Thursday, May 16, 2013

Transparency in health care remains the exception rather than the rule. Consumers often must go to great lengths to find reliable, understandable information to make comparisons about quality or price. Consequently, two big events recently were a giant step toward public access to information. First, Medicare released hospital cost data for 3,000 hospitals across the country (1). Now consumers can see how hospital fees compare on the top 100 most common reasons for hospitalization, based on an impressive 7 million discharge events (2). No doubt these numbers will soon be merged with safety and quality information to provide a new generation of useful, public health care-decision tools.

Perhaps even more important, the U.S. Department of Health and Human Services announced that hospitals will now be required to release cost data (3). Until now, hospitals in many states had no obligation to report any information about price. Other states “encouraged” hospitals to release data, but there were no strong requirements to do so. Reporting will now be mandatory, poking a large hole in the veil of secrecy held so tightly by hospitals and health plans.

One only has to review the headlines to understand why many hospitals were reticent to report. On Wednesday, May 8, 2013, most news agencies reported the Medicare data release by highlighting the absurd variations in price in their local market (4, 5). All over the country, strikingly similar stories described how hospital “A” was three (or more) times as expensive as hospital “B” doing the same procedure a few miles way. The ironic consistency nationwide is just how inconsistent prices are.

Hospital Charges Political Humor Graphic

Reprinted with Permission from The Hartford Courant

As one might expect, expensive hospital representatives were quick to provide explanations (excuses) for the difference; namely, their patients are sicker, their cost structure is more expensive, they add value in other ways (teaching). Plus, they add defensively, almost nobody pays the full price. While perhaps part of the story, one wonders how THOSE points explain how one facility can do the same, sometimes-routine things at one-fifth the cost of other facilities. In other words, while prices are now clearly visible, reasons for price variation are not.

It’s likely that the downstream effect of widespread data release will have an even greater impact than transparency itself. By lifting the blindfold on cost, the system gets increased scrutiny; people want answers. Not only will outlier hospitals be asked to explain themselves, the entire pricing method comes into question. One look at the data brings to mind some obvious subjects that need attention:

  1. How do consumers benefit from the nonsensical system of “charging” meaninglessly high fees that are mostly fictitious? Is this the hospital’s way of setting a mythological price from which it negotiates discounts? Or is there some other value (write-offs?) to prices that are rarely applied? Seeing charges and payments side by side only remind us how dysfunctional and confusing this industry practice is.
  1. Is it time to revisit the equation for determining payments from Medicare? The paid amount varies considerably. Do factors that determine a higher price encourage higher quality, better safety, or better outcomes? Do they simply reflect cost-of-living, or worse, reward facilities for inefficiency, added technology, or other presumed differences?
  1. How do prices correspond to safety and outcomes? Because we know that hospitals make more money when patients experience errors and complications, it’s possible we will find that the safest, highest-quality care will come with a lower price tag.

Yes, it was a good week for consumers and transparency. Medicare’s data release will have an immediate impact on the public’s ability to choose lower-cost providers. However, I’m hoping that the longer-term impact of this disclosure is much-needed scrutiny and eventual reform of the payment system.

References

1.   U.S. Department of Health and Human Services. (2013, May 10). Administration offers consumers an unprecedented look at hospital charges. Press Release. The Wall Street Journal. Retrieved from http://online.wsj.com/article/PR-CO-20130508-911728.html?mod=googlenews_wsj.

2.   Centers for Medicare & Medicaid Services. Medicare provider vharge data 2013 [updated May 10, 2013; cited 2013 May 10]. Retrieved from http://www.cms.gov/research-statistics-data-and-systems/statistics-trends-and-reports/medicare-provider-charge-data/index.html.

3.   Castro, C. Y., Ostrowski, M. L., Barrios, R., Green, L. K., Popper, H. H., Powell, S., et al. (200l, August 25). Relationship between Epstein-Barr virus and lymphoepithelioma-like carcinoma of the lung: A clinicopathologic study of 6 cases and review of the literature. Human Pathology, 32(8), 863-72.

4.   Medicare data show. Chicago Tribune. (2013, May 10). Illinois hospital prices vary widely. Retrieved  from http://www.chicagotribune.com/business/breaking/chi-medicare-hospital-charges-20130508,0,296684.story.

5.   Terhune, C. (2013, May 10). Medicare charges vary widely at California hospitals, new data show. Retrieved from http://www.latimes.com/business/money/la-fi-mo-medicare-hospital-costs-20130508,0,249621.story.


All postings to the Health Policy Forum (whether from employees or those outside the Institute) represent the views of the individual authors and/or organizations and do not necessarily represent the position, interests, strategy, or opinions of Altarum Institute. Altarum is a nonprofit, nonpartisan organization. No posting should be considered an endorsement by Altarum of individual candidates, political parties, opinions or policy positions.


 

Areas of Expertise