Price Transparency: Why It's an Issue & Where Hospitals Fit in

Healthcare prices have been an enigma within the U.S. healthcare system, especially in light of this year's TIME exposé on why healthcare and hospital services cost so much. Simply put: More patients are starting to question why their healthcare bills are so high — and why they can't find healthcare prices at all.

In an effort to clarify the muddied waters of healthcare price transparency, Catalyst for Payment Reform and the Health Care Incentives Improvement Institute released a report in March that quantified how a majority of states have failed to enact comprehensive healthcare price transparency laws. The two groups graded each state on whether healthcare pricing information is available, how accessible it is and the scope of information available. Overall, 29 states received an "F" grade, and seven states received "D" grades, meaning an overwhelming majority of states do not offer consumers adequate information on healthcare prices.

While the report is an indictment of the lack of healthcare price transparency legislation on the books today, Suzanne Delbanco, PhD, executive director of Catalyst for Payment Reform, says the groups did not conduct the research because they thought laws were the only solution to the problem. Instead, she views price laws as a last resort, and hospitals could be taking two steps on their own to ensure their patients have requisite knowledge to make informed healthcare decisions.

"Number one, hospitals can stop requesting health insurance companies to hide their pricing information from patient members," Dr. Delbanco says. "It's a minority that does this, but gag clauses leave gaping holes. Two, hospitals can make it as easy as possible for prospective patients to find out what hospital services will cost. It's one thing to post the chargemaster, and it's another thing to work with patients and their health benefits to figure out what they will pay out of pocket. That could help foster transparency when it's needed most."

Hospitals and chargemasters

The chargemaster, as mentioned by Dr. Delbanco, has been a lightning rod symbol for price transparency in the new era of consumer-driven healthcare, though few patients actually pay full chargemaster rates. Hospitals in California have already experienced "open book" measures when it comes to these all-encompassing lists of charges. Since 2006, the California Office of Statewide Health Planning & Development has required hospitals to submit a copy of their chargemasters to post online, as well as average charges for 25 common outpatient procedures.

John Bishop has served as CFO of Long Beach (Calif.) Memorial Medical Center, Miller Children's Hospital Long Beach and Community Hospital Long Beach — all part of Fountain Valley, Calif.-based MemorialCare Health System — for the past three years. He explains that chargemasters are important, but when it comes to the transparency movement, hospitals and health plans both play a role with them. Chargemasters are the result of years of negotiations with health plans that have requested discounts from hospitals' prices, Mr. Bishop says, and prices that appear to be high or inflated are "an unfortunate byproduct" of the bartering system that has endured for decades.

"Price transparency — and chargemaster price reduction — is a goal of ours, but it must be done in cooperation with the health plans in order for it to be successful," Mr. Bishop says. "There needs to be an industrywide recalibration of charges as the impact on health plan reimbursement, Medicare and [Medicaid] cost reporting and charity care will all be affected."

Price transparency — for the good of hospitals and patients

For Robin Gelburd, JD, the movement toward transparent and reliable healthcare price information started many years ago. Ms. Gelburd is president of FAIR Health, a New York City-based organization that maintains a database of healthcare charges across the country. She says healthcare price transparency is vital today because the previous system of "no questions asked" is no longer viewed as effective.

"For so long, the healthcare system, in a sense, worked in the shadows. Consumers had no skin in the game, and almost behind a curtain, the transaction was somehow settled upon," Ms. Gelburd says. "Cost was not a critical issue, and there was a lot of dust on chargemasters because no one was really looking at those with a bright light. Consumers are much more engaged in healthcare now due to the economic climate and [mechanisms] such as high-deductible health plans, and they have to manage care in a more proactive way."

While hospitals and other healthcare players work on becoming more transparent in their prices, one hurdle will still remain: Communicating to patients that prices and quality healthcare are two completely separate things.

"We could have complete price transparency, without the help of any laws, if hospitals, doctors and health insurance companies worked together to provide it," Dr. Delbanco says. "The other challenge is we have to continue to educate American consumers about cost and quality relationship — and the fact there really is none. People assume more expensive care is better. We have to pair cost information with quality information. Otherwise, consumers may assume more expensive care is better."

More Articles on Healthcare Price Transparency:

Bill Requiring North Carolina Hospitals to Post Prices Passes Senate Committee
Will Hospital Price Transparency Drive Up Healthcare Costs?
Explosive TIME Exposé Probes World of Hospital Costs

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