HHS Attempt to Provide Pricing Transparency Falls Short

But Release of Chargemaster Data Could be Step in Right Direction

May 22, 2013 12:45 pm "Voices" Staff

Depending on whom you ask, the hospital pricing data(www.hhs.gov) recently released by HHS represents either a remarkable move toward health care transparency or a giant waste of printer toner.

Perhaps the truth lies somewhere in between.

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On May 8, the agency released prices from more than 3,000 U.S. hospitals for the 100 most common inpatient treatment services provided in 2011. More than four times longer than Atlas Shrugged, Les Misérables and War and Peace combined, it's an OfficeMax manager's dream come true (if anyone actually prints it) at more than 17,500 pages.

HHS officials said the data will inform consumers about how much hospitals charge for given services and help them understand that there is great variability in pricing from hospital to hospital, even within a specific market.

Although the latter claim might be accurate, the former is not.

The problem is that the data HHS released are so-called chargemaster prices, which are useless to insured patients because payers negotiate rates that can be a small fraction of those prices. Hospitals rarely are paid what they charge by private or public payers.

Furthermore, hospitals often offer assistance to patients without health care coverage, so the data's value may be limited for the uninsured, as well. According to the American Hospital Association, U.S. hospitals provided $41 billion in uncompensated care in 2011.

And what about that price variability? Well, it's true, for example, that one New York hospital charges an average of $34,310 for complicated cases of asthma or bronchitis while another hospital in the same city charges an average of $8,159. But what we don't know is what an insured patient actually would pay at either of those hospitals because payers don't want their competitors to know what rates they have negotiated.

The public should be outraged by the wide variations in prices -- even if those prices don't represent what actually is paid -- and questions should be asked about why this convoluted process is allowed to stand. Patients, consumer groups and others should demand to know more about how much is paid and what the total cost of care on a per capita basis is for a given health system or accountable care organization. Only then will transparency provide consumers any leverage.

Although there is hope that hospitals may lower prices for some services after what amounts to a public shaming by HHS, the reality is that other hospitals now have been informed that their own chargemaster prices are drastically lower than those of their competitors. So, in some instances, this could lead to hospitals actually charging more.

HHS may have been aiming for transparency, but it has given us something that is translucent at best.

In an open market, pricing reflects costs and what people are willing to pay based on how they value a service. Unfortunately, there is no relationship between chargemaster prices and reality, and the relationship between what insurance companies actually pay and what a service costs is unclear.

The AAFP has policy supporting transparency in health care. Family physicians want to be wise stewards of limited health care resources, but this is difficult without having relative pricing for those services to which we refer -- including subspecialty care, imaging and hospital care. Having such information would help our patients save money on their medical expenses.

Need proof? A study by researchers from Johns Hopkins University(archinte.jamanetwork.com) recently published in JAMA Internal Medicine found that making physicians at one hospital aware of the cost of each test they ordered reduced the number of tests ordered by 9.1 percent, saving more than $400,000 during a six-month period.

Today, patients don't know exactly what they are paying until they get a bill or an explanation of benefits in the mail. By then, it's far too late. There is no fair competition for their health care business, and there is no way for them to make an informed decision about where to seek care.

Ultimately, patients need the actual negotiated fees for a service coupled with quality and outcomes data for each hospital and/or physician. That would allow patients to have a conversation with their primary care physician and then make the best decision for their individual needs.

Along with the chargemaster data, HHS said it is providing funding to states to enhance their rate review programs and to data centers that will collect and analyze pricing and reimbursement data. We are a long way from an open, transparent system, but this -- at least -- is a start.