Hears
Cover Story in Modern Healthcare.com Written by Matthew DoBias
Lifting the lid off of pricings
With HHS moving to post what it pays for common procedures,
the debate over healthcare pricing transparency is heating
up, Story originally published March 20, 2006
Last week, in policy and in practice, the idea that the general
public should be able to see the actual costs of certain medical
procedures became Topic A in Washington, with federal lawmakers,
policy shapers and physicians facing off over the issue in
public hearings and private meetings.
As the capper to a week that saw healthcare get a congressional
workout on Capitol Hill, HHS Secretary Mike Leavitt announced
that for the first time, Medicare, Medicaid and other federal
agencies would be required to post the prices they pay for
some very routine clinical procedures on a Web site as the
first step of a larger initiative championed by the Bush administration
and many in the Republican leadership.
It proved to be the fulfillment of a
promise by the federal government to lead by example on the
issue, and it expects hospitals and the provider community
to follow that lead -- like it or not.
"People don't have a clue what they
are paying and have no way of knowing how it compares to what
the person in the next room is paying, let alone in the next
hospital," Leavitt said in a prepared statement. "People
deserve to know."
While much of Capitol Hill has taken
up the issue recently in public and private forums, federal
lawmakers have found themselves debating not so much over
whether or not prices should be made known-most agree that
they should-but at a deeper level, they want to know the motive.
Steppingstone to HSAs
Many health policy analysts see the latest
push to make healthcare costs widely known as a steppingstone
toward making health savings accounts -- President Bush's
preferred method of insurance-a mainstay on the healthcare
front.
According to the latest reports, only
about 3 million Americans use the high-deductible plans. But
that number is growing fast, with many major companies increasingly
embracing the concept as a way to lower skyrocketing health
costs. Posting price and quality data, they say, will help
speed the process.
The administration's push has been strong
enough to draw questions even by some in favor of clearer
pricing. A family physician and consultant from Charlottesville,
Va., who testified on behalf of fuller disclosure of pricing,
David MacDonald, said he's no fan of Washington politics --
especially when it comes to the issue of transparent pricing.
He chided the event in an interview afterward as more about
making HSAs work and less about clear and understandable costs.
"If I knew that's what it was going
to be about, I wouldn't have agreed to testify," he said.
"The dilemma we face here is that
we're not having a rational discussion about what would be
the best source for the consumer," said Chip Kahn, president
of the Federation of American Hospitals. "We are not
separating one consumer from the other."
And that's a problem, Kahn said, because
varying factors, such as the type of coverage a person has
and how they enter the healthcare system, play a major role
in the cost infrastructure.
Simplistic discussion
Kahn said that the current discussion
between policymakers is overly simplistic. "It's based
on the simple notion that having some kind of price information
available will aid consumers in making better choices,"
he said. But that may not be the case. "The way people
are insured and the way that they pay may" not allow
that to work, he said.
Economist Paul Ginsburg, president of
the Center for Studying Health System Change, said he thinks
he knows why the discussion has become so polarized: "This
is not an obvious policy issue."
Ginsburg, who was one of seven health
leaders called to testify before a House subcommittee last
week, said that the debate among lawmakers tends to mask the
complexity of shifting healthcare costs to the consumer from
plans and payers. "It's not really about price transparency
by itself," he said. "This is just a way to joust
on bigger issues, like HSAs."
Regardless of the reasoning, Leavitt's
announcement was a clear signal that the Bush administration
plans to lead by example when it comes to pushing hospitals
and physician offices for more transparent pricing of healthcare
services.
In testimony at the hearing, former House
Speaker Newt Gingrich lashed out at the industry's effort
to protect their pricing data, citing the example of one devicemaker
who is using the courts to keep such pricing information under
wraps. It's a practice that would stop if Gingrich has his
druthers -- and ideally, he said, it would preclude the government
from contracting with companies that don't make their costs
transparent.
In one instance, Gingrich said, a device
vendor has been quick to claim that pricing information is
a trade secret and that hospitals that buy its devices may
not disclose the information to the doctors who use them,
the private payers who reimburse them or the patients who
receive them.
"The inevitable result is that no
price shopping can take place and price competition -- a fundamental
market force -- can't take root," he said in his statement
to Congress.
At a briefing earlier this month and
in speeches, Gingrich repeatedly ribbed the federal government
for enabling a healthcare system he sees as archaic. Because
of his stature, he is one of the few people who can praise
Leavitt and CMS Administrator Mark McClellan, yet at the same
time take jabs at them by calling the CMS "inherently
a Soviet-style command bureaucracy."
`Better access, fewer mistakes'
Gingrich said he favors moving healthcare
toward a free-market model, which he argues will put a premium
on "better systems, fewer mistakes (and) greater access."
"Healthcare is the only area of
America's economy where the consumer and the provider have
no idea what the goods and services they trade cost,"
Gingrich said. "The information age has left healthcare
behind, and the consequences are tragic."
He may not be far off. Healthcare professionals
who are far removed from the inside-the-Beltway politicking
have seen results by posting real prices --in other words,
the exact amount a patient will have to pay for certain procedures.
In 1997, family doctor MacDonald posted
the prices for a handful of common procedures on a Web site.
He and his colleagues at SimpleCare, a national pay-as-you-go
physician group for which he previously worked, saw results
almost immediately. "Costs came down in every regard,"
MacDonald said. Diagnostic tests, CAT scans and MRIs all toppled
in pricing. MRIs came down from $3,000 to about $600 and CAT
scans dropped to about $300, he said.
SimpleCare also worked with several different
laboratory companies to ensure that prices would drop even
more. The pitch: "We told them that we would collect
from the patient, then they would bill us at the end of the
month."
By removing the billing and administrative
costs associated with lab work, MacDonald said that costs
for routine tests plummeted. So the price for a lipid profile,
which ordinarily costs the hospital $47, dropped to $8, he
said. But hospitals today still charge in the $100 to $120
range for the exact same test, he said.
Rep. Daniel Lipinski (D-Ill.) last July
introduced legislation that would require hospitals to regularly
report to HHS the amount they charge for 25 of the most common
inpatient and outpatient procedures, as well as the 50 most
frequently administered medications. HHS would then post this
data on the Internet for public access. His bill has bipartisan
support.
During the congressional hearing, Lipinski
said that several states such as California, Florida, Georgia
and his home base, Illinois, have passed similar legislation.
In testimony submitted to the committee,
Gerard Anderson, director of the center for hospital finance
and management at Johns Hopkins University, said that while
he favors more transparency, pricing alone won't compel consumers
to become better health shoppers.
Anderson said that for meaningful change,
patients first need to know what services they will use. "Most
patients do not understand what goods and services they may
need and so they cannot comparative shop," he wrote.
Secondly, he said that prices would have to reflect market
forces, adding that list prices are established by hospital
and physicians without any market constrains.
One way to do so is to base all rates
on a single price standard, such as the Medicare payment rate.
Last December, Rep. Joe Barton (R-Texas),
chairman of the House Energy and Commerce Committee, suffered
a heart attack while ? ironically -- discussing Medicare with
some of his colleagues. The popular Texan, who as committee
chairman holds sway over much of the health legislation introduced
in the House, was rushed to nearby George Washington Hospital
in the district for treatment.
Now trimmer and healthier, Barton has
used his firsthand brush with America's healthcare system,
in part, as a guiding force to how he shapes his own health
policy initiatives-price transparency included.
"When I was on the gurney in the
emergency room, I wasn't really interested in what the cost
was," he said last week during a congressional hearing
on the topic. "I was very interested in the quality,
though."
The hospital billed Blue Cross and Blue
Shield more than $75,000 for the care, though Barton admits
that no one -- not the doctors, nurses or even the top administrators
-- could have given him that number had he asked.
And there's the rub: that very personal
experience has at least played a part in shaping the congressman's
view on healthcare costs, and whether or not they should be
made public. From a dollars-and-cents aspect, Barton said
he sees a move to clearer pricing as a strong first step to
taming a healthcare system he says has run amok.
"I cannot think of another sector
of our economy where consumers have less say," he said.
"By limiting patients' access to comparative information,
we restrict competition and cripple the ability of market
forces to make healthcare more affordable."
But from the personal side, he is more
succinct: "I don't personally know how much they actually
paid, but I think it was worth every penny of it."
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