When price transparency is useless (or worse)

Price transparency is a major concern to self-pay patients. Without knowing ahead of time what a provider charges for a particular service, there is no reasonable way to shop for care and make sure you are getting the best value for your health care dollars.

That said, price transparency isn’t all that helpful if the prices that are being revealed to the public aren’t real, or are shrouded in technical jargon that is meaningless to anybody without the benefit of a medical degree or a background in health care billing. Nor, I fear, are recent legislative initiatives to force providers to reveal their prices going to be very useful either, and may even be counter-productive. 

I recently came across two different stories about forced price transparency, one in Maine and one in North Carolina. Both raise serious concerns for self-pay patients. Here’s an excerpt from the Maine story:

For years, most patients have received medical procedures without knowing the cost. Want to know how much you’ll shell out for that X-ray or CT scan? Many would simply wait for the bill.

But starting in 2014, practitioners in Maine will be required to compile a list of their most commonly performed procedures — anything done more than 50 times per year — and the price that would be paid by an uninsured patient. Practitioners, from chiropractors to hospital internists, must inform patients about the availability of the list and provide copies upon request.

An Act to Require Public Disclosure of Health Care Prices, a bill by Sen. Dick Woodbury, I-Yarmouth, passed during the last legislative session and was signed into law by Gov. Paul LePage. The bill replaced an older law that simply required the posting of prices.

That effort was never really followed, said Gordon Smith, executive vice president of the Maine Medical Association…

Some may be surprised to find that I’m not really a fan of these price transparency efforts. There are two major problems that I see, both of which harm self-pay patients:

  1. The prices that are reported typically aren’t meaningful for self-pay patients, as they’re usually a mix of Medicare, Medicaid, insurer, and ‘chargemaster’ rates. The North Carolina statute requires hospitals to report a ‘range’ for what large insurers pay, as well as the ‘average negotiated settlement’ for a self-pay patient. None of these are real prices, and self-pay patients may wind up having to pay more than they otherwise would have to.
  2. Because of the nature of government and bureaucracy, there are going to be a number of people whose job it is to make sure the prices are being reported the ‘right’ way, adding administrative costs to the system and likely driving up the charges for the one group that can least afford it – self-pay patients.

I’ll pass on commenting further on the second point, as that probably gets more deeply into politics than I prefer to on this blog.

But the first point is especially important. The state of Ohio recently passed health care price transparency legislation. Michelle Katz, author of Healthcare for Less and who runs a web site by the same name, recently put up on her Facebook page a link to the prices released by the Wexner Medical Center at Ohio State University.

The price list notes at the very top that “The hospital’s charges are the same for all patients, but a patient’s responsibility may vary, depending on payment plans negotiated with individual health insurers. Uninsured or underinsured patients should consult with our admitting and billing staff to determine whether they qualify for discounts.”

So right away they are saying that these prices aren’t real, that insurers pay less and the uninsured can pay less too. Probably the only people who will have to pay these prices are the insured who are out-of-network, someone with a high-deductible plan whose insurer doesn’t bother to re-price the bill, or the uninsured who don’t ask for a discount.

For example, the price sheet lists a chest X-ray at $353. According to Healthcare Blue Book, a chest x-ray in the Columbus area (where OSU is located) typically costs an insurer about $53. A lipid panel lists for $235 at Wexner, while according to Healthcare Blue Book a patient paying directly through a national lab testing service would pay $48 (for what it’s worth, I found a price of $37 at EconoLabs).

Not all of the prices listed are wildly inflated. A basic level-1 emergency department visit lists for $269 (not including physician fees, drugs and supplies, and other incidentals) at Wexner, while Healthcare Blue Book says that insurers would typically pay $587 for a level-1 visit. At more extreme levels of care the price comparison’s still favor Wexner over what insurers pay ($2,197 list price for level-5 emergency care at Wexner, compared to $4,696 paid by insurers), although it’s hard to say for certain because Healthcare Blue Book includes imaging expenses in their cost while Wexner appears not to.

What this all means for self-pay patients is that the prices that are given under various price transparency requirements imposed by states will continue to be largely meaningless. They won’t reflect what most people pay, either because insurers get much better rates or hospitals can discount their prices for uninsured patients upon request.

Unfortunately some unwary people will mistake the newly-transparent prices for real prices, and assume that is the price they must pay. In this regard many self-pay patients may get stuck with higher medical bills than they would otherwise have to pay if they knew going in they were going to have to negotiate for a better price.

There is also the danger that these laws could actually prevent some doctors and hospitals from providing deeply discounted prices to self-pay patients. If providers are required to list the price they charge the uninsured, those who also accept insurance may be reluctant to list a price below what insurers pay, and also reluctant to then charge less than what is listed.

So while I’m obviously a big fan of price transparency, it’s important that those prices be real – like the ones charged at the PATMOS Emergiclinic in Greenville, Tennessee, or the Surgery Center of Oklahoma. In these and thousands of other practices and facilities around the country, health care providers have figured out how to charge a fair, transparent price for their services without needing legislation to help them to do so.

The bottom line is, just because a price is transparent doesn’t mean it’s real, and self-pay patients shouldn’t assume these laws do much to help them. 

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5 Responses to When price transparency is useless (or worse)

  1. DR. Mike Vasovski says:

    Just like the room rates that motels post on the back of the entry door where the check out times appear. “Maximum rate for one night $385” for a room that you are paying $90 when you checked in.

    Our primary care/general practice office charges $45 per visit inclusive of everything we do. After January 1, 2014 we go up to $47.

  2. Dave says:

    Yes, laws with dentures, not teeth–good grief, what a waste of time when they are written in pencil.

  3. JB McMunn says:

    I’d like to point out that the transparent prices at places like SCO are hideously inflated and could be done for far less while still being profitable. I wouldn’t call their prices fair by any stretch of the imagination unless you consider 3X Medicare to be fair.

    • sean@impactpolicymanagement.com says:

      Hmmm, as Medicare prices are set through something other than the market, I tend to discount them as being necessarily the ‘right’ price. Also keep in mind that the SCO prices are ‘all inclusive.’ Just looking at one procedure, an inguinal hernia repair, Medicare has at least 3 components (surgeon, anesthesiologist, facility). I stumbled across this document from Covidian, it’s a bit dated (2009) but suggests that at least for this type of procedure, SCO is in the ballpark. http://www.covidien.com/imageServer.aspx/doc187709.pdf?contentID=15159&contenttype=application/pdf And of course if you can find a better deal, take it!

  4. Pingback: Florida hospital backs away from price transparency |

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