
- Laboratory Services
- Comprehensive Preventive Visit (by age)
- Physical Therapy
- Radiology Services
- Behavioral Health Care
- Ambulance Services
Here is how it works
First, the individual is asked to identify the specific medical procedure they want to compare, i.e. Comprehensive Preventive Medicine – 18-39 years old. Next, they are given the option to search the NH Health Cost database based upon their health plan (Aetna, Cigna, Harvard/Pilgrim, other) or whether they are uninsured.
Finally, the individual is asked to identify the zip code and the distance (5, 10, 20, 50 miles) from that zip code they wish to search/compare.
Below is an example of the information individuals could receive based on their insurance status.
Physician office visit (99395): Comprehensive Preventive Medicine (18 – 39 years old)
|Uninsured Patient (i.e. cash)|
|Cost||Uninsured Discount Percentage||Uninsured Cost||Patient Complexity|
|Cost||Precision of Estimate*||Patient Complexity|
*Because of the variability across plans and plan types, it is difficult to predict exactly what the pricing for individuals might be. This is an estimate based on all the information available. The description of the estimate (low, medium, high) indicates the confidence level that what is posted is what you will pay.
|Anthem Group (Employer Plan)|
|Cost||Precision of Estimate*||Patient Complexity|
*Because of the variability across plans and plan types, it is difficult to predict exactly what the pricing for some plans might be. This is an estimate based on all the information available. The description of the estimate (low, medium, high) indicates the confidence level that what is posted is what you will pay.
Provider A above is the only provider offering an “uninsured” discount and is a medical center operated by a faith-based organization. Although most providers in New Hampshire don’t appear to offer uninsured discounts for office visits, this is not the case for many diagnostic services. In some cases, the “uninsured discount” offered by some providers is nearly 80% below list price.
According to a recent study conducted by the University of Michigan, researchers estimate that this price transparency tool has reduced out-of-pocket spending in NH by 11% over the past five years. More specifically, the researchers estimate that, in total, individuals saved approximately $7.9 million and payers saved $36 million on a range of services, especially diagnostic testing.
Where does this go?
The Trump Administration is “all-in” on the issue of price transparency and is firmly committed to enhancing the ability of consumers to get price AND quality information about services and providers. Many of the policy objectives outlined in a report released by the White House last fall, Reforming America’s Healthcare System Through Choice and Competition, clearly depend upon the ability of consumers to have clear, understandable price information if they are going to succeed.
In addition, there seems to be a growing number of members of Congress – from both parties – that feel price transparency is an important component of any health reform legislation, including the so-called “surprise billing” problem.
When you consider the various bi-partisan price transparency initiatives going on at the state level and combine those with federal initiatives mandating greater price transparency, it is hard to imagine that there will be a retreat on this initiative any time soon.
There are already signs that some institutions, fearing that their chargemaster information will be used by potential patients that “price shop” to seek out other providers, are re-evaluating their chargemasters to present more realistic pricing information.
A recent article in Kaiser Health News reported on a Florida hospital that revamped their chargemaster after a patient was administered 12 milliliters of rabies immune globulin at a cost of over $46,000 ($3,868 per milliliter). According to the report, the wholesale price for the 12 milliliters was approximately $4,300 ($361.00 per milliliter).
One month after this Florida patient received her injection and complained about the cost, the hospital revised its chargemaster for this injection, reducing the price to $825 per milliliter.
Incidentally, the price revision just happened to occur, shortly before the new rules requiring all hospitals to post their charges publicly took effect.
While the new federal requirements are still a work in progress, it is not difficult to see where innovative and creative consumer organizations will soon take the “raw” charge information – made available on hospitals and providers websites – and use that information to populate consumer friendly price comparison tools.
Whether consumers will take advantage of this information and “shop” for health care remains to be seen. The NH experience suggests that over time patients will become price sensitive. With more and more health insurance products coming with very high deductibles, price shopping may become even more prevalent amongst those with insurance.