Hospital price lists will be a joke

Several people have been pointing me to articles such as the one below from the AJC – all reminders of the 2018 CMS requirement of hospitals participating in Medicare to provide some form of pricing transparency.

I’m going to go ahead and ignore all the good, economic reasons why this isn’t going to work as intended to ‘make patients better consumers’ and ultimately reduce healthcare costs in a meaningful way. Reasons like healthcare not being a normal good that can truly be ‘shopped for’, asymmetry of information between patients and both providers and payors, issues with providers acting as agents for patients in the provision of care, among others. Even consider the possibility, hard to believe as it may be, that providers may not want to do a good job of providing pricing transparency into their business. All of these are great reasons why the current pricing lists won’t work, and I’d encourage you pick up a health economics text to explore these reasons and others more fully.

No, I’m going to say these lists are going to be a joke for purely practical reasons. Imagine that providers actually do want to do this well, it’s complicated and tedious to do in a way that’s really meaningful for anyone.

First, hospitals are likely only going to provide their side of costs, i.e. the facility costs, but most patients are going to get facility and professional bills. Facility and professional billing is almost always split between different departments or teams, even if it’s run out of a single revenue cycle team. Maybe if a hospital or system is using single billing office (SBO) functionality, they can easily get to both components of a patient’s bill, but that’s still a relatively small portion of providers. For everyone else, it’s either going to be too much work to provide, or it may not even be possible to get the professional bill in a community hospital with non-employed physicians providing care. As a patient, if you had any idea the pricing you’re looking at only encompassed a portion of your total cost (even if it’s likely the more costly portion) would you make your purchasing decision off that imperfect information? But don’t worry, patients have no idea about professional and facility billing is a thing, so they’ll be pleasantly in the dark until they get their real bills!

As a side note, if you’re a person just waiting for the release of the 2019 pricing lists to start your business/website/amazing news story/reddit data post, and you didn’t understand the last paragraph on facility vs professional billing, the door’s behind you – I encourage you to leave now.

Next, where are hospitals even going to get the prices they post? Since this is a checkbox type of exercise, probably somewhere easy, like the charge master. But the charge master is usually just maintaining charges at the individual charge code/ mapped standard code level – is this even useful? Great question! Are charges useful? Not really, would be my and most of my peer’s opinions. You see charges typically get used precisely because they’re easy to access and the people accessing them (I often see researchers and reporters) don’t know any better. But charges are the crazy, fabricated dollar amounts that accountants generate to play the ‘billing game’ with payors – people talk about charge-to-cost conversions, but I don’t know of any actual good way to relate a charge to it’s underlying cost accurately without having access to the accounting system. So, why not use something meaningful like the allowed amount, paid amount, or actual hospital cost? I suspect a couple reasons: 1)you don’t have to use them, 2)they tell you something meaningful and probably sensitive about a hospital’s business, revenues, and costs (which could also be abused by competitors), 3)they require more work to get to than the charges sitting in the charge master. So, why not just check the box, and post your charge? Just put a disclaimer on your list about the accuracy to an individual patient or procedure (which every hospital will need to do anyway) and everyone will be happy! At least until a patient gets a bill that bears no resemblance to their estimate.

On the last concept related to what pricing do you even use to estimate a patient’s cost, here’s some discussion on the related topic in medication pricing. Essentially, CMS was considering requiring any direct-to-consumer advertising of medications to include the cost of the drug in a similar effort to ‘educate’ the patient and attempt to rein-in drug costs. Here’s a good discussion of the unintended issues from a researcher formerly at my institution:

So, now assume you’ve actually done due diligence and attempted to provide a meaningful cost for the facility and professional side of a patient’s bill, are you done? Of course not! How are you going to define a ‘procedure’ that patient wants to price? Chances are, again, you’re going to do the easy thing if you’re a hospital checking a box. Take for instance, a colonoscopy – you’ll look up the pricing for a single revenue code or HCPC code. How many procedures, even on just the facility side, bill out with a single code? Not that many. In fact, in the case of colonoscopies there are about 10 different codes that could be billed, depending on the procedure specifics and context, plus the thousands of other codes that could be billed for necessary additional services like pathology, anesthesia, and peri-procedural medications. So, if you’re trying to accurately price a real procedure, how many groupings of HCPC codes exist for a given procedure like a colonoscopy? The answer is thousands. But don’t worry, that only matters if you want to generate an estimate that bears some resemblance to an actual patient bill, which we’ve already determined is probably not most hospitals’ goals. Also, don’t forget that even for a totally elective, planned procedure, the exact combination of codes billed won’t be known until after the procedure was performed. Consider a colonoscopy where polyps aren’t suspected, but subsequently found during the procedure – this changes the billing profile of the procedure quite a bit.

By the way, did you remember to reconcile a patient’s insurance contract (not the payor or the coverage, but the contract) back to a specific fee schedule? Since obviously, the dollar amounts for the allowed and paid amounts will be different for all the contracts using different fee schedules. So, take that into account. And did you account for each patient’s individual deductibles, and other personal insurance financials that change throughout the year?

Clearly, attempting to provide accurate pricing information is involved – not necessarily complicated but it is tedious and requires some prospective design. It’s unfortunate that we’re not going to get that from hospitals and also unfortunate that so many people are going to mis-understand what that information represents.

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