When legislators in California enacted a law last July forcing all hospitals in the state to publish their charge-masters, or list of prices for services, they may have envisioned a rush by patients to comparison-shop.
But at 655-bed Sutter Medical Center, Sacramento, not a single request for price information was made for about six months, until a reporter asked to view prices.
"That was not a surprise," said Bill Gleeson, spokesman for Sutter Health, a 26-hospital system based in Sacramento. Chargemasters, books that contain the prices of every medical service, good and product at a hospital, can be thousands of pages long and contain tens of thousands of line items, he said. "And the fact that consumers don't know the types, the range or the number of procedures that they will face in the hospital makes (the chargemaster) all the more difficult to use in isolation."
The cornerstone of the consumer-driven healthcare movement is the belief that patients will make better decisions about their care if they have more information. That belief is behind federal legislation introduced earlier this month that would force hospitals to publish price information. However, a separate study released last week challenges that belief, pointing out that patients-even when armed with cost information-rarely use it to decide where they want to receive care.
Earlier this month, following the lead of a growing number of states, Reps. Dan Lipinski (D-Ill.) and Bob Inglis (R-S.C.) introduced federal legislation that would require hospitals to report their 25 most common inpatient and outpatient procedures and 50 most commonly prescribed drugs. It is unclear how much support there is for the bill and there has been no companion bill introduced in the Senate.
In a news release, Lipinski said he became aware of hospital prices after he was injured in a bicycle accident last summer. Looking at the hospital bill, he saw he was charged $5 for a single-use packet of antibiotic ointment. For $6 at the local drug store, he could have purchased a tube of the ointment about 32 times larger than what the hospital gave him, he said.
"Informed consumers are a critical part of any long-term solution to address healthcare access and affordability," Lipinski said. "Healthcare decisions are just too important to be left to chance."
But whether such a bill, if passed, would affect consumer behavior is uncertain. Last week, surveys done for the Blue Cross and Blue Shield Association found that Americans are greatly interested in using publicly available information to help them make healthcare decisions. But the surveys also found that when they do look for information, it is primarily for quality data.
Only 14% seek cost data
According to one survey by the RAND Corp., a think tank, only 14% of respondents who searched for healthcare information during the past year searched for information on the cost of treatment. The vast majority of respondents were looking for information on treatments or treatment options.
Some 35% of respondents said that the cost of treatment influenced the treatment they chose and 14% said cost affected the facility they used.
The survey did not break down whether the facility was a doctor's office, clinic or a hospital.
Around the country, about a dozen states have adopted legislation that makes hospital prices publicly available, the most recent being South Dakota, whose governor signed a bill into law earlier this month requiring that hospitals list median prices for their 25 most common inpatient procedures (Feb. 28, p. 24).
Some states such as California require hospitals to make their entire chargemasters available to the public. In some states such as North Carolina, hospitals are required to give price information only for the most common procedures in their facilities.
In other states, such as Wisconsin, where no laws mandate price-reporting, hospitals voluntarily report prices either to the state or to the state hospital association for public use.
Shopping for deals?
The logic behind making hospital prices public is that arming consumers with information about prices will enable them to shop for the best deal. The ensuing competition among hospitals, it is argued, then lowers costs and improves quality.
The rise in the number of uninsured and increased scrutiny of hospitals' billing of the uninsured have also contributed to the movement to make hospital prices transparent.
"We think any information that helps consumers is useful. Knowing the prices for hospitals for the uninsured ... is sadly a part of the equation," said Kathleen Stoll, director of health policy at Families USA, a consumer advocacy group.
As healthcare spending continues to rise at a double-digit percentage pace, the spotlight has focused on spending on hospital services, which consumed 31% of the total $1.7 trillion spent on healthcare in 2003. Hospital services made up the largest share of the healthcare spending pie, according to the CMS.
In February, consumer prices for hospital services rose 0.7%, and over a 12-month period they rose 5.5%, according to figures from the U.S. Labor Department's Bureau of Labor Statistics. Meanwhile, acute-care hospital wholesale prices rose 0.6% for the month and 3.9% for the year.
Tom Getzen, a professor of insurance at Temple University, said month-to-month jumps in hospital prices don't necessarily give a clear picture of what is happening but said that hospitals may be raising prices now in anticipation of possible future cuts in Medicare and Medicaid.
Also, health insurers are in a more profitable part of the underwriting cycle and hospitals may be succeeding in getting payment increases from them, he said.
Even among those who support greater transparency in healthcare, there is skepticism about whether making such information available to the public serves patients well. For one thing, most patients are limited as to which hospital they can use by their health plans' hospital networks and by the facility in which their doctors have privileges, experts said. And while some consumer advocates say such information is necessary for uninsured patients, others say such information may not be helpful.
"Is making sick people make healthcare decisions based on cost the right thing to do?" asked Arthur Levin, director of the Center for Medical Consumers, an advocacy group.
Costs aren't only factor
Last week at a press conference in conjunction with the release of the RAND survey, Rakesh Chauhan, vice president of medical services and medical director for Premera Blue Cross, said that armed with information about hospital prices, patients still need to consider other factors when choosing a facility.
"We hope that patients are not using cost information in isolation, but that they're talking to their doctors and looking at quality measures" in making those types of decisions, he said.
When hospitals report prices, they generally are reporting their charges, or the retail prices for hospital services. But, because almost no one pays charge amounts, many say disclosing them is useless.
Uwe Reinhardt, a health economist at Princeton University, went so far as to call hospital charges "phoney." Unless the prices made available to consumers truly reflect what they will pay, "It wouldn't have any effect at all" on consumer education, he said.
But making prices meaningful to the public has proven to be elusive because in the hospital setting, price can have multiple meanings. It can refer to the charge, the discounted amounts that health plans pay to hospitals, or the Medicare or Medicaid reimbursement rates.
"In the healthcare world, pricing means so many things," Levin said. "There's a complexity that's not appreciated by legislators who say let's (make hospitals publish their prices)."
Two years ago, Florida lawmakers found out that legislating the transparency of hospital prices alone does not guarantee value to consumers. In 2003, a bill was proposed that would have made hospital chargemasters available to the public.
But unknown to the lawmakers, hospital prices were already being published on the Web site, www.floridahealthstat.com. When they did learn of the site, they also found that the information was nearly indecipherable.
Indeed, said Kim Streit, vice president of healthcare research and information for the Florida Hospital Association, one had to know DRG codes in order to use the site. The state and hospitals are now working to get the information refined so it is more consumer-friendly.
When the California Legislature decided hospitals needed to disclose their prices, lawmakers told hospitals to open their chargemasters to the public. The hospital industry there, in addition to reporting virtually no requests from patients to view them, says that even if patients did try to use chargemasters, they wouldn't be able to accurately estimate the cost of a hospital stay. To do so, patients would have to know the exact procedures they need and what drugs and medical devices would be used as part of their treatment.
"I would say it's impossible," said Reece Fawley, executive director of health plan strategy and revenue management at the University of California at San Francisco Medical Center. Like Gleeson at Sutter Health, Fawley said that he could count on one hand the number of people who have asked to view his facility's chargemaster, despite considerable publicity in state and local media and signs throughout the hospital about the chargemaster's availability.
"If you're a self-paid patient, you can ask what the procedure will cost beforehand," he said. "We've always had tools for our frontline staff to get estimates for patients."
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