“My intention was to post our prices from the different insurance companies,” he said. “I found out that our contracts with the insurance companies do not allow us to do that. We asked the insurance companies for their permission, and they turned us down,” Sonenreich said in an interview for this week's Modern Healthcare cover story. “The insurance companies feel that they need to keep their data concealed for strategic market reasons. At the end of the day, the lack of transparency is driving up prices.”
While small, for-profit healthcare providers have begun publishing cash-only price lists, a not-for-profit hospital CEO vowing to put negotiated rates online was, and remains, virtually unheard of. Sonenreich's goal was to show local employers how his competitors use their brand names to drive up commercial prices, even when their quality of the care is no than at lower-priced hospitals like his.
Because market dynamics send many of his 3,500 employees to other hospitals for care, Sonenreich said he knows that their prices commonly run much higher than Mt. Sinai's—35% or higher. Yet the quality of care at the higher-priced facilities is no better, he said. He thinks local employers in the Miami area who pay the bills deserve to see the same information.
“If they knew these disparities existed the way we know, they would put more pressure on their insurance consultants and insurance companies to provide products that are price-competitive,” Sonenreich said.
The prices negotiated between insurers and hospitals are typically considered trade secrets, and revealing them could be a breach of contract. But even the insurance industry has acknowledged the need for price transparency. Last November, America's Health Insurance Plans said the lack of price transparency was one driver of cost increases.
“Comprehensive reforms are necessary to reduce the growth in underlying costs—including high unit costs for certain providers and services,” the AHIP report said. “As an important first step, targeted measures to increase transparency can be a powerful force to drive down provider costs through market competition.”
Some experts note that price transparency can have costs. In the pharmaceutical industry, the Federal Trade Commission has warned (PDF) that allowing competitors to see each other's negotiated prices reduces the pressure to aggressively bargain for deep discounts and creates the ability for competitors to collude on prices and volumes. Those same risks may affect hospitals, especially in smaller and more consolidated markets.
Even so, more than half of states require some level of healthcare price transparency, and there are ongoing federal efforts to publish more information on providers' charges and payments.
But Sonenreich said none of those efforts are likely to be as effective as convincing large employers to take control of their own purchasing power by demanding price transparency. “It's the employers who are paying the bill that really need to step up and put the pressure on the insurance companies,” he said.
Follow Joe Carlson on Twitter: @MHJCarlson
