What Do Hospitals Really Charge? No One Knows, Even With Posted Prices

Last Updated Mar 14, 2011 3:49 PM EDT

An increasing number of hospitals -- along with health plans -- are posting the prices of common medical procedures and tests on their websites. What's not clear is whether this is helping consumers or confusing them. While the ability to shop online should help uninsured patients and those in high-deductible plans most, it may not matter if they can't afford to pay those prices in the first place.

Under the Affordable Care Act, all U.S. hospitals will have to publish prices for their most frequently performed services by 2014. In addition, not-for-profit hospitals will have to limit charges to patients who qualify for financial assistance to those they typically bill to insurers. So the evolution and impact of the new pricing transparency has broad implications across the country.

In Michigan, three hospital systems -- Henry Ford in Detroit, Oakwood in Dearborn, and Spectrum in Grand Rapids -- are publishing their average prices for common procedures and tests. Spectrum has been posting the average prices paid by major payers for 250 services since 2006, adding Medicare and Medicaid in 2008.

It's an advance, just not much of one
This approach is a significant advance beyond the publication of hospital "charge master" prices in Arizona, California, Florida and a few other states. Those prices represent what hospitals charge payers before discounts, which is often several times higher than what they actually get paid. The only people who pay the charge master price are the uninsured.

In the wake of some well-publicized cases in which people unable to pay these high prices had their wages garnished or declared bankruptcy, many hospitals began to change their approach to the uninsured. Today, in fact, some hospitals offer deep discounts and financial counseling to patients who are uninsured or underinsured. Letting people know how much their care will cost and what their financial responsibility will be upfront is considered a smart way to reduce bad debt while enhancing community relations.

A lot of people are interested in how much hospital care costs. The Henry Ford Health System says that 2,000 people a day visit its pricing website. Many of them belong to the high-deductible plans that more and more employers are offering. Similarly, Spectrum Health reports that 1,000 people a day visit its site for price information alone.

When a price isn't really a price
But there remain problems with the cost data, even if it's the average payer prices. First, these prices include only the facility fees, not the doctor fees, which may vary considerably. Second, the average price doesn't tell an individual consumer what he or she will pay, since Medicare and Medicaid pay so much less than private insurers do for the same procedure in most areas of the country. Moreover, a particular health plan's rate -- which members pay up to their deductible -- is directly related to its leverage in the market.

There is payment estimation software that enables institutions to calculate a patient's bill in advance, depending on its contract with that patient's insurer and the patient's deductible and copayments. But few hospitals are currently using it.

Hopefully, more hospitals will get beyond the charge master stage and begin to post average payments for big-ticket procedures and tests. But at this point, it's still not clear whether patients will use this information to pick a hospital. At the end of the day, when someone is facing a major medical procedure, they're still more likely to listen to their doctor and their friends and relatives than to base their decision on a cost figure that they may not understand.

Image supplied courtesy of Wikimedia Commons.

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  • Ken Terry

    Ken Terry, a former senior editor at Medical Economics Magazine, is the author of the book Rx For Health Care Reform.

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