U.S. orders price postings in hopes of curbing hospitals’ trillion-dollar costs

blawhospitalcostgrafic-300x174Tthe Trump Administration deserves credit for doing something right on hospital prices — but with what likely will be ineffective results.

The president and Alex Azar, the head of the sprawling Health and Human Services agency, have rolled out delayed new federal rules that will order hospitals, starting in 2021, to make public the discounted prices they negotiate with insurance companies and require insurers to allow patients to get advance estimates of their out-of-pocket costs before they see a doctor or go to the hospital.

Trump explained why, as reported by the New York Times, saying: “For decades, hospitals, insurance companies, lobbyists and special interests have hidden prices from consumers, so they could drive up costs for you, and you had no idea what was happening. You’d get bills that were unbelievable, and you’d have no idea why.”

To attack this problem, the administration will, the Washington Post reported, require hospitals to publish “in a consumer-friendly manner … negotiated rates for the 300 most common services that can be scheduled in advance, such as a knee replacement, a Cesarean-section delivery or an MRI scan. Hospitals would have to disclose what they’d be willing to accept if the patient pays cash. The information would be updated every year.”

Further, the Washington Post said, the administration would force hospitals to make their disclosures on “all their charges in a format that can be read on the internet by other computer systems. This would allow web developers and consumer groups to come up with tools that patients and their families can use.” And insurers would be compelled to create “an online tool that policyholders can use to get a real-time personalized estimate of their out-of-pocket costs for all covered health care services and items, from hospitalization, to doctor visits, lab tests and medicines,” as well as providing “on a public website … negotiated rates for their in-network providers, as well as the maximum amounts they would pay to an out-of-network doctor or hospital.”

Not happening, insurers and hospitals replied immediately to the administration plan. They said they would sue in federal courts to block it, as Big Pharma recently acted — successfully — to prevent an administration plan to have drug makers provide list pricing information in television commercials.

Skepticism also erupted among health policy experts about the administration’s cost plans. Some repeated their earlier doubts, arguing that research has shown that medical price transparency can have unintended consequences. It can, for example, lead to price increases, by stifling fierce negotiation or leading competitors to up charges after learning that they lag others’ rates.

Then, of course, pragmatism may play a big role in whether the public disclosures would be helpful, or not, to patients. The administration earlier had ordered hospitals to post on their web sites their charge masters, the long lists that purported provide important information about specific prices for an array of medical services provided.

The result, as the Kaiser Health News service reported earlier, was that “popping up on medical center websites is a dog’s breakfast of medical codes, abbreviations and dollar signs — in little discernible order — that may initially serve to confuse more than illuminate … While more information is always welcome, the new data will fall short of providing most consumers with usable insight.”

Larry Leavitt, an executive with the Kaiser Family Foundation, pointed out on social media that, even if the administration orders took effect, they carry modest penalties for hospitals that fail to comply: $300 a day. Contrast that to the average cost of an inpatient day for just one individual in 2019: $2,488. It may sound expensive to Joe and Sally Sixpack, but it might be a minor business expense for big hospitals to pay $110,000 or so annually as a penalty to avoid sharing competitive pricing information, much less putting their IT and communications departments through the potentially time-consuming and expensive process of putting online the required information in a federally compliant manner.

For patients, the most important people to be considered in the prospective price disclosures, much still must become clearer to know if the administration plans are helpful or not. They might benefit most if insurers can be forced to help their customers with a clearer understanding of what their medical services might cost, including how better to avoid “surprise” bills racked up with providers “out of network.”

Even with fancy computer or online interfaces to assist, can patients be helped by rolling through hundreds of medical procedures and trying to compare them from hospital to hospital? The experience with the charge masters suggests that doctors, specialists, and hospitals can make their work as daunting and complex as possible, if they want. And it isn’t as if most patients have the experience, expertise, or patience to sort through reams of medical jargon to know if, voila, the procedure they need is exactly the one described. The transparency on prices also may matter far less if time is a great concern.

And, how do cost disclosures deal with doctor or institutional reputations? If patients believe that Dr. Sawbones performs a given surgery better than any other practitioner in town, or if they think that an oncologist or cardiologist is the best for them, will the posted prices account for what an elite specialist or big-name hospital might want to get paid?

Noam Leavey of the Los Angeles Times recently reported on how difficult and stressful it can be for patients to shop around for health care, and how this reality — combined with changes in health insurance, especially whopping premiums and skyrocketing deductibles — may be altering a fundamental aspect of how economists and health policy experts have thought about how Americans pay for health care. Much of the cost-containment thinking was rooted in the idea, under lots of fire now, that efficiencies could be wrung out of the system by forcing patients to put more “skin in the game,” that is to bear a greater share of costs, so they would make better choices and search out cheaper alternatives.

In my practice, I see not only the harms that patients suffer while seeking medical services, but also their struggles to access and afford safe, efficient, and excellent medical care. This has become an ordeal due to the skyrocketing cost, complexity, and uncertainty of medical therapies and prescription medications, too many of which turn out to be dangerous drugs.

Hospitals make up the biggest share of U.S. health care costs, and even though they may realize they need to get themselves under control, few institutions meet even their modest goals to do so, Sara Hansard reported for Bloomberg News’ law section. Hospital costs keep rising ahead of inflation and will account for $1.3 trillion of the nation’s health care spending. But institutions, consolidating to fewer players in markets, have few checks on them, so they keep raising their prices and patients and employers keep forking over the dough.

Maybe greater price transparency, in some form, will be a help with this economic menace. We’ve got a lot more work to do, though, to ensure that hospitals don’t gouge patients so much that they make them financially ill as a cornerstone of their care.

Patrick Malone & Associates, P.C. listed in Best Lawyers Rated by Super Lawyers Patrick A. Malone
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