Price transparency alone won’t solve our health system’s ills

His right testicle had jumped into his abdomen after he lost control of his motorcycle on the highway.   My 43-year-old patient, whom I’ll call Richard, in otherwise healthy condition, was brought to the ER with severe pain.  Fortunately, his testicle was still intact and only needed to be put in the proper place.

I am an attending physician in the emergency department and trauma center at San Francisco General Hospital.  I see patients who encounter unexpected medical situations and seek care during desperate times.  As someone with a bird’s-eye view of the health care system — the ER is the only place where all patients are seen regardless of their ability to pay — every day I see huge gaps in our health care system.

One of the biggest gaps is actually the way our health care system is structured. We have a fundamental market-driven approach to health care in the United States which is very American in nature — we hope the market can provide all of our needs, and we hope we can be empowered as consumers to shop for care and make decisions that force the market to respond to our needs.  One of the most touted measures has been increased price transparency as a potential solution to the current opacity and inefficiency in the health care system.  I believe this is crucial in having our health care system “own up” to our failure in providing society reasonable, cost-effective care.

At the same time, price transparency alone will not be able to solve many of our market’s ills.  Let’s take Richard’s case as an example. The root cause of the inability for the market to work in health care is because of information asymmetry, or when all parties involved in a transaction do not have relevant knowledge.

First, Richard had no idea where his testicle went. In fact, even the radiologist couldn’t identify the “unidentified heterogeneous structure in the right lower quadrant of the abdominal cavity.”

Second, Richard had no way of predicting he would be in need of medical services that day and, in fact, would not even know how to shop for this service even if he had been able to predict it beforehand.  More than that, even if he had been able to diagnose himself and knew the name of this procedure he required — “manual closed reduction of unilateral testicular dislocation” — it would have been impossible for him to “shop around” for either price or quality of the procedure to be performed. Try Googling the procedure along with the word “price” and you will not find a match for any documents. On the entire Web.

And finally, even if he were able to determine the best person to put his testicle back into place at the best price, he did not have any information on whether or not that procedure was absolutely critical to life or could be delayed or would resolve on its own.

Now let’s think about something markets do work well for — take, a laptop computer, for example.  For a particular model, I can find out what specifications it has, how much it costs, and where to buy it.  I know or can find enough information about the quality and shop around. And, perhaps most importantly, I know a critical reproductive organ is not at risk if I choose not to buy it now.

What are the options then?  To be sure, the simple existence of market failure does not mean that government will succeed.  But the contrapositive is also true: government failure does not imply markets will succeed.

Given that the United States health care system is built heavily on market principles, there is a great deal of room for the government to use its tools of regulation, financing, and even production to ensure more equitable and efficient delivery of health care services.

Debates in health care are inevitably emotionally charged and, in fact, should be, since health care is a deeply personal issue. (For those curious about Richard, we maneuvered his testicle back into his scrotum, and he — and the testicle — are now fine.)

We all agree that care should be provided — now we need to focus on the how.  Market failures mean that we have the opportunity to improve both efficiency and equity.  If we can’t get support for this level of reform, then we have much to lose as individuals and as a society.

The ball, as one might say, is in our court.

Renee Y. Hsia is an emergency physician.

Price transparency alone wont solve our health systems ills

This post originally appeared on the Costs of Care Blog. Costs of Care is a 501c3 nonprofit that is transforming American health care delivery by empowering patients and their caregivers to deflate medical bills. Follow us on Twitter @costsofcare.

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  • Duncan Cross

    Thanks for this — from someone who has tried to shop around for planned surgeries, but been stymied by a lack of good information. I worry you are going to get some push-back on this statement: “We all agree that care should be provided.” — but not from me.

  • http://hautuconsulting.com/ Shane Irving

    Very insightful… Having lived in a number of countries under socialized medicine before moving to the US I am still surprised by the way healthcare is structured here. Not sure we really get our moneys worth….

    Healthcare spending accounted for 17.7% of GDP in the United States in 2011 which is more than eight percentage points higher than the OECD average of 9.3%. (Netherlands (at 11.9% of GDP), France (11.6%) Germany (11.3%) Canada (11.2%) Australia (10.8%) New Zealand (10.3%).

    Most OECD countries have enjoyed large gains in life expectancy over the past decades. In the United States, life expectancy at birth increased by almost 9 years between 1960 and 2011, but this is less than the increase on average in OECD countries. As a result, while life expectancy in the United States used to be 1 ½ years above the OECD average in 1960, it is now, at 78.7 years in 2011, almost 1 ½ years below the average of 80.1 years. (Netherlands (at 81.3 years), France (82.2) Germany (80.8) Canada (81) Australia (82) New Zealand (81.2).

    • batcavenc

      oedc life expectacy rate doesn’t mean much , given our homicide rate and demographics and the life styles that come with it obesity, not just a southern thing anymore. Apples and oranges.Healthcare can only over come so many bad habits.

    • buzzkillersmith

      Medical care is only a minor factor in preventing early death, explaining maybe 10% of it or so. Google Schroeder’s Shattuck Lecture NEJM 2007, free on the web.

      Obviously medical care in many cases is life-saving, not to mention health-improving, but the “denominator,” the huge number of people for whom this is not the case, dwarfs the numerator.

      At the margin, social/lifestyle factors are more important than medical care in determining life span. But these things are less attention-grabbing and don’t interest the public as much.

  • SherryH

    Hello, I’ve been reading this blog for quite some time, and have finally decided to join the discussion. As a person who had never been ill until this past year, I can tell you, that I have learned a lot of hard lessons about the health care industry. Price transparency, aside from emergency and complicated circumstances, would benefit everyone greatly, and be a huge step in the right direction. Being called a health care “consumer” is disingenous at best, since it is almost impossible to find out the information you need to make informed decisions. The hospitals, pharma companies, insurance companies and medical supplies companies benefit from keeping people in the dark. That way they can charge you whatever they want and legally get away with screwing you by charging you a 300% markup. Transparency would help a great deal on things like tests, MRI prices vary wildly. The hospital by home charged $1400 plus a fee to read it, I managed to find one for $400 including the fee to read. It took too much work and anxiety to find out these prices. This should not be difficult. Transparency would also help a great deal with things like medical supplies. I was charged $338 for a walking boot, insurance adjusted it to $273, and yes, I saw the same boot at a medical supply store later on for $60. It’s shameful and unethical the way some of these entities prey on sick and vulnerable people. There are great people in the industry too, I hope you understand I am not talking about you.

    • whoknows

      Welcome! I am so relieved someone else has had the same experience. I have been overcharged for MRIs’ for years and had the exact same thing happen with a boot that was a 300 percent markup and saw it online for $70. Imagine what they charge and the markup for those that need a scooter. It is highway robbery and enraging. i wish there was something else that could be done other than complain here but thanks for listening and welcome. And there are no drug reps on here or durable medical device types so don’t worry. there is no one to offend. they are offending us!

    • buzzkillersmith

      Well said. Price transparency would not get us all the way there, but it would help a heck of a lot in many cases.

    • C.L.J. Murphy

      Also, if you step on a rusty roofing tack which managed to pierce your skin right through the bottom of your shoe, a tetanus booster shot at your local ER can cost as much as $1,000. Go to your local Walgreens or CVS and you can see it on their clear and transparent price board listed for $40, cash.

      • Suzi Q 38

        Thanks for the tip!

    • Suzi Q 38

      I wholeheartedly agree.
      I shopped around for my MRI’s. The cost for the MRI’s of my c-spine (neck), thoracic (upper back) and lumbar (lower back) spines varied greatly from $6K to $25K.
      I imagine almost any service of item needed would vary greatly in price. Surgeries included.
      I needed a brace for my right knee and the physical therapist gave me a brochure for a special brace, fitted for me.
      I threw the ad in the trash, as she said that they cost about $2K.
      When I told her that it was kind of “pricey,” she told me not to worry, as my insurance would pay for it.

      I went out and bought one at the medical supply store for $40.00. Afterwards, I looked the brace up on the Internet store (Amazon) and found it for $20.00. At the time, it worked great.

      • SherryH

        I too have been met with impatience and hostility when trying to find out prices. Both by the provider and the insurance companies. Getting a straight answer from either one can be very difficult. I have been flat-out lied to about prices, coverage, etc. And yes, I have insurance, but it certainly doesn’t cover everything. Why are they so surprised that I care about how they are spending MY money? Baffling. I just want honest answers. I have had no trouble with that at the dentist or the eye doctor, so why not other forms of health care?

  • psychomd

    you should be writing this stuff politicallyincorrect. I had the same impressions about the free market or lack there of.

  • Duncan Cross

    “Need” is too strong a word. Oddly enough, I agree that she’s overestimating the free-ness of the market.

  • Edward Stevenson

    >>At the same time, price transparency alone will not be able to solve many of our market’s ills<<
    There is no market unless there is prices, we have no health care "market" because we don't have price transparency. There are no market solutions or failures when there is no market. there are insurance financing failures and government financing failures that have created our current health care system and lack of market system.

  • Brian Lanier

    I’ll add to the chorus that says while price transparency alone may not be “sufficient”, it is absolutely necessary to bring down costs. It’s not just transparency to the patient, but to the physician as well. One feature of our system that allows that medical-industrial complex to extract wealth from Americans is that doctors are also blinded to the exorbitant costs. I wish there was a price next to every EMR checky-box. If a resident knew that they were about to inflict $4000 of financial damage to a patient by ordering an MRI (that should cost $500), there would likely be a moment of thought about the value of the information that test would produce. Would we order AM labs on every single patient as a matter or course if we knew that CBC will cost the patient $300 (for a $3 test)? Would the EM resident be more likely to apply some clinical epidemiology to her thinking rather than ordering everything but the kitchen sink? I agree that this would might less impact in the ED, and with acutely sick patients time is brain/heart muscle, etc, so the kitchen sink is often appropriate. But the lack of transparency in our system is immoral.

  • Patrick Randolph

    Bring in price transparency and wait for the end patient to yell. When that happens, change will be forced and good things will happen. Great comments below!

  • C.L.J. Murphy

    I will be looking forward to it, I am an inveterate blog-lurker. Be sure to pass along the URL once you get it set up!

  • Suzi Q 38

    Sinequa non is how Sinequan (Doxepin) was named.

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