When you need work done on your car or bring a contractor into your home for some work, you can expect to get an estimate on what the job will cost. Even closing on a home mortgage and sale requires a comprehensive "good-faith estimate" of expenses before you sign on the dotted line.
Unless you're paying out of pocket, that's rarely the case in health care, where bills mostly come after the service is performed, long after you've had a chance to shop around.
Related: The Truth About Rising Health Care Costs
Since most Americans rarely have to worry about the full cost of their medical bills — they are largely covered by employers — this isn't an issue. For those with high-deductible policies, choosing elective surgery or running businesses, though, getting treatment is a different ball game — one that requires honest and accurate upfront pricing disclosure.
Yet unlike most other consumer services, very few Americans have access to meaningful disclosure — or know how to compare pricing for similar services.
Perhaps to head off closer scrutiny and regulation, the health care industry has stepped up to provide estimate information for patients. The Healthcare Financial Management Association (HFMA), a trade group representing insurers, employer groups and providers, recently released a task force report and consumer guide on estimates.
The HFMA report's summary sounds most of the right notes for befuddled consumers:
The task force agreed that all Americans, regardless of their insurance status, should be able to receive accurate price estimates from a reliable source; that transparency should help people make meaningful price comparisons ahead of service; and that price estimates should be accompanied by other relevant information (e.g., quality, safety, or outcomes) that will help consumers assess the value of a healthcare service.
Although it's hard to deny the importance of this report — it's backed by heavyweight industry groups such as the American Hospital Association and America's Health Insurance Plans — these are proposed guidelines. They still lack the power of regulation or federal and state laws. They are essentially best practices or "guiding principles" that look like consumer-friendly rules of engagement.
It would be great to know, as the report cites, "a consensus on models and appropriate quality metrics." Then patients could know how certain hospitals and doctors rate on post-operative care. Do patients come out of a hospital sicker than they went in? Which doctors and hospitals have the lowest infection rates and post-procedure complications?
Benchmarks Should Accompany Disclosure
Standards are needed so that patients can benchmark providers on outcomes — that is, how patients mostly fare after leaving their care. Are you dealing with a doctor with a passing or failing grade that's determined by an impartial board or service?
Much of what the task force recommends, however, hospitals and other providers are pretty much already telling patients. For example: A price for a basic service doesn't cover complications. In many cases, a hospital bill is separate and may be in addition to physicians' bills. A provider may not be in the patient's insurance network. Most reasonably informed patients know this and can get simple estimates on their own.
What is more elusive, and not adequately explained in this report, is how billing codes work and how to determine a fair price for a service.
Some explanation is provided in the HFMA's accompanying "consumer guide," but much more illumination is needed, because this is a complex set of price lists. The thousands of billing codes are the lingua franca of the medical billing system. Without understanding them in the context of a hospital's annual "chargemaster" price list, it's not possible to fully understand how much procedures cost — or compare them across institutions. The 20-page HFMA guide only provides a half-page explanation of billing codes.
What's a fair price for a common procedure? If you're fixing the brakes on your car, you can call dozens of shops and arrive at the conclusion yourself. But what if you need a colonoscopy? It's much more involved, granted, but performed widely. And there's a tremendous spread in hospital pricing. When the Safeway supermarket chain priced this service for employees, the report noted, it found that the procedure was priced from $848 to nearly $6,000 in one market surveyed. The company then launched a "reference pricing program" and gave their employees a $1,500 limit for the procedure along with a list of doctors who would do it for that amount of money or less.
What's even more important is how much insurers actually pay for certain billing codes. Health care is one of the few businesses where, due to third-party payers like employers writing the checks for care, few entities pay "retail" or the "sticker" price. Insurers or self-insured employer groups typically receive discounts of 50 percent or more because they have bargaining power and have agreed to contracted rates for services.
Further Consumer Protections
To put some teeth in the industry's initiative, federal law should require estimates and price sheets for basic services. You will be able to clearly see what's being charged going in the door.
When my daughter went to the emergency room last year after suffering a serious burn on her hand, we would've liked to have known upfront what seeing a doctor there was going to cost us. Our bill was $1,000 for only a few minutes of examination.
It was an out-of-pocket expense for us, so not only was it a costly surprise — we fought the bill all the way to the hospital's operating officer — we would've relished the opportunity to compare this facility's charges with its competition.
Attention software developers: A phone app could've done the trick in seconds.
The most empowering consumer information would certainly make provider pricing easy to access and compare. The next step would be to disclose what discounts are being paid for specific services.
This is already being done for other big-ticket services like college expenses. You can now survey a list of colleges and see what their "tuition discounts" are. This is yet another business where informed consumers don't have to pay retail because they have the power of information when they go into financial aid offices to negotiate.
Could you survey a group of local hospitals to find providers with the lowest prices and best outcomes for hip replacement surgery? Many patients are doing this, but right now it requires a lot of homework and patience. You may find the hospital with the best price, but you could still have serious questions about quality of care. Disclosure is effective only if it's comprehensive and tells you what you most need to know.
Like many industry efforts, the HFMA task force report is well meaning and heading in the right direction. But it will not empower consumers unless every provider is required to hand patients full price disclosures before a procedure — and allow them time to shop around and digest the metrics. While this is not practical in emergencies, it would certainly make a difference in expensive services like surgeries and long-term treatments.
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