In previous posts, Dr. Ellis Weeker and Dr. Gary Li discussed the current state of hospital pricing and the forces that shaped the system we have today. In the third installment of our four-part series on transparency, they turn their attention to the future and the many ways in which this payment system might evolve over the next decade.
So now that the charge master has been unmasked by the Centers for Medicare & Medicaid (CMS) and high profile news stories in Time and The New York Times, will it survive?
No one knows for sure, but we think that there are a number of forces working toward the demise of the charge master and a movement toward greater transparency.
For one, consumer pressure will likely become a factor. Until recently, insured patients haven't been too concerned about the wildly uneven state of hospital pricing. Whether a procedure cost $20,000 or $50,000, they paid their deductible and copay. They had little incentive to decipher confusing hospital bills or shop for bargains.
However, that's all changing. Back in 2006, just 10 percent of employer health plan subscribers were enrolled in high-deductible health plans. Today, it's more than 30 percent. And it's a good bet that patients who pay more out of pocket for their care are going to demand greater transparency.
We certainly know people in our own lives who are angry about this issue. A friend of Dr. Weeker's was so fed up with his indecipherable hospital bills that he joined an integrated health system. Another friend was treated for an illness at the Mayo Clinic. When he found out he could have saved $30,000 by having the same procedures near home, he was furious.
So we do believe that consumers will push for increased transparency in coming years. They'll want to know how much their healthcare costs and where to go for the best deal. And they'll expect their physicians to refer them to others who provide high-value care.
How will patients get their information? It seems likely, given CMS' growing interest in transparency, that the government will eventually require hospitals to publish their pricing. A handful of states, including Massachusetts, New Hampshire and North Carolina, have already passed stringent transparency laws, and similar bills have been introduced at the federal level.
Just as they shop for travel deals on Orbitz, future patients may compare provider costs online. A handful of enterprising tech companies are already tapping into this need. PokitDok, a Silicon Valley startup, recently received a $4 million infusion of venture capital to build a consumer-facing site that will allow patients to research and buy some healthcare services. According to the company, over 1,000 providers have already volunteered to participate in beta testing.
While these are positive steps, increased transparency has several potential pitfalls. Ideally, hospital pricing would be published in increments, beginning with elective procedures. But requiring across-the-board disclosure could potentially cripple hospitals and harm patients, particularly in the area of emergency care (more on that in our next post).
It's also important to note that listing prices won't in and of itself help patients make informed decisions. Quality data is also an important part of the equation. You need both quality and cost data to determine value.
Many patients are surprised to learn that in the healthcare industry, higher prices don't necessarily reflect quality. Some assume that a more expensive hip replacement is likely to have a better outcome, just as a pricey red wine will be superior in taste.
Given human beings' collective tendency to associate price with quality, publishing hospital prices could actually drive up those prices. In a recent post on KevinMD, physician and behavior scientist Peter Ubel points out that the hospitals with lower prices today would likely raise these to bring them in line with the market once they see what competitors are charging.
Ubel also points out that transparency could impact hospital pricing by reducing the negotiating power of insurers. This is problematic because the discounts negotiated by third-party payers are arguably one of the greatest benefits of having personal health insurance today.
Quality data — combined with increased awareness on the part of consumers — could be one factor opposing this trend and combating price inflation.
So what will hospital pricing look like down the road? We don't have all the answers, but we think it's safe to say that increased transparency is coming in some form or another. Its evolution may be gradual, but movement in this direction will be steady. And in our opinion, despite some potential pitfalls, it's probably the right thing to do.
In this series:
Physicians Discuss Price Transparency in Medicine (Part I)
Perspectives on Hospital Pricing: Where Did This System Come From? (Part II)
Transparency in Medicine: Where Will Be in 10 Years? (Part III)
The Impact of Increased Transparency on the Acute Care Continuum (Part IV)