Price Transparency Becoming More Vital for Hospitals (Part 1 of 2): The Federal Reveal

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With the federal government releasing its chargemaster list last week, the pressure is on for hospitals to embrace price transparency, Cheryl Clark of HealthLeaders Media reports. However, there are those hospital executives who are placing little weight on the list, which gives the prices for 100 types of hospital care, because they believe it has little relevance to the actual charges.

As Clark points out, though, the list really isn’t meant to benefit the executive. It’s meant to ease the healthcare burden for Medicare Advantage patients, the underinsured, and the uninsured and act as a motivator for hospital financial assistance offices “to write more flexible policies if they want to be paid.”

“For them and their advocates,” Greg Knoll, executive director and chief counsel of the Legal Aid Society of San Diego, the chargemaster list “becomes something to use in negotiation around how the cost of their care should be discounted.”

Hospitals who charge more for treatment will be forced to justify those charges, he speculates, while hospitals who charge less will receive a boost in volume. He thinks “this will…eventually get regional areas together on what the cost really is.”

How much of a price disparity can there be in one market? Take San Diego, where Knoll is located. Clark writes, “The average Medicare payment for people treated for respiratory infection and inflammation with major complex comorbidities ranges from $24,084 at the University of California San Diego Medical Center, to $18,862 at Sharp Memorial Hospital, to $11,989 at Pomerado Hospital.”

It’s important to note that those figures, circa 2011, aren’t “the sticker price, but the much lower amount that Medicare actually pays.”

“Any two-person household earning, say, $40,000 a year, may have a tough time paying for even the lowest prices,” Clark observes. “But if they knew about the variations in cost, they might have at least picked a less expensive facility if they’d had the chance.”

Even though many analysts believe it’s time for hospitals to publish their prices, Joseph Fifer, president and CEO of the Healthcare Financial Management Association, is skeptical as to how soon hospital executives will actually go down that road.

He said, “I think you’re going to get reactions all over the map. There’s still going to be a lot of hospitals that just blow this off, saying, ‘You know what? Price doesn’t mean that much anyway,’ so they would try to ignore it. But that would not be my advice. They open themselves up to really pretty heavy scrutiny.”

In our next posting, we’ll take a look at one healthcare executive who is going transparent with his system’s prices, not just with Medicare, but also with private insurers. And he’s daring other hospitals in his market to do the same.

In the meantime, as healthcare executives, in light of the government revealing its chargemaster list, do you feel it’s time to publish your prices of care? What are the pros and cons in doing so?

-by Pete Fernbaugh

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