Blog PostDecember 5, 2013

Health Care Pricing Should Not be a Mystery


If your car needed all four tires replaced and the first auto repair shop you called quotes you $500 per tire, you’d likely call other tire stores to find a better price on a comparable set of tires.

If your child needed four stitches and the first hospital you called quoted you $500 per stitch – and it weren’t a life or death situation – you might call another hospital or two.

Unfortunately, your stitches “shopping” expedition would end before it started.

Our health insurance system has led to such a profound “bill me later” culture that price quotes are difficult to come by and has played a very big role in driving up costs – the very heart of what’s wrong with our health care system.

And the Affordable Care Act does nothing to fix it.

A New York Times piece titled “As Hospital Prices Soar, a Stitch Tops $500” recounted the cases of Ms. Singh and little Orla, both treated for cuts in a hospital emergency room:

“Then the bills arrived. Ms. Singh’s three stitches cost $2,229.11. Orla’s forehead was sealed with a dab of skin glue for $1,696. “When I first saw the charge, I said, ‘What could possibly have cost that much?’ ” recalled Ms. Singh. “They billed for everything, every pill.”

The NYTimes cites government statistics which calculate hospital charges “represent about a third of the $2.7 trillion annual United States health care bill” and  a study by Journal of the American Medical Association which finds hospital charges are “the largest driver of medical inflation.”

How could hospital charges get so out of hand? A Reuters story titled, “Hospitals will quote prices for parking, not procedures” summarizes results of another JAMA study (subscription required):

“People usually don’t know what their medical procedures cost until after they leave the hospital, and a new study suggests they would have a hard time finding out in advance.”

Researchers tried to get price quotes for a standard diagnostic test from Philadelphia area hospitals:

“They found that parking prices were readily available by calling the hospital and asking, but only three out of 20 hospitals could provide the cost of an electrocardiogram test.”

And those three prices? $137, $600 and $1,200.

In the meantime, nineteen of the 20 hospitals provided parking price information to the researchers, with ten further offering parking discounts.

Lead researcher Dr. Joseph Bernstein concludes that since hospitals were so forthcoming with prices and discounts on parking, they could do the same for patients’ questions about medical costs – but choose not to:

“We don’t think providers are going to discuss prices – let alone compete on that basis – unless and until consumers start to demand that information,” Bernstein said. “Yet without that exchange, there won’t be (enough) pressure to keep prices down. As such, consumers of health care should get in the habit of asking, ‘if you don’t mind, please tell me what that will cost.'”

When tire stores have to compete for your service and auto repair dollars, the customer is rewarded with lower prices and better service. The same principle should be applied to health care. When people know how much medical services cost, they can shop around for the best value for their healthcare dollar. And medical providers must respond with the best quality at the best prices.

Dr. Martin Makary, who wrote “Unaccountable: What Hospitals Won’t Tell You and How Transparency Can Revolutionize Health Care”, told Reuters this idea of “price transparency” could be an important improvement to the health care system along with “quality transparency”:

“Quality transparency, he explained, includes things like appropriateness criteria and complication rates.”

“Makary envisions that price transparency coupled with quality transparency will be the dominant measure of the future health care marketplace and that it will have a serious impact on the way that business is done.”

Job Creators Network believes these stories underscore how important it is to health care reform that patients be more in control of the dollars being spent for their care. Price matters for nearly everything else we buy. So it should for medicine.