Why doctors need to care about price transparency

As healthcare costs become a bigger and bigger chuck of our Gross Domestic Product (GDP), price transparency is a subject that insurance companies and patients are talking about. The idea of knowing how much something costs, be it canned black beans in the grocery store or replacing the leaking faucet in your kitchen, seems obvious but it will be an uphill battle to enact change within the healthcare system.

The concept seems simple–make prices accessible to the people who are paying them just like in any other service industry. While healthcare is more complex than a plumbing job, there are still some things that should be easy to price–cataract extraction, blood pressure check, yearly physical, uncomplicated appendectomy. The hidden prices and unknowns in medicine can quickly add up. It is no wonder that  patients are angry, frustrated and incredulous.

Case in point, my mother called yesterday to ask why she was not told that going to a cardiologist in our system for a test was “outpatient treatment” in a hospital. She had no idea that was the case until the  EOB (Explanation of Benefits) came from her insurance company with a charge specifically associated with that. The answer is that the cardiologists are employees of the hospital so there is an additional fee tacked on to her bill.

Even though her visit appeared to be in a doctor’s office, it is now an extension of the hospital. As such they tack on a “facility fee” that, while technically allowable, I find distasteful and misleading, even as it is done by my own healthcare system. Talk about a lack of transparency! My mother had no clue and at 84, even if someone did explain it to her, I doubt she understood what they were talking about. Not until she got the EOB from her insurance company did she start to question.

A patient with congenital heart disease told me this week she was putting off getting an imaging study on her heart because she can’t afford the $1000 hospital fee that her now-hospital-employed physician would be adding to her bill. One thousand EXTRA billed dollars solely for that reason? How do hospitals justify this? They state that patients are paying for the “added services” that being a hospital-associated facility affords them, like infection control and patient safety. I doubt anyone thinks paying four times what the doctor charges for a facility fee is justified by patient safety.

It’s encouraging to see patients becoming more involved in this process–pushing for price transparency. Doctors are also beginning to understand that we can no longer hold ourselves above the fray, believing that caring for the patient in the best manner possible without knowing the economic burden that care incurs to the patient or family is not our concern. Best care does include knowing costs. In the meantime, my patient who needs the echocardiogram waits, and hopes for the best.

Kathy Nieder is a family physician who blogs at Family Practice 2.0.

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  • http://www.thehappymd.com/ Dike Drummond MD

    If you are having an elective surgery and need a CXR or EKG … try this. Call around your town and see if you can get a medical office to give you a price quote for you to just come in and get these two tests. In most areas the offices you call will not be able to give you a quote … ridiculous. In many cases you will be the first person who has ever asked them this question. And if they did give you a quote, it would vary hugely depending on whether or not you have insurance.

    Here is a study from earlier this year by Thompsen Reuters showing that medical price transparency could save $36 BILLION in the USA.

    And here is the only service I am aware of that is trying to give you web access to competitive and transparent pricing in major markets in the US. http://www.saveonmedical.com
    They are only in a few markets at the moment. Where do have a local presence you can find a provider, schedule and pay for the test with complete transparency and the offices compete to offer you the best price. About time.

    Dike Drummond MD

  • Beau Ellenbecker

    A needed conversation. This practice is done in almost every other country in the world. Without being able to compare apples to apples, consumers will always be on the wrong end. Same basic principle as the health exchanges. Thanks to Dr. Drummond for the website link, I will check that out as well.

  • JPedersenB

    Amen to all of this! We will NEVER get medical costs under control until all costs are easily available. Hospitals (and doctors, labs, etc.) should not be allowed to add on sneaky fees or to obfuscate extra charges with a labyrinth of billing codes…

  • http://twitter.com/OurH_careSucks John Lynch

    Given the dismal track record of US hospitals for infection control and patient safety, it’s hard to believe this was offered with a straight face. Maybe if they were paid discounted rates based on their ACTUAL performance on patient safety, we’d start to see more, you know, patient safety.

  • southerndoc1

    The “facility fee” is the biggest, most obvious, easiest to fix pork chop in medicine today. That CMS and the large insurers have no interest in killing it indicates that they have no real interest in reducing costs.

  • http://www.facebook.com/jackie.murray.790 Jackie Murray

    When I went through my OUTRAGEOUS bill for a 70 minute outpatient surgery (upwards of $15,000 dollars) I found a lot of things. Like a $280 charge for typing “general anesthesia” on the paperwork. Some booties for almost $300 dollars. Rental of a blanket $20. Radiologist $15, because my surgeon couldn’t read an x-ray? Over $100 for a half cast and the list went on.
    $800+ for an anesthesia NURSE (masquerading as a physician) who defied my wishes (and informed consent laws) and gave me sedation and g/a which I had forbidden. ‘Tiers of care’ whereby the same damn nurse got MORE money the more drugs the crna gave me. The crna actually charged me an EXTRA $300 for “electronic transmittal of data,” IE a fax or an e-mail. All of this after I did my best to find out how much the stupid, unnecessary surgery would cost. The hospital said it was impossible to know how much the surgery would cost, but gave me a price of $3,000. That was only for the rental of the OR for an hour, but THAT little tidbit wasn’t forthcoming. HOW MANY SIMPLE ORIF DISTAL RADIUS FRACTURES DID THE HOSPITAL HAVE TO DO BEFORE THEY COULD TELL ME THE GENERAL COST?
    I feel like I was targeted for a rip-off scam. I was lied to and misled. If I had known the truth, I would have NOT had the surgery for the reasons above (cost) and some significant OTHER reasons. (severe side effects)

  • http://cognovant.com/ W Joseph Ketcherside, MD

    This is a critical part of making healthcare a fair marketplace. There are two key requirements for an efficient market – price transparency and quality transparency. In other words you need to know what a Cadillac costs and what a Chevy costs, and you need to know the difference in quality and features that justifies the cost difference. Without both, the purchaser cannot make a rational decision.

    Until we achieve both price and quality transparency in healthcare there will be no successful reform of our private/public system. I believe that the increased efforts to push responsibility and cost onto consumers will drive this – none of us will continue to put up with the nonsense we get from the current health system.

  • http://www.facebook.com/devin.trousdale Devin Trousdale

    Dr. Drummond: check out Health Care Blue Book online. It was cited by Consumer Reports.

  • Russell Roeder

    Ironically, the ability of the hospital to tack on additional “facility fee” charges is a means for the hospital to support the inflated compensation to its employed physicians (mostly specialists). One of the reasons doctors are increasingly migrating to full employment under a health system’s “wing” is because the hospitals are agreeing to sustain (and depending on the specialty) increase physician’s compensation well beyond what they could make in private practice. Generally, this is a losing financial proposition for the hospital, but they’re able to offset some of the losses by capitalizing on the “facility fee” charge to insurers/patients. This, of course, is a cute trick whose result is to continue to support the artificially inflated income of specialists. The payment methodology used by Medicare and insurers (and by extension by patients) in this country is so impossibly convoluted that explaining it to a normal person (much less an 84 year old woman) simply cannot be done. It is beyond absurd. And it is shameful.

    • http://twitter.com/docnieder Kathy Nieder MD

      Shameful nails it. It’s flabbergasting when I can’t easily explain something to a patient regarding costs and I’m supposedly “in charge” (ha).

  • Bradley Evans

    I remember an article by Reinhardt called “It’s the price, stupid!” As I recall, his point was that the health care crisis was due to pricing. Although there’s the Dartmouth studies showing that ordering medical tests varies by ten-fold, studies of pricing show that there is 100 fold difference in pricing.

    One problem is that there is no one price. There’s a portfolio of pricing, dependent upon insurance. So, when you say, “What’s the price?” there’s no one answer.

    So what you are talking about is pricing for uninsured patients. There’s really no incentive for hospitals to lower these prices. They just keep ratcheting them up.

    One way to try to rationalize this pricing is to make prices free and easily available. Right now, I can’t even get prices of the medicines I prescribe. I used to go to drugstore.com and that was bought out.

    Perhaps there are subtler ways of getting the same result? How about mandating that hospitals can provide insurance for administrators and hospital Boards, but only high-deductible insurance? How about mandating the same thing for Government employees? Sure, they might be able to buy insurance to cover their deductibles, but somebody’s going to get a bill, and they will complain.

    I also recall that there is a company based in LA that contests bills for patients who have been high balled by their hospital. Their strategy is not only to contest the bill, but to embarrass the hospital with lawsuits and adverse PR in the local paper.

  • http://www.facebook.com/profile.php?id=1096440166 Sara McFarland

    The convoluted pricing gap that exists for imaging studies is just mind-blowing. The worst part? Patients don’t know it exists until it’s too late, meaning they already overpaid thanks to the lack of transparency. Whether patients are uninsured or not, SaveOnMedical is a good resource for determining the quality of providers and understanding the baseline price for their procedures.

  • Marshall Ge

    Dr. Nieder,

    This is an interesting post highlighting the confusion and frustration for patient and doctor alike in our current healthcare system. As an undergraduate student hoping to become a physician, the problems plaguing our healthcare system are important to me as I intend to pursue my career in this field. Given that price comparison is a vital tool for improving efficiency and thereby reducing cost, it is puzzling to learn that such a big portion of the US industry has been slow to implement it. It is also interesting to see that, while physicians are being criticized for ordering unnecessary tests, hospitals are benefiting fourfold from such tests through “facility fees” for benefits that are not nearly as justified. Although it is good to see patients responding to these blown up charges, I think that simply boycotting procedures critical for one’s condition is not the best way forward. In order to give non-participant hospitals an impetus to change, institutions willing to participate in publishing prices should be rewarded with a larger patient market to advertise to and it is encouraging to see the advent of websites that act as an Expedia.com for hospitals.

    I am glad that you brought up the fact that doctors need to be cognizant of the patient’s financial health as well as their bodily wellbeing and I agree that “best care does include knowing costs”. Though no one likes to admit it, money is always a factor in any decision and because of this, doctors need to be aware of the potential financial burden. However, what could doctors do to remedy this situation? Beyond calling for hospitals to release prices, doctors do not have any tools that could be used to help organize/alleviate the impact of healthcare bills on the patient’s finances. Perhaps hospitals could hire advisers to speak with the patients that need help? After all, many healthcare bills easily top the price of a new car and most car buyers receive help from the dealership’s financing department. These issues only become more complex when we add into the fray the “variety of insurance benefit structures”. How are we going to publish hospital services pricing when there are many different insurance arrangements and policies? Due to the diverse idiosyncrasies of each insurance plan, there are so many variables and service specifications needed to produce a single price quote. Maybe it should be the responsibility of insurance companies to publish healthcare prices.

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