Florida hospital backs away from price transparency

A story caught my eye this morning regarding a Florida hospital that had at one point promised to post the prices they charged insurance companies online, but is now backing away from that decision.

For self-pay patients, of course, getting accurate and up-front prices for hospital care is vital. Hospital care tends to be the most expensive type of care, and is also usually for the treatment of the most serious medical conditions, illnesses, and injuries. So the lack of real prices can pose a real problem for self-pay patients.

Most people reading this story I suspect will come away with the impression that the hospital had no alternative to dropping their price transparency plans, and believe it is a shame they’re doing so. I’m pretty sure that first impression will be the wrong one, and the second is somewhat dubious as well.

Here’s the story that caught my eye, in Becker’s Hospital Review:

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

…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…” he said… 

Mr. Sonenreich’s bold stance… 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… 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…

When it comes down to dollars and cents, hospitals and health systems drive their margins with commercial insurers…[they] 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…

So, it’s all the insurance companies fault!

Well, not so fast. The story goes on to pinpoint what I think may be the real problem here – a hospital system that is stuck in the chargemaster world, and isn’t able to look at things with a different perspective.

…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…

This, of course, is incorrect. The insurance companies don’t prevent hospitals from disclosing all prices, only the negotiated rates that they agree to be paid by the contracted insurer. This sounds secretive to some, but it’s actually pretty common in the business world – I’m pretty sure that Walmart doesn’t want Levi’s posting what they pay for each pair of 501 blue jeans, nor does Home Depot want lumber mills posting what they paid for cedar siding.

So hospitals can disclose their retail prices. The problem is, those retail prices are ludicrous, the so-called ‘chargemaster’ rates that I’ve explained here before. And as the story demonstrates, the hospital seems uninterested in examining whether the problem isn’t the ‘gag clause’ in their insurer contracts but their bizarre pricing practices:

Hospital executives who have been gun-shy to accept the price transparency movement have several options…

The most foundational step hospitals can take, however, is simple: Post chargemaster prices, and clearly communicate what they mean for patients.

From the perspective of a self-pay patient, however, I don’t see where this helps all that much – making transparent prices that are typically wildly inflated (usually anywhere from three to five times more than what an insurer would pay, sometimes much more) is more likely to dissuade someone from seeking needed care than anything else, and if they do opt to pay the excessive charge it could cause severe financial strain or bankruptcy.

The story includes a bit about another hospital system that does post its chargemaster rates, which I think illustrates the limits of transparency under the current system:

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.

I went to the site of Lee Memorial to look at their posted prices, and found what I expected – inflated prices, even after discounts for self-pay patients.

Consider the first item listed under inpatient care, major joint replacement (typically either hip- or knee-replacement surgery). It provides a range of between $ 59,868 and $ 62,853. It also shows two discount rates, $ 46,021 for uninsured patients and $ 34,516 for uninsured patients who are ‘prompt pay.’ Lee’s pricing policy for uninsured patients is fairly straightforward – 25% off the chargemaster price for uninsured, and if they pay in advance they knock an additional 25% off of the reduced price, which works out to be about a 44% discount.

But even after these discounts, self-pay patients would still be paying well above what an insurer would pay. According to Healthcare Blue Book, a total hip replacement in the Ft. Myers area would run around $21,470 if paid by an insurer.

Outpatient procedures also shows inflated chargemaster prices. A hernia repair at Lee averages $13,248, which comes down to $7,452 for a self-pay patient, while Healthcare Blue Book suggests $4,078 is what an insurer might pay. At Surgery Center of Oklahoma, hernia repairs range from $3,060 to $4,500, depending on type.

To me, it’s clear that the problem that Mt. Sinai and other hospitals are facing with price transparency isn’t that insurers won’t let them reveal what they are reimbursed when they treat a patient that is insured by Aetna, Blue Cross, United Healthcare, or any of the other insurers.

The problem is that they don’t have real retail prices to begin with, they instead have chargemaster prices. And this is a problem that could be easily fixed by simply developing real prices and putting those up on their sites.

I’ve expressed my skepticism in the past on legislation that mandates healthcare price transparency, based on the fact that the transparency being mandated would have little value to self-pay patients. The proposed solution for Mt. Sinai, that they simply reveal their chargemaster rates to the public, falls in the same category.

What’s needed is not for hospitals and other providers to reveal their inflated chargemaster prices, or what any given insurer or government payer pays them. What’s needed is real prices. Thankfully there is a growing number of facilities that understand this (including one opening in Charlottesville, Virginia tomorrow, the Monticello Community Surgery Center), and self-pay patients are likely to be among the biggest beneficiaries. 

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3 Responses to Florida hospital backs away from price transparency

  1. Jerome Bigge says:

    They are afraid that if they post prices, people will start using the Internet to shop for the lowest price. It is also interesting to see the amounts that doctors will charge Medicare, and how much less Medicare actually pays them. In one case, the difference was 5 to 1.

    Problem is caused because there is no effective economic competition in health care. It is a legal monopoly from A to Z and those who control it want it that way.

  2. Pingback: The Myth of Bulk Buying in Health Care

  3. Chester Wade says:

    What is so frustrating is the fact we pay for insurance and then get hit with another fee when you enter a hospital for a procedure.
    If I had no insurance, it would be understandable.

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