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Decoding health care prices: The need for drug price transparency

by Pat McNees (updated 1-14-19; original post 10-10-15 was 'Taking the mystery out of health care prices')
Can we lift the veil on health care prices? Are we moving toward pricing transparency (getting doctors, patients, service providers, and insurance companies on the same page)? When our doctors send us for tests and procedures, must we be like the dinner guest in a fancy restaurant who is handed the menu without prices? How many of us know up front what a colonoscopy costs -- or how much charges for any procedure vary from one clinic or doctor to another? What does an MRI cost? Are prices uniform or predictable?

Until recently, it has been difficult to know in advance what a particular health problem or procedure will end up costing us, as patients. Or how much health care costs vary between practices, cities, and states. Some things are changing, but you have to do your homework to be a smart health care consumer. The following articles shed light on a changing system and improvements in which information consumers have access to.
As Hospitals Post Sticker Prices Online, Most Patients Will Remain Befuddled (Julie Appleby and Barbara Feder Ostrov, KHN, 1-4-19) "As of Jan. 1, in the name of transparency, the Trump administration required that all hospitals post their list prices online. But what is popping up on medical center websites is a dog’s breakfast of medical codes, abbreviations and dollar signs — in little discernible order — that may initially serve to confuse more than illuminate....That’s because the price lists displayed this week, called chargemasters, are massive compendiums of the prices set by each hospital for every service or drug a patient might encounter. To figure out what, for example, a trip to the emergency room might cost, a patient would have to locate and piece together the price for each component of their visit — the particular blood tests, the particular medicines dispensed, the facility fee and the physician’s charge, and more....And there’s this: Other than the uninsured and people who are out-of-network, few actually pay full charges....Even when consumers do locate the lists, they might be stymied by seemingly incomprehensible abbreviations....Nevertheless, some experts say that merely making the charges public shines a light on the often very high — and widely varying — prices set by facilities....Billing expert George Nation, a finance professor at Lehigh University, said that rather than posting chargemaster lists, hospitals should be required to provide the average prices they accept from insurers. Hospitals generally would oppose that, saying negotiated rates are a trade secret."
In Health Care, A Good Price (Or Any Price) Is Hard To Find (Jenny Gold, Reporter's Notebook, KHN, 9-14-17)A recent story about why Northern California is the most expensive place in the country to have a baby began as a tip from an obstetrician. Dr. Sarah Azad told me that insurers were paying her just a third of what they pay doctors employed by large hospital systems in her town of Mountain View, Calif. "As it turns out, the vast majority of contracts between doctors or hospitals and insurance companies are subject to a gag clause, which prohibits either party from disclosing negotiated rates. That means it’s almost impossible for consumers, researchers or journalists to find actual, accurate numbers, despite the fact that cost differentials among doctors can be so stark.... I have long understood that the lack of price transparency is one reason our system stays so expensive. It was a surprise, though, to find out that this opacity is cemented by legally binding contracts....It’s no accident that data on physician costs are so hard to find. Its inaccessibility allows hospitals to keep raising their prices. It’s simply not in their interest for the public to know how much they’re charging. And insurers don’t want other doctors or hospitals to see the high prices they’ve agreed to pay, for fear they would demand the same....In the end, all of us — through our insurance premiums and our taxes — pay a price for non-transparency."
The Risky Game One Doctor Plays To Help Patients Find Affordable Insulin (Martha Bebinger, Commonhealth, WBUR, 4-19-18) "There are several websites that list the cash prices for insulin and hundreds of other drugs. But most of [Dr. Hayward] Zwerling's patients have health insurance, and each health plan varies. When Zwerling meets with patients, he can't tell what the copay will be for each drug. He doesn't know if the patient has met their deductible. Those on Medicare may be in the so-called doughnut hole. The brands of insulin Zwerling prescribes are covered by some plans, with varying costs for members, and not others. And the negotiated price for each drug may be different from insurer to insurer and pharmacy to pharmacy....There are some remedies in the works. CVS Health has just rolled out a program that lets pharmacists show patients the cost of a prescription before they fill it, as well as cheaper options....Massachusetts is, in theory, ahead of many states because doctors, hospitals and insurers are required to help patients find the price of services. But that requirement does not apply to pharmacies or prescriptions, and there's no move to amend the law. That's disappointing to some consumer advocates."

Truecostofhealthcare.org (David Belk MD's site is a "treasure trove of information and analysis for journalists and highly regarded by academics as well" (Randy Barrett, AHCJ, Spring 2019) Hover over the heading "healthcare" and dig deep into material under subheads: Medications, Pharmaceutical Industry, Billing, Medicare, Hospitals, etc.
Clear Health Costs: Cracking the Code Coverage. In April 2017, New Orleans PriceCheck, reporting on and crowdsourcing health prices with partners WVUE FOX 8 Live and NOLA.com/The Times-Picayune, began saving its readers and listeners lots of money by comparing health care prices publicly. Says Jeanne Pinder, "We use shoe-leather journalism, data journalism and crowdsourcing to reveal the mysteries of pricing. The project is on fire, with hundreds of people sharing their stories, commenting, and sending in their EOB's [explanations of benefits]. The hospitals are extremely upset with us, and we have been able to save people hundreds of dollars -- and completely change the conversation in New Orleans about health care. Here's a page with our coverage collected together: https://clearhealthcosts.com/new-orleans-partnership/. Scroll down here for an earlier story about Clear Health Costs, and do watch The Healthcare Industry and the USSR Jeanne Pinder's wonderful talk (YouTube video, Ignite Health Foo 2013).
Lowering Health Care Costs: Some Benevolent Geniuses Are On It (Ester Bloom, Billfold, 12-4-15) Brief mention of medical professionals and other smart folks with resources who really are trying to shift the status quo.
• Dr. Robert Fogerty's story, Price Transparency: A Rosetta Stone (Dr. Robert Fogerty, MedPageToday, 5-14-15): "If we have figured out a way to watch video of the Martian surface, transplant a face, even replace organs with machines, surely we can figure out a way to prevent the crippling debt of modern medicine from victimizing the sick. The healthcare system can do better with pricing -- for all patients."
( I hope the following stories shed light on the subject and raise a few questions in the right places.
The problem with price transparency (Niran S. Al-Agba, MD, KevinMD, 3-26-17) Transparency — including price, quality, and effectiveness of medical services– is vital to lowering costs and improving outcomes, but it must go hand-in-hand with financial incentives for patients and consumers, or the quest will be in vain. Information about cost, value, and effectiveness should be readily accessible to patients so they can make meaningful comparisons across providers and specialists. But there should also be proper incentives to motivate patients to make informed choices. Physicians and hospitals should post prices for general well and sick visits (including applicable facility fees), basic procedures, and other services offered whenever feasible. Insurance companies should financially incentivize patients to choose the lower cost, given a choice between equally efficacious treatment methods.
Incremental progress seen in price transparency, but report may rate A+ among journalists (Joseph Burns, Covering Health, Association of Health Care Journalists, 7-28-16) There has been a bit of progress in states giving consumers the information they need to shop for care based on price, though 43 states earned a failing grade to meet even minimum standards. This year, three states earned an A: Colorado, Maine and New Hampshire. Oregon moved from an F to a B. Vermont and Virginia each got a C, and Arizona got a D. Vermont and Virginia each got a C, and Arizona got a D.
"To demonstrate how price transparency could be more effective, the report included an analysis of average hospital prices for vaginal deliveries in one state. In a chart, those prices are shown from a low of $4,500 to high of almost $10,000. In that state, an insured consumer with a silver-level plan would pay $5,079 at the highest-priced hospital in out of pocket costs (meaning deductible plus co-insurance), but only $3,531 out of pocket at the lowest-priced facility, the report explained."
Clear Health Costs Helps Consumers Determine if Medical Costs Will Be Just Expensive, or Really Expensive ( Robin D. Schatz, Fast Company, 11-27-13). "Startup Clear Health Costs aims to help consumers comparison shop for medical procedures—after all, why pay $3,500 for a vasectomy when you can get it for $450? The site also shows the Medicare reimbursement rates in a region as a benchmark to help guide consumers.
Clear Health Costs ("Your Source for Finding Health Care Prices"). See, for example, this Range of costs for cholesterol screening and this range of costs for CBC blood test.
A push for transparency in healthcare pricing (Dan Gorenstein, Marketplace, 3-27-15) “How did we get to this place where you ask what something costs and no one can tell you and we accept that as normal?" asks Jeanne Pinder, who launched Clearhealthcosts.com, a guide to health care prices... We don’t pretend to be exhaustive or comprehensive. It’s a sampling so that you can have an idea how big the price range is to orient yourself in the marketplace,” she says.
How Much Is That MRI, Really? Massachusetts Shines A Light (Martha Bebinger, WBUR and KHN, All Things Considered, 11-6-14) "There are no uniform prices; they vary from one insurer to the next. And you have to read the fine print on these sites to know what is and is not included in the dollar figure you'll see online."
Steep hospital markups strike blow to uninsured (Patrick Malone, Santa Fe New Mexican, 7-26-14). Award-winning series. Other articles in the New Mexican series include High prices raise questions about hospitals’ charity status (Patrick Malone, 7-26-14);
High court frees state from pharmaceutical dispensing fee (Patrick Malone, 8-25-14), among other stories.
Price Transparency In Medicine Faces Stiff Opposition — From Hospitals And Doctors (Rachel Bluth, Kaiser Health News, 7-25-17) Two years after it passed unanimously in Ohio’s state Legislature, a law meant to inform patients what health care procedures will cost is in a state of suspended animation. Its troubled odyssey illustrates the political and business forces opposing a common-sense but controversial solution to rein in high health care costs for patients: Let patients see prices. Opposition has been formidable, led by the goliath Ohio Hospital Association, which filed an injunction to delay enactment of the law. It and various organizations of health care providers “don’t want to expose this house of cards they’ve built between hospital physician industry and the insurance industry.”
Elusive Goal: A Transparent Price List For Health Care (Eric Whitney, Morning Edition, Shots, NPR, 2-19-14) Actual prices for a colonoscopy are hard to find and vary greatly from one clinic to another. Colorado is one of eleven states that are starting to make public a lot of health care prices. Since doctors and hospitals generally don't tell people how much services cost beforehand, the best way to figure out the price is to get receipts from the parties that pay the bills: insurance companies, Medicaid and Medicare, mostly. But "claims data is dirty" and takes lots of scrubbing before it can be presented in consumer-friendly formats.

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Health Care Price Transparency: Can It Promote High-Value Care? (Martha Hostetter and Sarah Klein, Quality Matters, Commonwealth Fund, April/May 2012) Some consumer advocates, employers, and health plans are pushing for greater reporting of the prices of health care services as a way to encourage consumers to choose low-cost, high-quality providers and to promote competition based on the value of care. In spite of the challenges, price transparency may be spurred by the growing number of health care consumers who are being required to pay a larger share of their medical bills.

Bitter Pill: Why Medical Bills Are Killing Us (Steven Brill, Time Magazine, Health & Family, 2-10-13). This story on hospital pricing started a wave of revelations and pressure for reform. Brill took actual medical bills and "dissected them line by line." Another story, Coming up with “A Bitter Pill” (Steven Brill, Thomson Reuters, 3-5-13) explains the genesis of the "A Bitter Pill" story.'

Medicare Provider Utilization and Payment Data . Under the Obama administration, soon after Steven Brill's article came out, in 2013, the Centers for Medicare & Medicaid Services (CMS) publicly posted inpatient prices for hospitals across the country, making public huge variations in cost for the 100 most common inpatient services, 30 common outpatient services, and all physician and other supplier procedures and services performed on 11 or more Medicare beneficiaries.

The Pricing Of U.S. Hospital Services: Chaos Behind A Veil Of Secrecy (Uwe E. Reinhardt, Health Affairs, Jan. 2006, vol. 25, no. 1, pp. 57-69. Important article, covering many topics (How hospitals set their prices and how they are paid; Price discrimination by hospitals; Hospital pricing and consumer-directed health care; with invaluable links to other sources.) And the title sums it up: "Chaos behind a veil of secrecy!" "To move from the present, chaotic pricing system toward a more streamlined system that could support genuinely consumer-directed health care will be an awesome challenge. Yet without major changes in the present chaos, forcing sick and anxious people to shop around blindfolded for cost-effective care mocks the very idea of consumer-directed care....The bewildering and sometimes troublesome picture of contemporary U.S. hospital pricing is not entirely of hospitals’ own making. They are part of a wider system of health care financing whose administrative expense now ranks as a major cost component of U.S. health care (as much as 25 percent)."

Revealing a Health Care Secret: The Price (Tina Rosenberg, Fixes, Opinionator, NY Times, 7-31-13) A new health care approach: Don't hide the price. "Why are health care costs so high? ...only sellers, and not buyers, know the price. If prices are secret, patients can’t comparison shop. There is no way to push prices down, or force providers to compete on price. Price secrecy hides the need for reform. “Getting prices out in the open is crucial to bringing prices down,” said Katherine Hempstead, senior program officer at the Robert Wood Johnson Foundation."

How U.S. Health Care Became Big Business (Fresh Air, NPR, 4-10-17) Terry Gross interviews Elisabeth Rosenthal, editor of Kaiser Health News and author of a super-important book, An American Sickness: How Healthcare Became Big Business and How You Can Take It Back. Rosenthal explains how health care became big business and how the pricing and billing of medical services, devices and prescription drugs became so complicated even a lot of doctors don't understand it.

Symbiosis Health brings transparency to self-pay prices (Sean Parnell, The Self-Pay Patient, 8-8-18).

Can Health Care Transparency Make a Difference? (Martin Gaynor, Compassionate Economics, 3-7-13) "Trying to achieve greater transparency in health care is a worthwhile effort, but it has to involve usable measures of both price and quality. Further, it's unrealistic to expect consumer shopping alone, and hence transparency efforts, to drive the health care market. Transparency is but one ingredient --- much more is required."

Chargemaster (Wikipedia). Excellent links to articles on medical health care costs and billing. "In the United States, the chargemaster, also known as charge master, or charge description master (CDM), is a comprehensive listing of items billable to a hospital patient or a patient's health insurance provider. In practice, it usually contains highly inflated prices at several times that of actual costs to the hospital. The chargemaster typically serves as the starting point for negotiations with patients and health insurance providers of what amount of money will actually be paid to the hospital. It is described as "the central mechanism of the revenue cycle" of a hospital."

Hospital Prices No Longer Secret As New Data Reveals Bewildering System, Staggering Cost Differences (Jeffrey Young, Chris Kirkham, Huffington Post, 5-8-13) Hospital price disparities made public

A Foundation Delves into Health Care Price Transparency (M. Gabriela Alcalde, Health Affairs blog, 5-21-15) To shed some light on the issue of price transparency and possible strategies for Kentucky, the Foundation for a Healthy Kentucky convened more than sixty Kentucky leaders in government, business, policy, and health care on October 23, 2014, for a facilitated discussion about price transparency. It decided that Kentucky should develop and establish an all-payer claims database as a necessary tool in price transparency for consumers and other stakeholders.

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Building Cost Transparency from the Ground Up (Tara Oakman, Health Affairs blog, 4-20-15) n March 2015 the Robert Wood Johnson Foundation (RWJF) sponsored the second annual conference on health care price, cost, and quality transparency. At the conference, Niall Brennan, the Centers for Medicare and Medicaid Services (CMS) data officer, pointed out that just a few years ago, a three-day summit on health care transparency would have been unheard of because there would have been nothing to talk about.

Defending Your Chargemaster (Elizabeth Gardner, Health Data Management, 2013, p. 27 ff.) Experts weigh in on the new rules of the game. See Gardner's "Reporter's Notebook" sidebar, for an overview of the effect of CMS (in May 2013) releasing data on charges for inpatient care. Yes, a hospital with more Medicaid patients may have to charge paying customers more than a hospital with few or no Medicaid patients, but hospitals may now have to change their approach to charges and pricing.

Patients Want To Price-Shop For Care, But Online Tools Unreliable (Elana Gordon, WHYY, KHN, 11-30-15) Online cost estimation tools offered through insurance companies provide some price transparency, but the tools are not always accurate. "Some of the estimators reflect an aggregate range of possible costs; others are based on historic pricing, or claims data from varying sources. Many, he says, are limited in the type of procedures they include." And they have limits. It's "hard to predict what a particular doctor will actually do during an exam, treatment, or office visit, and how he or she will bill for it." And "The way billing and reimbursement works in health care is extremely complicated" .... "with 8,000 procedure codes, tens of thousands of diagnostic codes, a million different providers, and hundreds of insurance companies."

Consumers demand price transparency, but at what cost? (Beth Kutscher, Modern Healthcare, 6-23-15)

OpenNotes (evidence suggests that opening up clinicians' visit notes to patients may make care more efficient, improve communication, and most importantly may help patients become more actively involved with their health and health care) “Open notes create partnerships toward better health and health care by giving everyone on the medical team, including the patient, access to the same information.”

Patients and clinicians on the same page (Open Note videos)

FOI: Guidance on the release of information concerning deaths, epidemics or emerging diseases (voluntary guidelines developed by and for journalists and public health officials to consult when decisions must be made about what information should be released about deaths, epidemics, emerging diseases or illnesses) Interesting both as guidelines and for background. The public health officials agreed that it is best to release as much detail as possible without violating the privacy of individuals.

Request: True stories of where patient engagement in the chart made a difference (e-patient Dave, on e-patients.net, 9-5-14)

Physician Payments Sunshine Act (Wikipedia entry) This" healthcare law first introduced in 2007 by Charles Grassley and Herb Kohl....requires that all manufacturers of drugs, devices, and biological and medical supplies covered by federal health care programs collect and track all financial relationships with physicians and teaching hospitals....All manufacturers are required to report their collected financial data to the Centers for Medicare and Medicaid Services, who will in turn report the information publicly on a website launched on September 30, 2014."

Unaccountable: What Hospitals Won't Tell You And How Transparency Can Revolutionize Health Care (listen online to interview on Diane Rehm show, WAMU, with Dr. Marty Makary, surgeon at Johns Hopkins and author of Unaccountable: What Hospitals Won't Tell You and How Transparency Can Revolutionize Health Care

Less than half of doctors in insurance directories may be available (Andrew M. Seaman, Reuters, 10-29-14) Inaccurate directories of doctors covered by an insurance plans means people have very few options and the U.S. government approves plans that don’t meet standards about provider availability, writes study team in JAMA Dermatology. Insurance companies should “hit the pause button” before removing any more providers from their insurance plans. More than half the dermatologists in Medicare Advantage plan directories were either dead, retired, not accepting new patients or specialized only in specific conditions, researchers found when they tried making appointments.

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Society for Participatory Medicine is "a model of cooperative health care that seeks to achieve active involvement by patients, professionals, caregivers, and others across the continuum of care on all issues related to an individual's health. Participatory medicine is an ethical approach to care that also holds promise to improve outcomes, reduce medical errors, increase patient satisfaction and improve the cost of care."

The diverse nature of patient communities: a prostate cancer patient’s experience (e=Patient Dave). It’s "not easy to find a good community for most diseases" so he started e-Patient Dave (a voice of patient engagement)

Research: Price transparency could save billions in health care costs (Joseph Burns, Covering Health, Association of Health Care Journalists, 5-1-14). Members of AHCJ have been very helpful at providing leads to many resources listed here.

A Potent Recipe for Higher-Value Health Care: Aligning quality, price transparency, clinical appropriateness and consumer incentives report (PDF) by Elizabeth Q. Cliff and Kathryn Spangler (Center for Value-Based Insurance Design, University of Michigan) and Suzanne Delbanco and Nicole Perelman (Catalyst for Payment Reform), and A. Mark Fendrick (Center for Value-B). Among other points made: "Twenty-nine states received an F because they provided no information or almost no information to the public about health care prices for hospitals, providers, in-patient, and out-patient services....Even when price and quality information are readily available, consumers need better information regarding whether recommended treatments and procedures are clinically necessary." "By reducing cost-sharing for certain high-value services and providers and increasing cost-sharing for certain low-value services and providers, Value-Based Insurance Designs encourage consumers to use high-value services and think twice about using services not likely to improve their health."

VA Honesty Project (House Committee on Veterans' Affairs). Its goal: to highlight the Department of Veterans Affairs’ lack of transparency with the press and the public about its operations and activities

House committee puts up website to track stonewalling by Veterans Affairs press office (Mark Flatten, Washington Examiner, 3-24-14)

Talk to the Hand (Jenni Bergal, Nieman Reports, Spring 2014). Public health reporters say federal agencies are restricting access and information, limiting their ability to cover crucial health issues. Transparency is crucial for reporting on health stories. ("If the press didn't tell you, who would?"--old SPJ slogan)

Are New York Hospitals Hiding Herpes From Metzitzah B'Peh Circumcision Rite? (Seth Berkman, Jewish Daily Forward, 4-1-13). Are some New York City hospitals and the city’s Department of Health suppressing disclosure of cases in which a dangerous herpes virus is being transmitted by ultra-Orthodox mohels to newborns? One staff member "explained that hospitals do not report these cases because Hasidic clients would not return if they were made public."

Tired of “out of network” insurance games (Data News, DocGraph Journal, 12-15-14). That doctor is "out of network." "We need to be able to build systems that tell us for sure which providers are in a given plan at a given time. We need to have that system available when we purchase our health insurance so that we can buy insurance that covers the doctors that we already use, or the ones that we want to use." See Open Provider-to-Plan Data Comments

How health insurance works (TurboTax)

Sunshine in Government Initiative (promoting transparency & accountability in government -- a coalition of media groups committed to promoting policies that ensure the government is accessible, accountable and open).
Pay Patients, Save Money (David Kestenbaum and Robert Smith, Planet Money, Episode 655, 10-2-15) So, 98% of health plans have some level of cost information available to their members, but only 2% actually use it. It's hard to get to. And often, there is no reason for people to shop around because they are not paying -- their insurance is. Since 2010 a small company with a product called SmartShopper is trying to bring the cost of health care down. It searches a 20-mile radius from your home zip code. You may find an MRI at a freestanding facility that costs much less than an MRI at a hospital that has to price the MRI in a way that helps cover all its other costs. And by choosing the cheaper service, you earn a check from SmartShopper. Stay tuned.

Material from another blog post, Making Health Care Prices Transparent, was moved here to consolidate related links.

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See also:
Reforming the U.S. health care system
Understanding the issues health care reform should address
Improving health care practices
Organizations serious about reforming the health care system
Updated 7-25-17, 6-9-17, 7-29-16 and 11-30-15

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