Transparency at what cost?

Bill DiGiorgio is the man behind the slowly rising curtain at 196-bed Doylestown (Pa.) Hospital.

DiGiorgio answers the recently installed telephone hot line—a leading-edge but relatively low-tech effort to bring a significant level of pricing transparency to prospective patients. Patients can call the hot line during regular business hours Monday through Friday, describe the medical procedure they need and their health insurance coverage and within 24 hours, DiGiorgio promises to tell them their out-of-pocket costs.

From July 2007 when the program was first launched until early this month, DiGiorgio had responded to 304 calls—fewer than one a day.

“I’m taking calls for inpatient services but very bluntly, most of the calls involve imaging procedures,” DiGiorgio says. “The most surprising thing to us is that we expected we would get patients that have consumer-driven health plans, but we are seeing very little of that.”

Apparently, patients in suburban Philadelphia are not exactly clamoring for hospital pricing information. Yet with the anticipated rise in high-deductible health plans in which consumers will be expected to shoulder a higher proportion of the costs, consumer advocates, Congress, the Bush administration, the American Hospital Association and the Healthcare Financial Management Association all have been preaching the gospel of greater pricing transparency for several years.

Preaching it and doing it are two different things. Last Aug. 10, Ed Fraser Memorial Hospital began posting its chargemaster on its Web site, announcing the initiative with a statewide news release, says Dennis Markos, president and chief executive officer of the 68-bed hospital in Macclenny, Fla. The initiative was sparked by the growing nationwide push for pricing transparency as well as confidence that “our pricing is extremely competitive with major hospitals in Jacksonville,” he says. Since that date, the Web site has clocked visits by 328 different people viewing the site 436 times.

“I really don’t know how to interpret it,” Markos says. “I’m not sure the public is as interested in hospital charges as everybody is making it out.”

On the face of it, healthcare’s newest grail—pricing transparency—seems like a noble mission, but under the microscope all sorts of pesky problems begin to come into focus, caused in large part by healthcare’s notoriously inscrutable pricing system. And although it seems to be a no-brainer as a necessary way for engaging patients into making informed healthcare decisions, it may not be the panacea for consumerism that it is made out to be.

Paul Ginsburg, president of the Center for Studying Health System Change, says he has been trying to convince policymakers of that for some time.

“The potential of price transparency is being oversold,” Ginsburg says. “Its potential to make a difference in the near term in consumers’ decisions is fairly limited, and by the way, if it’s done in a clumsy fashion, it could even raise prices.”

The Congressional Budget Office raised the same issues in a June 5 brief, examining whether increased transparency would help restrain the rapid growth in healthcare costs. “The answer is unclear because evidence can be marshaled on both sides of the issue,” according to the brief. Since more than 80% of the population is covered by health insurance, most people are insulated from the full force of rising healthcare prices and have limited incentive to compare prices, the CBO says. Meanwhile, on the provider side, more transparency could even lead to higher pricing in highly concentrated markets “because higher prices are easier to maintain when the prices charged by each provider involved can be observed by all of the others.” What’s more, more transparent prices would likely narrow the pricing range, the CBO adds.

Still, providers and payers are pushing forward in efforts to bring transparency to their pricing policies, and it’s a work in progress. Healthcare organizations are all over the map in terms of how much of their pricing they are willing to reveal and in what form they disclose it.

“I think as a society we’re doing all of this, but we’re not sure in the end how useful it is going to be,” says Michael Freed, executive vice president and chief financial officer of seven-hospital Spectrum Health in Grand Rapids, Mich. “That’s a question a lot are asking themselves.”

Leading the movement, as always, is the CMS, which has always made what it pays hospitals and physicians a matter of public record and is now taking it one step further by moving things into the “value proposition” side—a means of integrating publicly reported quality measures with pricing. But Ginsburg says, “one of my other themes is that the government has done some silly things in the price-transparency area in putting out a lot of data that is very difficult for people to make any good use out of.” Since all Medicare beneficiaries pay the same deductibles, knowing that the CMS pays, for example, one teaching hospital more than it pays another might only serve to encourage Medicare patients to go to the more expensive hospital, he notes. “Since it absolutely doesn’t matter to Medicare beneficiaries, it is not going to affect their decisionmaking except in a perverse way,” Ginsburg says.

It may all be a moot point because no one, not even the CMS, has reached the pricing pinnacle yet, presuming it is even feasible to compare hospitals side by side on pricing in the same way that consumers can compare cars and television sets. Hospitals each have their own methodologies in terms of revealing pricing data. There are high-tech versions accessible through hospital Web sites and low-tech versions such as Doylestown’s, which is arguably more effective.

Doylestown would eventually like to post its pricing information on its Web site, but “it’s a pretty complicated process that requires some degree of research,” says Douglas Boyle, Doylestown’s vice president and CFO. “We felt it was important to talk to patients. … Currently there is too much of a dialogue we need to do.” Anyone can publish charges, he adds, but “I don’t know if that is completely useful to patients. A patient wants to know what they are going to pay out-of-pocket.”

In fact, hospital charges are readily available for public consumption in most states. Two years ago, the AHA, in a policy paper calling on hospitals to “share meaningful information with consumers about the price of their hospital care,” noted that 32 states already had statutes requiring hospitals to publicly report pricing information either through a hospital, hospital association or government Web site. Markos of Ed Fraser agrees that posting the chargemaster, which merely describes the “suggested retail price” without any allowances for the deep discounts given most insurers, might raise questions regarding a patient’s out-of-pocket costs. But there is something to be said for the fact that the hospital’s charges haven’t taken an across-the-board increase in six years, he says.

“I don’t see a problem putting out the charges,” Markos says. “Hospitals say it confuses patients. That’s fine. Patients can call and ask questions.” The arguments against the policy are a “smoke screen—then probably you have a reason for not showing them,” he adds.

Robert Berry, a physician who operates the PATMOS EmergiClinic in Greeneville, Tenn., would agree. Berry has waged a one-man public relations campaign against 140-bed Laughlin Memorial Hospital, also in Greeneville, for not making public the prices of routine outpatient services such as laboratory tests and imaging studies. PATMOS stands for “payment at the moment of service,” and Berry refuses to do business with insurers, including Medicare. Opened in 2001, the clinic now has more than 8,100 patients; 60% of them do not have insurance, and as many as 20% have high-deductible plans, he says.

Berry, who doesn’t have an X-ray machine at his office, says that he was seeking Laughlin’s charges so he could refer his patients to hospitals with the most favorable pricing. When Charles Whitfield Jr., Laughlin’s president and CEO was installed as chairman of the Tennessee Hospital Association, Berry raised the pricing transparency issue along with a host of others in a letter to the editor of the Greeneville (Tenn.) Sun.

“It’s hard to make a decision about care if patients don’t know how much tests are going to cost,” Berry says.

Whitfield says posting the bare charges “creates a lot of confusion.” Patients seeking a simple CT scan, for example, may learn only afterward that there are additional charges for the contrast agent “and all of a sudden charges start building,” Whitfield says. “It’s putting an unrealistic expectation in the patient’s mind, I’m afraid. Every case is individual, and all of a sudden they are met with a higher price than they were told. I’m not seeing a push from other patients or doctors for that kind of information.”

Actually for more than a year, the Tennessee Hospital Association has been posting charges for hospitals, including Laughlin, or, for a few exceptions, links to hospital Web sites with the information, says Craig Becker, the THA’s president and CEO. The original impetus for the site was to provide pricing information to the uninsured in response to the national debate over hospital charity-care policies and price transparency. The hospital association would like to develop it further and work with insurance companies so patients can get a better idea of their out-of-pocket costs. But a lot of insurance companies resist transparency for competitive reasons, he adds. “They don’t want hospitals to know what they are paying other providers,” Becker says.

“Hospitals have been taking the heat,” Becker says. “The criticism was deflected to us, but it goes way beyond us.” Taking it even further, medical-device manufacturers keep their pricing close to their chests, he notes. “Why shouldn’t we know what they are charging?” Becker says. “That’s the most frustrating thing. It’s all of our issue as opposed to everybody else’s issue.”

Health insurance companies are rolling out hospital cost comparison tools but they of course are exclusive to the particular health plans’ members. Anthem Blue Cross and Blue Shield, owned by WellPoint, launched its tool in the Dayton, Ohio, market in 2006 and has rapidly expanded it to 17 markets covering 8 million members, says Eric Fennel, WellPoint’s staff vice president for consumer innovation. Care Comparison provides the range of costs patients can expect to pay at specific facilities for 39 procedures.

“We actually look at the cost of the whole episode from the consumer’s standpoint,” Fennel says. In the future, WellPoint hopes to further integrate cost and quality data as well as demographic and other administrative data, he adds. “From a strategic standpoint, we view transparency as a great way to engage consumers and help them make informed decisions,” Fennel says. “Every health plan is offering some level of transparency in terms of showing network prices, but I would say relative to others I feel we’ve taken a slightly different approach in terms of focusing on transparency as a means, not an end.”

Taking health-plan transparency a step further, the 17 members of the Wisconsin Association of Health Plans signed a pledge last month to begin providing by Sept. 1 estimates of out-of-pocket costs to enrollees who request them. The pledge arrived in the wake of state legislation pushing transparency measures for both providers and insurers that was introduced during the last legislative session, but died when the Legislature adjourned.

“Our board members recognize this is just one step in the progression of overall price transparency,” says Phil Dougherty, senior executive officer of the Wisconsin Association of Health Plans. “Not everybody, providers included, is on the same page in terms of what should be provided or needs to be provided for consumers to be best informed.”

Joe Kachelski, vice president of the Wisconsin Hospital Association’s information center, says the health plans’ pledge includes “common-sense kinds of things. I think policymakers are looking for and in part motivating them to do it. We welcome it. Our message consistently has been that we are doing our part, and others need to. We’ll never be done.”

As early as February 2005, the WHA launched an online tool called PricePoint, one spot place where anyone can get pricing information for 34 different outpatient procedures and every inpatient discharge at every hospital in the state. Besides average charges, the tool offers some utilization data such as average length of stay for the procedure, and offers an opportunity with compare selected hospitals to other individual hospitals. The WHA has replicated the tool for 14 other state hospital associations. As of earlier this month, the Wisconsin site received 2 million cumulative page views and 325,000 visits, Kachelski says.

“The market is changing and the payer is changing rapidly. A growing proportion of the market is covered by insurance where the billing charge might actually be relevant to what a patient pays out-of-pocket,” Kachelski says. “We think the trend is in the direction of more consumerism in healthcare, and this is our effort to do our part.”

Nevertheless, “what is most important for consumerism is what the patient is going to pay out-of-pocket”—information that has to come from insurers, Kachelski adds. “So much of this is going to depend on how people pay for healthcare. If, as we believe, consumerism is going to be bigger, insurers are going to have to play a bigger role in getting information out there. A lot is going to depend on what is more relevant to consumers. If everybody does his part in engaging consumers, then consumers need to take it from there.”

Believing that consumers should be able to compare hospital prices before they purchase healthcare services, 114-bed Alliance (Ohio) Community Hospital in April began offering $100 to anyone who submitted his explanation of benefits, or EOB, documents from health insurance companies for services performed at other area hospitals. Alliance officials said in a news release that they were specifically seeking data on inpatient stays, emergency room treatments, MRIs and CT scans, and physical therapy. Consumers submitting the documents were asked to redact any personal information such as name and Social Security number.

The hospital subsequently spent about $4,000 on 40 EOBs and now has enough information about the three closest hospitals, information such as the negotiated rates on four procedures and where Alliance stood in the marketplace, says Stanley Jonas, Alliance’s CEO. The request perhaps has raised a few eyebrows but no formal protests from hospitals or insurers, he says. Jonas also admits that he is not sure where the hospital is going with the EOB information.

Hospitals in Ohio already are required to publish the prices of their top 60 procedures, but those “list prices are meaningless to the consumer,” Jonas says. Alliance’s Web site also includes the pricing for the three closest competitors “so if people want to look at our competitors they won’t have to figure out how to get there,” he adds. “The information we put out there is the same information they have public access to; we are just making it easier to find.”

Jonas says that he is struggling with how to present meaningful information to consumers that doesn’t run afoul of contractual agreements restricting the disclosure of negotiated rates with insurers. “We don’t know if people know they have the choice to go to a different facility,” Jonas says. “We’ll stop once we have the information we asked for in surrounding areas. Then we have to figure out how to help consumers. … They deserve the information, and we should figure out how to get it to them.”

Leveraging the knowledge that comes from operating a 500,000-member health plan as well as seven hospitals, Spectrum Health went “live” with charge data on the Web in October 2006, and added net payments by Medicare, Medicaid, commercial insurers and the uninsured last February, Freed says. The site has tracked nearly 40,000 visits since its launch—an average of about 2,000 per month.

Average charges for about 200 of the most popular procedures are currently posted. For example, for code 39.71, an abdominal aortic aneurysm repair with graft, the Web site discloses the estimated average price ($46,300), the average Medicare payment ($23,180), the average Medicaid payment ($14,604) and the average insurance payment ($34,883).

Besides believing in transparency as the right thing to do, Spectrum through its own health plan has noticed a “change going on in the industry,” Freed says. Nearly half of Spectrum’s enrollees are in high-deductible plans—defined by Freed as deductibles of $1,000 or more—and those people understandably would have more interest in what their out-of-pocket charges would be.

“For those interested in what it is going to cost them, we want to be responsive, and that is why we are putting information on the Web,” Freed says. “Do people really care about this or do they think quality and pricing are the same everywhere? That’s a big question mark, so I think a lot of people are saying, ‘I’m not going to invest in this unless I absolutely have to.’ Somebody has to step out there and try, and that’s what we’ve done.”

Nine-hospital Alegent Health in Omaha, Neb., has perhaps taken price transparency to its highest level, launching the My Cost online tool in January 2007 (April 30, 2007, p. 22). Still evolving, it provides after a series of questions, out-of-pocket cost estimates both for insured and uninsured patients. Consumers don’t have to know their deductible and copayment amounts; the tool will automatically calculate it, says Linda Waldmann, manager of My Cost.

Links to quality information are also provided on the Web site, which originally started with the top 500 procedures and has since added 31 more based on consumers’ requests.

The Web site has experienced more than 38,500 hits since January 2007—an average of 1,900 a month, much like Spectrum.

“We feel it’s important for consumers to become engaged in healthcare decisions, and they need actionable material at their fingertips,” Waldmann says. Many insurers are providing the same information, she says, “but we’re providing it for a wide range (of health plans) as well as for the uninsured.”

Patients are encouraged to print out the results and bring it with them to the hospital. If they have any difficulty accessing the information, there is a toll-free phone number with a full-time employee assigned to answer all related calls and e-mails.

Waldmann, whose background is in revenue-cycle reimbursement, says she believes “one of the most frustrating things for consumers is not knowing what it is going to cost” to see a doctor or have a checkup.

“You have to be smart how you present the information, and it has to be relevant and in a format that is easily understood by the consumer,” Waldmann says. “We believe that our consumers should have the ability to become more engaged in healthcare decisions, and in order to do that they need information that is relevant, meaningful and actionable.”

What do you think?

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