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Hospital Pricing Mandate – A Sort of ‘Bird Box’ Reality

NOTE: This photo is not Sandra Bullock, but rather, a healthcare shopper seeking assistance online.

Over the holidays, my daughter and I watched a newly-released Netflix movie, ‘Bird Box.’ Other than having Sandra Bullock as the lead actress, I knew nothing about the film. The plot of this show, without issuing a spoiler alert, is that some unknown force mysteriously destroys the earth’s population, and the only certainty of survival is to not ‘see’ this evil. To remain alive, survivors must cover their eyes from the evil that chases them. One small peek can spell doom for those curious. In this riveting movie, having blindfold vigilance is the difference between life and death.

Recent findings in the January issue of the Health Affairs journal reveals that higher costs, not better patient care, serve as the primary explanation on why the U.S. spends much more on healthcare than other developed countries. Researchers found that U.S. healthcare spending was $9,892 per person in 2016, about 25 percent more than second-place Switzerland, which averaged $7,919 per person. Our neighbor to the north, Canada, is less than half of what we spend, $4,753.

The drivers for this enormous cost chasm, according to this article, is that the U.S. has higher drug prices, higher salaries for doctors and nurses, higher hospital administration costs and, yes, higher prices for many other medical services. Despite these costs, Americans have less access to many healthcare services than residents of other developed countries. A perfect storm, we might say. I have reported similar findings in a prior blog.

To make matters worse, the same study indicated that in 2015, there were 7.9 practicing nurses and 2.6 practicing physicians for every 1,000 Americans, compared to OECD medians of 9.9 nurses and 3.2 physicians. The long-term prospects of our numbers improving are not promising. Also in 2015, the U.S. had only 7.5 new medical school graduates per 100,000 people, considerably less than the median of 12.1 in developed countries.

Certainly, there must be some good news to share with you, right? Yes…and no.

Hospital Price Transparency Requirement

The prices we pay for hospital care, clinics, surgery centers, and prescribed medications, are usually unknown until sometime AFTER the interaction – typically following review and payment by our insurance vendor. The healthcare infrastructure gives much lip service to patient centricity, but follow through is underwhelming, to put it mildly. Transparency is extremely important these days because most Iowans and Americans are required by their health plans to pay higher deductibles and co-pays when seeking medical care.

Beginning January 1, the Centers for Medicare and Medicaid Service (CMS) is attempting to force price transparency by requiring all hospitals to post their list prices online. Under this arrangement, hospitals are required to publish a list of their standard charges online in a “machine-readable” format and to update this information at least annually. Hospitals are currently required to make this information publicly available or available upon request.

On the surface, this appears to be a hopeful beginning for all shoppers – and it is. However, when I look at hospital websites in Iowa and elsewhere, mandated compliance is far from patient centric. Using two of the largest hospital systems in Des Moines as proof – Mercy Medical Center and UnityPoint – we have a long way to go before price transparency nirvana can be reached.

Mercy Medical Center – Des Moines

The Mercy ‘Cost Estimator’ tab begins with a disclaimer that any costs published are nothing more than ‘estimates.’ The price-shopping patient must first click the “I Agree” button before being allowed to advance to the next page, which is sort of a magical mystery tour (special thanks to Lennon and McCartney). This page shows a similar disclaimer that all prices are mere ‘estimates,’ (special thanks this time to lawyers and marketing). In the left margin, we find links to a dozen ‘body systems’ that will allow price-shoppers to analyze procedures, median charges, various percentile charges, MS-DRG/CPT and Codes.

Not to be outdone, an exhausting ‘list of current standard charges’ is found subtly at the bottom of the ‘Body System’ list. Progress is now being made (tongue in cheek), as the price-shopper (hopefully not needing urgent care while searching for helpful prices) can find a treasure trove of data in an Excel spreadsheet:

  • CDM Numbers
  • Code Descriptions
  • CPT Codes
  • Revenue Codes
  • Charge

This spreadsheet shows 40,054 charge description masters (CDMs), which are incomprehensible medical procedures that are a hodgepodge of numbers and technical medical terms. One example is the 46040 4405 Abscess I&D Ischiorect, which has a charge (before discounts) of $10,936.  Huh?

In fairness to Mercy Medical Center, largely due to their repeated disclaimers, my expectations for finding value were set reasonably low. Put another way, I would not use this website as a shopper, as it is absolutely meaningless. Hospitals provide this data (and the gibberish language that comes with it) only because they are federally required to do so, not because they have a profound desire to empower patients.

Have you ever bought a non-medical product or service using ‘estimated’ prices? I didn’t think so…nor have I.

UnityPoint Health

UnityPoint’s ‘prices’ are found in the tab aptly labeled, ‘Patient Charges and Costs.’ On this page, the hospital does a reasonable job of explaining what the charges are…and are not. About halfway down this page the price-shopper can find two links that provide “Des Moines’s current charge information as of December 31, 2018,” in addition to “Des Moines’s standard Diagnosis-Related Group charge information as of December 31, 2018.” Each link will take the shopper to Excel spreadsheets that make little to no sense…even for someone like me, who makes a living using spreadsheets.

UnityPoint also provides a link to Iowa Hospital Charges Compare, a website provided by the Iowa Hospital Association. In addition to comparing ‘estimated’ hospital inpatient services by selected Iowa hospitals, it also provides ‘estimated’ prices for outpatient surgery procedures.

Trying to determine hospital prices in advance of a test, procedure or stay is daunting, frustrating and futile. This new hospital ‘transparency’ requirement is a very small step that needs a rocket boost into the 21st Century. What price-shoppers now see on hospital websites come from ‘chargemasters,’ which are massive compendiums of prices set by each hospital for every service or drug a patient receives. Historically, even hospital administrators can be flummoxed by how chargemasters are established.

But the real issue is that each published price is nothing more than a ‘list’ or ‘estimated’ cost. Currently, most procedures are still being charged separately, and are not bundled together. In most hospital encounters, it is extremely difficult to determine whether additional procedures will be required PRIOR to the patient entering the hospital. On top of this, the negotiated price of any claim is determined by the third-party payer (e.g. insurance companies, self-funded plans, Medicare, Medicaid, etc.) the shopper uses. Additionally, hospital location and the shopper’s specific health plan features (deductibles, coinsurance, etc.) will also determine the final cost.

Here’s a novel concept: Instead of pricing their services using the ‘horseshoes and hand grenades’ approach, hospitals could take the initiative and partner with ‘motivated’ insurance payers to develop a patient-friendly tool that provides legitimate ‘real-time’ prices along with patient-specific health plan out-of-pocket calculators. This sounds much too simple, doesn’t it?

Transparency WITHOUT the blindfold

To stay alive, Sandra Bullock needed to keep her blindfold close by before navigating outdoors. Healthcare shoppers, on the other hand, are trying remove their blindfolds to make appropriate decisions when seeking high-value healthcare. Unfortunately, to maintain the status quo, the current healthcare infrastructure works very hard to keep the blindfolds tight and opaque. But, to do the right thing in healthcare, we must tear down the existing silos of self-interest that dominate the care that Iowans and Americans deserve – and pay for.

Much work needs to be done to find this common good. By doing so, our blindfolds may finally be removed and clarity revealed.

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  1. Ed Whitver says

    David, you raise a great question. Having worked at both hospitals and physician clinics–where I set the charges–I can say there is nothing rationale about how prices are set. An organization’s cost certainly comes in to play, but it is far from the only factor. Most government and private insurance plans pay close attention to how much a health care organization or professional charges. You get flagged, and possibly audited, if your charges are consistently higher than like professionals. But the actual payment is based, in part, on the prevailing charges of like professionals, and the provider certainly doesn’t want to charge less than the prevailing rate because they might actually receive less in reimbursement. Medical prices, at best, can only ever be approximations. If you go to the hospital for a procedure, your own health history may make your case more costly to resolve–do you have high blood pressure, are you allergic to certain medications, do you bleed easily, do you have other health problems that will need to be managed along with the current procedure, it goes on and on. It’s not like going to the Chevy dealer and ordering a car with a defined list of options–I would reasonably expect to pay the same in Des Moines as I would in Grinnell, or Jefferson, or wherever. Health care isn’t that cut and dried. If all I needed was an MRI, or a single blood test, these costs are easily obtainable. Most heatlh care interactions aren’t that simple.
    But based on X number of procedures they have performed in the past, most health care organizations could tell you that for the procedure you are about to receive, their charge is typically $Z. It can only ever be quoted as an average.
    If I had a high deductible health plan, or HSA, or paying out of pocket. the most important thing for me to do would be to approach the hospital, physician, or medical professional, and say that whatever my bill ends up being, I am willing to pay whatever the organization would get reimbursed by Wellmark, or United Healthcare. While this is still a significant discount, the medical organization doesn’t have to worry about denials, pre-authorizations, and all the other hassles that go along with getting paid, so it is a win situation for them. And, of course, I need to understand from my health plan what my actual deductible and out-of-pocket cost will be.
    I am a firm believer that in order to reign in health care costs, the consumer/patient must have more skin in the game. But for the cost conscious consumer, they have to know what they may be charged for the services they require. That’s assuming you want to go to the lowest priced medical professional. But then, it’s kind of like being a NASA astronaut–do I really want to be blasted to outer space on equipment built by the lowest bidder? Each person has to make their own decisions.

    • David P. Lind says

      Ed, thank you for your explanation about how charges are set by medical organizations, this is very helpful. I realize that this process is extremely complex and has no quick remedies, as you suggest. The complexities of patient morbidities are, at best, problematic when determining upfront costs, etc. As you know, many patient encounters when seeking care are just not feasible for understanding costs upfront, due to emergencies and other critical care settings.
      It is interesting that you mentioned a NASA astronaut in outer space using “equipment built by the lowest bidder.” If there is anything that I have learned in healthcare delivery and pricing it is that cost, for the most part, does NOT determine quality (or value). Just because one provider charges less for the same procedure compared to another competitor, does not automatically suggest the care is inferior. Perhaps that provider has found a more efficient way to deliver higher-quality care and can justify charging less for the procedure (at least that is what a market-based approach would suggest). But let’s be honest, our healthcare ‘system’ is not a true market-based model.
      Using the NASA example one step further – if we could put a man safely on the moon 50 years ago this coming July, using technology that is now widely perceived as highly antiquated, why can’t we use our uber-automated technological resources today to crack the cost (and quality) conundrum that seems to be so elusive to the provider communities and the public? It is my belief that we have the resources to determine solutions, but unfortunately, we don’t have the key ingredient that allowed us to land on the moon in ’69 – the UNIFIED willingness to succeed. Instead, what we have are disparate business interests that do not serve the common good.
      Thanks again for your informative comments, Ed!