Skip to main content
Sister Publication Links
  • ESG: THE NEW IMPERATIVE
Subscribe
  • My Account
  • Login
  • Subscribe
  • News
    • Current News
    • COVID-19
    • Providers
    • Insurance
    • Government
    • Finance
    • Technology
    • Safety & Quality
    • Transformation
    • People
    • Regional News
    • Digital Edition (Web Version)
    • Patients
    • Operations
    • Care Delivery
    • Payment
    • Midwest
    • Northeast
    • South
    • West
  • Digital Health
  • Insights
    • ACA 10 Years After
    • Best Practices
    • Special Reports
    • Innovations
  • Data/Lists
    • Rankings/Lists
    • Interactive Databases
    • Data Points
  • Op-Ed
    • Bold Moves
    • Breaking Bias
    • Commentaries
    • Letters
    • Vital Signs Blog
    • From the Editor
  • Awards
    • Nominate/Eligibility
    • 100 Most Influential People
    • 50 Most Influential Clinical Executives
    • Best Places to Work in Healthcare
    • Excellence in Governance
    • Health Care Hall of Fame
    • Healthcare Marketing Impact Awards
    • Top 25 Emerging Leaders
    • Top 25 Innovators
    • Diversity in Healthcare
    • Women in Healthcare
    • - Luminaries
    • - Top 25 Diversity Leaders
    • - Leaders to Watch
    • - Luminaries
    • - Top 25 Women Leaders
    • - Women to Watch
  • Events
    • Conferences
    • Galas
    • Virtual Briefings
    • Webinars
    • Custom Media Event: ESG Summit
    • Transformation Summit
    • Women Leaders in Healthcare Conference
    • Social Determinants of Health Symposium
    • Leadership Symposium
    • Health Care Hall of Fame Gala
    • Top 25 Women Leaders Gala
    • Best Places to Work Awards Gala
    • Top 25 Diversity Leaders Gala
    • - Hospital of the Future
    • - Value Based Care
    • - Supply Chain Revenue Cycle
    • - Hospital at Home
    • - Workplace of the Future
    • - Strategic Marketing
    • - Virtual Health
  • Listen
    • Podcast - Next Up
    • Podcast - Beyond the Byline
    • Sponsored Podcast - Healthcare Insider
    • Video Series - The Check Up
    • Sponsored Video Series - One on One
  • MORE +
    • Advertise
    • Media Kit
    • Newsletters
    • Jobs
    • People on the Move
    • Reprints & Licensing
MENU
Breadcrumb
  1. Home
  2. Opinion & Editorial
July 20, 2019 01:00 AM

Commentary: As healthcare prices are revealed, hospitals face hard choices

Suzanne Delbanco
  • Tweet
  • Share
  • Share
  • Email
  • More
    Reprints Print
    Suzanne Delbanco

    Suzanne Delbanco is executive director of Catalyst for Payment Reform.

    Greater transparency has always been a source of anxiety for many healthcare industry stakeholders. When I was the founding CEO of the Leapfrog Group, verbal rotten tomatoes were often launched my way when speaking to hospital leaders about the insights into hospital quality and safety sought by employers. The argument: There is no easy, accurate and fair way to measure quality, much less report it publicly.

    Over the last decade, the voice of employers seeking transparency into healthcare prices and quality has been amplified, and healthcare providers and payers have warned about unintended consequences. Among the arguments: It will lead to higher prices when low-cost providers see that the market will pay more and it will encourage patients to seek care from higher-priced providers because they equate price with quality.

    At Catalyst for Payment Reform, we understand the complicated differences across charges, prices, a patient’s share of the costs and the total cost for an episode of care. But these excuses have gotten us nowhere but to a system that seems to ignore the real health and financial impact on Americans.

    We know there is little relationship between healthcare prices and quality and that there is great variation in both. And now, thanks to a recent study by RAND Corp., we know which hospitals across 25 states are being paid the highest prices. Pandora’s box is open and there’s no closing it. The RAND study found that, on average, private payers are paying hospitals about 2.7 times what Medicare pays them for the same services.

    Why can some hospitals charge higher prices than others? Market power.

    Increasingly there is a correlation between who has the market power and what prices they can command. In the case of hospitals, market power can either be a result of market share or reputation. But given the poor correlation between quality and price, it doesn’t provide a satisfying rationale to employers and the other healthcare purchasers who cover much of the expense of healthcare services used by the 158 million Americans who get their insurance through their employer.

    What are healthcare purchasers likely to do with their newfound knowledge? Steer employees and their family members away from overpriced healthcare providers through benefit design incentives or create narrow or tiered provider networks. Some purchasers have cut out coverage for particular providers. Others have pursued direct contracts with providers. And they will continue, where they can, providing quality and price information about covered providers to enrollees in their health plans. While we know few Americans regularly use such information to make healthcare choices, employers will use it in designing their healthcare benefit programs.

    Hospitals have a choice about how to react to these employer-led strategies, as they did in response to the California Public Employees’ Retirement System’s now well-known reference pricing program for total joint replacements. Some hospitals made the cut due to the prices they had already agreed to; others asked to renegotiate to avoid losing patient volume.

    A lot can get in the way of purchasers’ strategies. Market power sometimes gives providers leverage to refuse to share information about their quality and cost or to deny health plans the ability to steer patients away from them. Even when exposed through studies like RAND’s, they can continue to command higher than competitive prices.

    The next few years are likely to test the ability of the healthcare marketplace to meet the needs of those who use and pay for care. If employer efforts continue to be thwarted, significant policy intervention could be on the way, whether federal or state, such as laws governing surprise billing and out-of-network charges or making contract terms between health plans and providers transparent.

    The quest for transparency began with quality and, consequently, we now have employers who won’t consider hospitals for a high-performance network if they won’t report to the Leapfrog Group survey. With the lid ajar on Pandora’s box, we are likely to see employer demands pegged to price transparency and more strategies built on provider prices.

    Letter
    to the
    Editor

    Send us a letter

    Have an opinion about this story? Click here to submit a Letter to the Editor, and we may publish it in print.

    Recommended for You
    Dennis Matheis
    Sentara Healthcare names Dennis Matheis next top executive
    supreme-court-healthcare-ok_WEB_i.jpg
    Healthcare groups react to Supreme Court abortion ruling
    Sponsored Content
    Get Newsletters

    Sign up for enewsletters and alerts to receive breaking news and in-depth coverage of healthcare events and trends, as they happen, right to your inbox.

    Subscribe Today
    MH Magazine Cover

    MH magazine offers content that sheds light on healthcare leaders’ complex choices and touch points—from strategy, governance, leadership development and finance to operations, clinical care, and marketing.

    Subscribe
    Connect with Us
    • LinkedIn
    • Twitter
    • Facebook
    • RSS

    Our Mission

    Modern Healthcare empowers industry leaders to succeed by providing unbiased reporting of the news, insights, analysis and data.

    Contact Us

    (877) 812-1581

    Email us

     

    Resources
    • Contact Us
    • Advertise with Us
    • Ad Choices Ad Choices
    • Sitemap
    Editorial Dept
    • Submission Guidelines
    • Code of Ethics
    • Awards
    • About Us
    Legal
    • Terms and Conditions
    • Privacy Policy
    • Privacy Request
    Modern Healthcare
    Copyright © 1996-2022. Crain Communications, Inc. All Rights Reserved.
    • News
      • Current News
      • COVID-19
      • Providers
      • Insurance
      • Government
      • Finance
      • Technology
      • Safety & Quality
      • Transformation
        • Patients
        • Operations
        • Care Delivery
        • Payment
      • People
      • Regional News
        • Midwest
        • Northeast
        • South
        • West
      • Digital Edition (Web Version)
    • Digital Health
    • Insights
      • ACA 10 Years After
      • Best Practices
      • Special Reports
      • Innovations
    • Data/Lists
      • Rankings/Lists
      • Interactive Databases
      • Data Points
    • Op-Ed
      • Bold Moves
      • Breaking Bias
      • Commentaries
      • Letters
      • Vital Signs Blog
      • From the Editor
    • Awards
      • Nominate/Eligibility
      • 100 Most Influential People
      • 50 Most Influential Clinical Executives
      • Best Places to Work in Healthcare
      • Excellence in Governance
      • Health Care Hall of Fame
      • Healthcare Marketing Impact Awards
      • Top 25 Emerging Leaders
      • Top 25 Innovators
      • Diversity in Healthcare
        • - Luminaries
        • - Top 25 Diversity Leaders
        • - Leaders to Watch
      • Women in Healthcare
        • - Luminaries
        • - Top 25 Women Leaders
        • - Women to Watch
    • Events
      • Conferences
        • Transformation Summit
        • Women Leaders in Healthcare Conference
        • Social Determinants of Health Symposium
        • Leadership Symposium
      • Galas
        • Health Care Hall of Fame Gala
        • Top 25 Women Leaders Gala
        • Best Places to Work Awards Gala
        • Top 25 Diversity Leaders Gala
      • Virtual Briefings
        • - Hospital of the Future
        • - Value Based Care
        • - Supply Chain Revenue Cycle
        • - Hospital at Home
        • - Workplace of the Future
        • - Strategic Marketing
        • - Virtual Health
      • Webinars
      • Custom Media Event: ESG Summit
    • Listen
      • Podcast - Next Up
      • Podcast - Beyond the Byline
      • Sponsored Podcast - Healthcare Insider
      • Video Series - The Check Up
      • Sponsored Video Series - One on One
    • MORE +
      • Advertise
      • Media Kit
      • Newsletters
      • Jobs
      • People on the Move
      • Reprints & Licensing