Making hospitals publish list prices for common medical procedures is being touted as a way for health consumers to shop for the best deal. But a new study of list prices casts doubt on whether that information is a useful shopping tool or whether the health care marketplace lends itself to that kind of shopping.
Among its findings, the study from the Cleveland-based Center for Community Solutions says that list prices vary wildly throughout Ohio. It also shows that such prices are considerably higher than the national average and far higher than in other developed nations.
The federal government in January will start requiring every hospital to publish the prices, but there are a lot of questions about whether they show anything other than the brokenness of the healthcare marketplace.
Researchers contacted each of Ohio’s 206 hospitals and asked for their “chargemaster” rates for six common procedures: appendectomy, bypass surgery, angioplasty, total joint replacement, caesarean section and normal delivery. Depending on the procedure, anywhere from 28% to 56% of hospitals responded.
For each procedure, the chargemaster price in Ohio was greater than the national average. How much ranged from 143% for a C-section to 240% for bypass surgery.
In addition, the list prices were highly inconsistent. Bypass surgery ranged from $13,000 at a rural Ohio hospital to $288,000 at a teaching hospital in the state.
But Loren Anthes, the Treuhaft Chair in Health Planning at the Center for Community Solutions, cautioned that such list prices serve only as a starting point for negotiations with insurance companies and other payers. Since very few end up paying that price, it’s hard to say if Ohio’s hospitals really are more expensive than others throughout the country, he said.
However, with new emphasis being placed on chargemaster data, it deserves closer examination, said Anthes, who wrote the report.
In 2019, President Donald Trump issued an executive order fully implementing part of the Affordable Care Act that will require all hospitals to make their chargemaster data publicly available in a “consumer friendly” manner come January.
But Anthes argued that the fact that most patients flock to hospitals without regard to list prices or final cost illustrates one way that the marketplace is broken. Part of that is because insured patients don’t pay the final cost.
“Patients are consumers of insurance, they’re not really consumers of health care,” Anthes said.
In his report, he delved more deeply into the disconnect.
“If patients were only empowered with the information necessary to make informed decisions, as the theory goes, the marketplace would naturally stabilize and prices would fall,” Anthes wrote. “But evidence shows that price transparency in health care does not drive down prices or substantially influence individual consumption patterns.
“In fact, research suggests that patients are ‘predictably irrational,’ meaning the choices patients make about services and where to receive them are often not based on complex evaluations of available information and data, including price.”
In an interview, Anthes stressed that the problem wasn’t the fault of any one player, but caused by the lack of a competitive marketplace.
“This is a systems problem,” he said. “This is not a hospital problem or a patient problem.”
The Ohio Hospital Association seemed to agree about the usefulness — or its lack — of the chargemaster data.
“It is extremely rare for a patient to ever pay the full amount listed on the chargemaster, and hospitals and other healthcare stakeholders have frequently warned that reliance on these list prices does not provide meaningful pricing information to patients,” John Palmer, the group’s director of media and public relations, said in an email. “These published charges do not take into account the health insurance coverage of individuals, which varies greatly from one insurance plan to another.”
Palmer said that Ohio hospitals are committed to helping patients understand the cost of their care. To that end, the group is supporting Ohio Senate Bill 97, which would require hospitals to provide patients with cost estimates upon request.
Anthes has recommendations of his own, including:
- Creation of an independent commission to investigate pricing and make policy recommendations.
- Instead of allowing hospitals to set list prices and use those as the starting point for negotiations, state insurance plans could use Medicare rates as a starting point. The Center for Policy Solutions report said that Montana adopted such a system, paid 234% of Medicare rates and saved $15.6 million on state employee insurance plans in 2018.
- Create a basic healthcare plan for Ohioans earning between 138% and 200% of the federal poverty level, contract with a private insurer to run it and provide the insurer with leverage to negotiate better prices with health systems