12/03/2013
Aaron CarrollIt’s a study I wish I’d done myself. “Availability of Consumer Prices From Philadelphia Area Hospitals for Common Services“:
Most people in the United States are shielded by third-party payers from the marginal cost of their health care consumption. It has been suggested that removing that shield would foment concern about price and, in turn, create market pressure to keep prices down.
Nevertheless, however concerned about prices they may be, consumers cannot act on their concerns if prices are not easily available. This point was raised by Rosenthal et al,1 who attempted to find the price for hip replacement and discovered that “many health care providers cannot provide reasonable price estimates.”
Still, it may be incorrect to extrapolate the findings of Rosenthal et al to all health care because hip replacement is a complex service. The price of a hip replacement may not be known in advance because costs are higher if a special implant will be needed or if the patient requires a prolonged hospital stay. Furthermore, even if hospitals know their typical cost, they may find it unwise to offer hip replacements at that figure. Owing to information asymmetry, hospitals selling hip replacements to all comers at their typical cost might find themselves inundated with patients who suspect that their own costs will be higher.
It also may be the case that hospitals are ill equipped to answer questions about price over the telephone
To test these hypotheses, the methods of Rosenthal et al were used with a variation. We telephoned and asked whether price information could be obtained for an electrocardiogram (ECG)—a procedure with uniform costs and free of adverse selection. Next, we telephoned and asked whether price information could be obtained for the cost of parking at the hospital. The provision of parking prices would suggest that hospitals can indeed answer telephone queries about costs—when they want to.
When I read the above, I imagined the last paragraph in a very sarcastic tone. I suggest you do the same. Anyway, they called up 20 hospitals and asked them the prices for parking and an ECG. In each case, they declared that they were uninsured and would be paying in cash. Here are the results:
It turns out that hospitals are completely capable of reporting prices over the phone. Ninety-five percent of facilities could tell you the price of parking. Only 15%, however, could give you the price of an ECG. The prices ranged from $137 to $1200. I have no idea how such a variance could be justified.
They also seemed to offer free or discounted parking almost all of the time. So they can be sensitive to consumer demand. Just, apparently, not for actual care.
by SAO on December 3rd, 2013 at 08:26
And the follow up should be what the actual costs were. Was the $137 for just the ECG and not including nurse time, doctor time, facility fee and any number of other costs that make the final bill much higher?
by ladybitsnp on December 3rd, 2013 at 08:41
The lack of price transparency in health care is astonishing – even to me, and I’m a health care provider. Whenever I try to contact our laboratory services provider on behalf of an uninsured (or just curious) patient to request what the fee will be for a particular lab test – say, a Pap test or a throat culture – it gets bounced around to who knows how many individuals within their billing and customer service departments before giving me a price about 48 hours later.
How can we possibly expect patients to exert downward pressure on health care costs if they have no way of knowing what those costs will be before care has been provided and the bill has arrived?
by dr2chase on December 3rd, 2013 at 08:55
I don’t suppose the researchers could be persuaded to get a few ECGs at some of the NP hospitals to discover what the prices actually are, or how a $137 ECG differs from a $1200 ECG. If I were cynical, I’d expect that the $137 ECG would be more likely to turn up problems needing further treatment — not unlike the loss-leader drive-through oil-change (“oh, looks like you need new filters, you want us to get those, too?”)
by Rick, RN on December 3rd, 2013 at 09:17
It would be interesting to see in the hospitals that quoted ECG prices, which one would be interpreted by a cardiologist vs. ED or PCP. Also if there is a difference between in house cardiology interpretation vs. using a service.
by Sean Parnell on December 3rd, 2013 at 10:09
Well, this is what you’d expect in a non-market system where most are shielded from anything resembling a real price. There are a few options for people looking for real prices though, see: http://theselfpaypatient.com/2013/11/26/pricinghealthcare-com-brings-price-transparency-options-to-hospital-care/ and http://theselfpaypatient.com/2013/11/08/more-choices-for-online-health-care-price-transparency/
One thing I tell people is, if at all possible, DO NOT GO TO A HOSPITAL FOR CARE. Sometimes it’s unavoidable of course but for labs, diagnostic imaging, outpatient procedures, you are almost always going to find a better price (not to mention a real price) by going somewhere else. The whole health care system is a mess when it comes to real prices, but hospitals are especially terrible.
by Katie K on December 3rd, 2013 at 10:23
Thanks for the post! I’d love to see a post about whether and how an all-payer claims database has helped to make pricing/cost more transparent. But, transparent to whom? Consumers/patients? Purchasers of insurance (employers, consumers)? Governments? Thanks for considering!
by Mark Spohr on December 3rd, 2013 at 11:11
Here’s one hospital (a first class JCI accredited international facility) which isn’t afraid to quote prices for a hip replacement:
“The estimated cost* for hip replacement is approximately 350,000-450,000 baht or about US$10,000-12,860 for one hip, including hospital charges of 260,000 baht (US$7,400) for 7 days hospitalization in a single room and doctors’ fees, and the prosthesis cost estimate* 90,000-190,000 baht (US$2,600-5,500).”
Note that this is for hospital, doctors, and prosthesis… all inclusive.
http://www.bumrungrad.com/en/orthopedic-surgery-care/orthopedic-hip-replacement-surgery-thailand
by Sean Parnell on December 3rd, 2013 at 11:56
And for those who prefer to stick with domestic medical providers, there’s Surgery Center of Oklahoma and Regency Healthcare (NYC), among others.
The lack of price transparency in the U.S. is the direct result of the desire to insulate people from having to pay more than a nominal sum for their care. When prices don’t matter, why should prices be transparent or real?
by SAO on December 4th, 2013 at 00:44
Providers make prices opaque because that helps the organized providers extract more from payers and helps the disorganized ones hide the fact that they can’t manage the complex beast they are supposed to be managing.
The pricing complexity is accepted by the most payers because insurance companies and the Gov’t get discounts. The Gov’t probably thinks the higher prices others pay are helping to subsidize their much lower prices and the discounts available to insurance customers are another reason to be a client of an insurance company.
This is a place for Gov’t regulation. Why it hasn’t been down is a mystery to me.
by Lynn in SC on December 3rd, 2013 at 12:07
I recently had the opportunity to sit in a Veterinary Emergency Center (owned and operated by local veterinarians) with a friend and her very sick cat. To a health economist this was an eye opening and heart breaking experience.
The lucky pet owners (or their parents) with working credit cards as well as the those who had more limited resources (yet no doubt loved their sick or injured pet as much as the well healed) were presented with both clinical and price information in a kind and dignified manner and then the owners struggled with their decisions.
Those owners who for whatever reason made the decision to end their pets suffering were simply charged a relatively modest fee (especially when the staff recognized that the decision was basically financial.) . Owners with resources (or good credit) often moved forward with care, even when the Vets were uncertain of the out come. Upon reflection what I observed was truly respectful and dignified informed consent. Three weeks later I was in a local ED with a friend with a broken wrist and no one I asked had any clue how much any item, procedure, or service cost.
If Vets can do this why can’t my local hospital? [ I am not recommending euthanizing people with this analogy but believe knowing the relative price of services helps us determine value. ]
by Sean Parnell on December 3rd, 2013 at 16:57
They can, they just have little reason to do so. Here’s one that does: http://theselfpaypatient.com/2013/10/18/orthopedic-surgery-center-in-new-york-city-begins-offering-cash-prices/
Health care in this country generally operates on the assumption that normal market forces are icky, so they are suppressed. With predictable results, at least if you think normal market forces operate in health care regardless of the wishes of politicians.
by Don Miller on December 3rd, 2013 at 14:47
My province’s single-payer reimbursement for cardiologists is $24.05 plus $8.42 for the ECG itself. http://www.health.gov.bc.ca/msp/infoprac/physbilling/payschedule/pdf/13-cardiology.pdf (My ECGs have all been done by a third party lab company with a cardiologist reading and preparing the report for my doctor .) 1 CAD = 0.94 USD
by Ken Hamer on December 3rd, 2013 at 16:47
And for those who want the complete list of hard, transparent prices:
http://www.health.gov.bc.ca/msp/infoprac/physbilling/payschedule/
by Don Miller on December 4th, 2013 at 15:05
The average actually paid to cardiologists for year ended 3/31/2013 was $24.12 (item 33016 on .pdf page 58 of 104 Fee items 10 – 95065 http://www.health.gov.bc.ca/msp/paystats/ )
If you’re worried about starving specialists to death, the specialist I saw for the ECG was paid just over $633,000 by the provincial medical plan for the same 12 month period. http://www.health.gov.bc.ca/msp/legislation/pdf/bluebook2013.pdf
Like TIE international price comparisons generally, there’s no obvious reason why a procedure billed for $30 here should be billed at $1,200 in the U.S. (other than the “greed is good” mantra). The technology is identical, the training of cardiologists is identical, the patients belong to the same species.
by Cardinal Fang on December 3rd, 2013 at 15:04
Even when the hospitals give numbers, it doesn’t mean anything. Sure, $137 or $1200 for the ECG, but also $500 for walking in the door and $700 or $2000 for someone to interpret the ECG and this and that and the other thing. The hospital billing department apparently uses the Dartboard O’ Prices. If you ask for a price beforehand, and get one, your bill will still be different than the quote. And always bigger, never smaller.
by Sean Parnell on December 3rd, 2013 at 16:58
Dartboard ‘O Prices? I like it! ;->
by Robert on December 3rd, 2013 at 22:52
“I have no idea how such a variance could be justified.”
Because insurance is a mechanism that takes two numbers – the actual economic cost to provide a good or service, and the actual cash price paid by the recipient of the service – and makes them almost impossible for even trained thinkers to correlate. If you bought “car insurance” that replaced your car every few years, some people would be getting Yugos at Cadillac prices while others would be getting a new MItsubishi every three months at something close to close, and others still would get no cars at all but still be paying huge premiums.
Insurance is gambling. The gambling economy tends to be run by criminals. Criminals love to obsfuscate costs and force their customers to rely on noneconomic rationales like “loyalty” or “protection” so that they can extract unearned rents without the marks even realizing they are marks.
by Jeanne on December 4th, 2013 at 09:56
I love this study.
We have found in our research at clearhealthcosts.com that hospitals are the hardest places to find out prices. A call to a hospital gets us bounced around from billing to scheduling to financial services to (sometimes) a third-party service in India. True story.
But increasingly, we are learning that providers — especially non-hospital providers — are able to deliver a cash or self-pay price if we ask succinctly and precisely.
It’s a sign of the times: whether providers and payers like it or not, the health-care marketplace is moving toward transparency or visibility of prices. And not just parking prices.