Post Your Price: It's Not So Simple for Hospital Executives

Last May, amidst the groundswell of support for price transparency in the healthcare system, Steve Sonenreich did something almost no other hospital executive had done.

Mr. Sonenreich, president and CEO of Mount Sinai Medical Center, a teaching hospital in Miami Beach, Fla., pledged in a local radio interview to post the rates of what the hospital charges private health insurers.

"We will post our prices relative to Blue Cross, and Aetna, our contractual prices, and we'll challenge Baptist [Health South Florida in Coral Gables] and the other systems in the community to do the same," he said.

For many hospital leaders, this marked a turning point: Either embrace price transparency for what it is, or dig in the heels to maintain the status quo.

The rise of healthcare price transparency
Mr. Sonenreich's bold stance did not come about without context. It occurred only a few months after journalist Steven Brill threw the healthcare industry into a state of frenzy with his explosive TIME exposé, "Bitter Pill: Why Medical Bills Are Killing Us." The 36-page investigative report — the longest story TIME has published by a single author — delved into the high costs of healthcare, the role of chargemasters and how providers and insurers can profit off the lack of transparency throughout the system.

CMS then released troves of charge data, partially in response to Mr. Brill's article, on the 100 most frequently billed inpatient procedures and 30 most common outpatient procedures. The data found hospitals prices varied wildly from market to market. CMS figures included both the sticker price of procedures (potentially what uninsured patients would have to pay) as well as what Medicare actually reimbursed to the hospitals, which was not nearly as variable.

While many hospitals and health systems had previously developed ways to help their patients understand their financial responsibilities, the uproar from last year sounded an alarm that more needed to be done — and that the incumbent pricing structure needs to be rationalized.

Mount Sinai's stand
StevenSonenreichMr. Sonenreich says other hospital executives likely understand his perspective. As large employers, normally the largest employer in a given community, hospitals pay a lot to provide health insurance to their employees. At Mount Sinai, there are 3,500 employees.

Officials knew the pricing structure had to change once they witnessed employees receiving care at competing hospitals. Mr. Sonenreich says Mount Sinai, a standalone facility, has been paid 35 percent less from private payers than their competitors for similar procedures and comparable quality. They discovered this information by looking at their own healthcare costs and claims, which were skyrocketing when employees ended up at other hospitals due to emergencies and other circumstances.

"As a large academic medical center, it's concerning when our employees find themselves in neighboring hospitals that, because of the size of their system, have much more pricing leverage than we do," Mr. Sonenreich says, noting that the hospital consolidation trend is partially to blame as well. "Our interest in pricing transparency is about controlling our expenses as an employer with regard to health insurance for the organization and for the organization's employees."

The opaque health insurer contract
When it comes down to dollars and cents, hospitals and health systems drive their margins with commercial insurers, not with Medicare or Medicaid. Organizations don't barter with government payers for rates — those are simply established through prospective payment systems. But they do negotiate confidential contracts, terms of which do not see the light of day, with commercial payers.

Despite Mr. Sonenreich's pledge to publish private payer rates, those confidential terms within the contracts — what he calls a "gag clause" — have prevented his institution from doing so. Mount Sinai officials contacted all of their insurance carriers to release the information, but the insurers refused to grant Mount Sinai permission to disseminate the rates.

"They thought it was a challenge to strategic market information," he says. "We believe there's a direct correlation between the lack of transparency and the increase of insurance expenses."

However, private health insurers have argued provider rates have nothing to do with the consumerism-focused push for price transparency.

Susan Pisano, vice president of communications for America's Health Insurance Plans, says if the rates that insurers pay to providers were made public, it would "inhibit competition." She says it could potentially encourage hospitals to demand the highest reimbursements in a given market, which would not benefit patients.

"Consumers care about two things: quality of provider and what it is they are going to have to pay out of pocket," Ms. Pisano says. "That's the information that is useful to consumers. The behind-the-scenes information isn't useful to them."

MountSinaiMedicalCenterFloridaBut Mr. Sonenreich and hospitals have said otherwise. The old adage goes that transparency is the best disinfectant, and Mr. Sonenreich believes publishing all payer rates will force all players within the increasingly concentrated health system to price their services more rationally.

"Insurance companies and providers sign contracts, we all do, that do not allow us to disclose our prices," Mr. Sonenreich adds. "The only way we find out this kind of information is when our employees wind up in another institution. And it's shocking. We believe that transparency would save employers and employees — and our country — money, and it would substantially reduce the expense of health insurance coverage."

What hospital executives must embrace
Hospital executives who have been gun-shy to accept the price transparency movement have several options.

Mr. Sonenreich says hospitals must get involved with other employers. "Employers are frustrated that the cost of health insurance continues to rise," he says. For hospitals that are low-cost, high-quality providers, now is the time to market those features to an audience that is increasingly shopping for the highest quality and the most reasonable price.

The most foundational step hospitals can take, however, is simple: Post chargemaster prices, and clearly communicate what they mean for patients. Anne Rose, vice president of revenue cycle at Lee Memorial Health System, a network of four acute-care hospitals based in Fort Myers, Fla., says her organization has listed the prices of inpatient, outpatient, lab and other ancillary services on its website for the past five years.

"We did that because the approach we've taken is we want to try to facilitate our patient experience not only from a clinical standpoint but also from a financial and business standpoint," Ms. Rose says. "We've invested resources to really try to have some of our website devoted to explaining hospital charges, hospital billing and what [patients] can expect."

She says the feedback has been very positive, and Lee Memorial will use that momentum to further answer the calls for price transparency among the patient base.

"Obviously, you're involved in healthcare for your work that you do, and so you understand, it isn't as easy as quoting how much it's going to cost for a new carburetor or some other more discreet service," Ms. Rose says. "We wish it was a simpler process, but we will continue to try to refine the information to the best of our abilities so it is the most helpful to our future patients."

More Articles on Hospitals and Price Transparency:
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