Moving Backwards at the Speed of Light: The Story of Price Transparency in Hospitals

By  |  June 13, 2018 | 

In 2011-2012, an undergrad pre-med student performed an ingeniously simple but enlightening health policy study. Jamie Rosenthal called 122 hospitals across the U.S. (2 randomly selected hospitals from each state, plus Washington D.C., along with the 20 top-ranked orthopedic hospitals according to the US News and World Report rankings that year) and asked them what should have been a simple question: how much would it cost for her grandmother to receive an elective hip replacement surgery at their hospital?

In this “secret shopper” study, she explained that her grandmother had been fully evaluated and it was clear that she needed the surgery, she did not have comorbid conditions, and she did not have health insurance but would be able to pay for the procedure out-of-pocket.

As far as hospital price transparency goes, this should be a lay-up, right? A commonly performed elective procedure. Straight out-of-pocket cost, without having to wade through any idiosyncratic vagaries of specific insurance coverage. Basically the optimal condition for advance price shopping.

In that study, 14% of hospitals could not provide any sort of partial estimate despite multiple attempts.

A lot has changed since 2012. There has been an intense focus on the need for price transparency and prominent demands for hospital transparency. Most US states now have legislation mandating hospitals to report price information. Health companies and third-parties have created a number of price transparency products.

Surely, these same hospitals would perform a lot better now.

Nope.

Calling 120 of those same hospitals in 2016, resulted in 44% not being able to provide any price. What the hell?

Maybe you are not shocked, but I am embarrassed to say that I naively was.

However, I probably should not have been. Last year, I co-wrote an editorial about a similarly premised “secret shopper” study at pediatric hospitals, which found that one-third of children’s hospitals could not ever provide any cost information for an elective tonsillectomy and adenoidectomy (T&A) at their hospital, despite up to five attempts to obtain an estimate.  “Even when one could eventually obtain the requested cost information, the path for doing so was strewn with numerous obstacles: websites with unintelligible medical jargon (what parent can decode “Complete CBC w/ auto diff wbc”?), labyrinthine interdepartmental phone transfers, incomplete or inaccurate information, or hospital preregistration requirements prior to provision of cost estimates,” we wrote.

Another one of my favorite – and most depressing – articles that shine a light on the lack of price transparency was done by a high school student who found that when she called 20 hospitals to ask about the price of an electrocardiogram, only 3 could give her an estimate. Yet, 19 of them could give information about the cost of parking, and many offered parking discounts. “Hospitals seem able to provide prices when they want to; yet for even basic medical services, prices remain opaque,” they wrote.

In addition, a separate study showed that over a year after California introduced price transparency legislation to supposedly allow the uninsured to shop for care by requiring hospitals to provide price estimates, only 28% of hospitals responded to requests for price information for laparoscopic cholecystectomy, open hysterectomy, and screening colonoscopy.

I recognize that hospital price transparency is certainly not going to be a policy panacea. Especially considering the patients we take care of as hospitalists, who are often emergently admitted for acute problems (or acute exacerbations of chronic issues), price transparency is unlikely to make any noticeable dent. However, it feels like the basement-level of what we need to do to get a handle on health care costs. Knowing the costs is phase 1 on any path toward improving costs.

There is not a single reasonable patient-focused argument against price transparency. As one of my favorite health economists, policy experts and health care writers, Austin Frakt tweeted, “If ‘patient centered’ means anything, it’s got to include providing prices. Failing to do so is a moral failure (even if I don’t believe price transparency will appreciably reduce spending).”

I am not a health economist, but I do think it is likely more than a moral failure. Even if patients do not shop around, I think increased transparency could potentially change hospitals’ behaviors. Consider that public calorie reporting on restaurant menus did not seem to change individual ordering behaviors on the aggregate (which I still find surprising, because it certainly effects my ordering behavior), but it was associated with lower overall calorie content of offered items on restaurant menus.  We mention in our pediatric hospital price transparency editorial that perhaps this would be similar for hospitals: “Maybe it becomes embarrassing when you publicly report a $15,000 charge for a T&A [tonsillectomy and adenoidectomy, for us non-pediatricians] when your competitors quote as low as $1,200. Of course, critics may suggest that this level of transparency will encourage lower cost hospitals to raise their prices toward the mean.”

It is unconscionable to me that in 4 years we have not only failed to make substantial progress on phase 1 of cost awareness, but we have actually allowed hospitals to go backwards and become even more opaque. As hospitalists, community-members, and patients, I believe we must all stand up and clearly say to our hospital leadership, “This will not stand! This aggression will not stand, man!”

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About the Author: Chris Moriates

Chris Moriates
Christopher Moriates, MD is a hospitalist, the assistant Dean for Healthcare Value and an Associate Professor of Internal Medicine at Dell Medical School at University of Texas, Austin. He is also Director of Implementation Initiatives at Costs of Care. He co-authored the book Understanding Value-Based Healthcare (McGraw-Hill, 2015), which Atul Gawande has called “a masterful primer for all clinicians,” and Bob Wachter said is “essential reading for everyone who care about making our system better.”

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