Hospital Pricing Transparency-The Next Health Care Mandate

Hospital and Medical Procedure Price Transparency-The Next Health Care Consumer Reform

Given the mandated personal responsibility for health insurance, pay for performance Affordable Care Act methodology, and increased reporting of insurance plan administrative data, it is clear that consumer driven health care is launched.  However, one piece of the puzzle is still missing, which is an understanding of the cost of a procedure before you have it done at your chosen facility. Increasingly there has been consumer demand for better disclosure of health care pricing which has resulted in a number of legislative proposals across the country. Also, one state created a unique and highly effective payment model for hospital services over forty years ago and it may be the future for a workable streamlined national model for reimbursement. This article reviews data from the nonprofit organization, National Conference for State Legislation.org, as well as state public health, and the Medicare All-Payers-Claims-Database to show the spread between states for procedure charges. Using the Centers for Medicare and Medicaid site, the public can now obtain patient safety and cost information from the government web site in advance of choosing a facility for a medical procedure.[1] In addition to this price/compare site, Health and Human Services has the Hospital Compare web site which allows parties to search based on safety records also.[2]

The National Conference for State Legislation report illustrates a vast difference in total hospital charges for the same procedure, but the Medicare reimbursement was nearly uniform.[3] The spread between the gross or marked-up charges reflects a combination of under-reimbursement from CMS and a climate of private payer willingness to pay more for the procedures. The CMS report from which this May 2013 article was based reviewed 130 of the most common medical procedures at hospitals to establish the price perspective. The exception to the dramatic price spread between gross charges and actual reimbursement paid was Maryland, because of its model for pricing transparency. For example, the statistical average charge for joint replacement in Maryland in the August 2012 report was $21,230 and the actual reimbursement paid to the hospital was $20,048. This contrasts greatly with the other states who report variances as wide as $60,000 between the billed price and the net reimbursement from Medicare.

I accessed the web site for the Centers for Medicaid and Medicare and performed an EXCEL search for the diagnostic code 482, which is a common code for orthopedic surgery, but not for full hip replacement; then extracted that data for my conclusions below.[4] (The information was drawn from 2009 published data, based on 2007 Medicare payment information.) California had the widest discrepancy between the billed charges and the Medicare payment, reflecting its high labor, rent, and other marginal costs impacting business in that state. But Nevada came in at number two for the most egregious pricing for this procedure code, despite its low labor costs, inexpensive real estate, and low scores for health status, as revealed in Unraveling U.S. Health Care-A Personal Guide in 2013.[5] This means that private insurance companies are paying a much higher cost for this same procedure than other insurers pay in other states. This factoid should be of interest not only to the patient, but to the insurance companies who negotiate contracts with hospitals and clinics.

 The five most expensive states for this type of orthopedic procedure were:

State                     Total Charge                      Actual Reimbursement

California                $68,603                                 $12,359

Nevada                  $63,755                                 $10,358

New Jersey            $55,694                                 $11,054

Florida                   $50,455                                 $  9,353

Pennsylvania          $46,672                                 $  9,880

 

The five least expensive states for this same orthopedic procedure were:

State                     Total Charge                      Actual Reimbursement

Maryland                $14,931                                 $14,081

Maine                     $22,832                                 $10,362

Montana                 $23,196                                 $  9,284

Vermont                  $23,308                                 $13,445

North Dakota         $24,129                                 $  9,787

The Maryland Model- An Alternative Method for Calculating Hospital Payment

Let’s take a closer look at Maryland’s hospital pricing model, called an All Payer Pricing Model, which was established in 1971. Rates for medical procedures are set annually in Maryland, sort of like the state insurance commissioner’s “file and use” policy for insurance pricing. The purpose of the legislation was to provide financial stability to the hospital industry, to create efficient and effective care, to constrain hospital costs, and to find a way to finance the increasing burden of uncompensated care. In order for Maryland to have this type of payment methodology they had to apply for a waiver from Medicare, which pays a percentage of gross charges for everything, rather than this bundled price per procedure.  It seems the Maryland model is practical and has worked for four decades, so why can’t we adopt something like this across the country? We already have states with waiver programs for Medicaid. If that isn’t enough of an incentive, Maryland’s hospital cost increases were 2% in 2009 versus 4.5% for the rest of the nation.[6] What an appealing quality for possible business advertisement for the Chambers of Commerce in the Chesapeake Bay State.

 State Legislation to Create Hospital Pricing Transparency

States which are leaders in the charge for medical service pricing transparency with laws mandating disclosure of hospital prices include: Colorado, Kentucky, Kansas, Minnesota, Maine, Massachusetts, New Hampshire, New York, and Utah. Utah actually has a web site that allows consumers to view procedure and price information for payers, if you know the ICD9 or DRG code and can use a query form. States with legislation to enact medical service pricing transparency include: New York, Ohio, Oregon, and Pennsylvania.

States with voluntary price reporting for hospital services are Michigan and Washington. While attempting to access hospital procedure price information for Washington State, the National Conference of State Legislation.org web site led me to the Puget Sound Health Alliance.org web site which resulted in a non working link. After hunting around on the Puget Sound Health Alliance web site (funded by health plans, health systems, and employer groups), I could not locate any price/procedure information or report. Theoretically hospitals report their pricing for procedure data to Puget Sound Health Alliance, but it isn’t available for public scrutiny at this time.

Since we are all subjected to the most expensive health care system in the world, I think we deserve to know what the services cost before we sign our lives away, literally and figuratively. And this is the healthpolicymaven signing off wishing you a safe and happy holiday season.

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[1] http://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/Medicare-Provider-Charge-Data/index.html

[2] http://www.medicare.gov/hospitalcompare/search.html?AspxAutoDetectCookieSupport=1

[3] http://www.ncsl.org/Portals/1/Documents/magazine/articles/2013/SL_0913-Hospital.pdf

[4] http://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/Medicare-Provider-Charge-Data/Inpatient.html

[5] http://www.amazon.com/Unraveling-U-S-Health-Care-Personal/dp/1442222972

[6] http://www.ncsl.org/research/health/uncovering-hospital-charges-sl-magazine.aspx

Insurance Exchange Triage

Insurance Exchange Triage

Long wait times, changes in coverage for those covered under high risk pools, and changes in provider networks are some of the problems which have occurred with the national insurance exchange implementation. This article provides pragmatic advice for those seeking insurance through an exchange, working with an agency who has to implement some of the mandates, and who want straight talk on how to accomplish your mission. First and foremost, apart from the standardization of insurance coverage and national role out of a quasi national health care policy, much of the griping over the exchange implementation is merely a ramped up “open enrollment process” which occurs annually for those covered by private insurance plans. To help allay some of the misconceptions, each of the concerns are addressed below.

Timely Processing of Insurance Exchange Applications

Firstly, we can all acknowledge that the federal exchange roll-out has been problematic and now let’s move on to the concern of a delayed application, which is-will I still have medical coverage. If you applied timely, provided all of the documentation, such as proof of income, address, family information, and plan selection your application will be processed with the date you requested. The federal law isn’t effective until January 1, 2014 which is the earliest your exchange plan will be effective. If you miss the December 15^th enrollment deadline, you can still enroll for a plan with an effective date of February or March of 2014. Since the majority of the people purchasing insurance on the exchanges are uninsured, this is not a crisis as these people do not have insurance now.  Secondly, if you are having trouble getting through on the phone or the web site for exchange enrollment, get a paper enrollment form and attend one of the free sessions at local libraries on how to enroll on the insurance exchange.

Limitations on Provider Networks

Health care clinics or hospitals in the insurance exchange offerings may not be the same as other private sector plans outside the exchange. The reason for this is the insurance companies had to meet both price and strict benefit guidelines to participate in the exchanges and the way they were able to achieve this is to negotiate with hospitals and other providers. Provider limitations or changes Is nothing new in the insurance industry, as there are contract changes every year. For example, Premera has aligned with Virginia Mason as its main hospital for their Washington State Insurance Exchange Plans in Seattle. For me, this is not a negative as Virginia Mason has annually had one of the best patient safety records of all Washington State hospitals, based on publicly available data.

 It is the insurance applicant’s job to review the provider/insurer network information and discern whether it is adequate for their needs. And hold the phone, if you doctor doesn’t have privileges at your in-network hospital, you can obtain a referral to someone who does. The primary concern shouldn’t be that you may have a different hospital network, it should be about having the safest facility.

Here is a list of the latest patient safety rankings by the LeapFrog Group, a nonprofit patient safety advocacy and research group that conducts an annual hospital survey on patient safety, as mentioned in Unraveling U.S. Health Care-A Personal Guide. Leapfrog Group identifies five patient safety criteria for prevention of medical errors including: prevention of medication errors, appropriate intensive care unit staffing, steps to avoid harm to patients (ex. falls), managing serious errors (ex. surgical site mistakes), and safety focused scheduling (ex. post discharge follow-up). There were only four hospitals in the entire State of Washington that met all of these criteria 100% of the time for the 2012[1] reporting period and these stellar performers are:

Swedish Hospital-Issaquah

Swedish Hospital-Cherry Hill

Swedish Hospital-First Hill

Virginia Mason Medical Center

Access to Doctors

One of the primary concerns with the implementation of the insurance exchanges has been how this newly insured population will access health care since many do not have a doctor. This is a huge issue and is also one of the reasons the federally qualified health centers known as community health plans have taken a lead in enrolling folks without insurance. Group practices are better able to integrate new patient populations. Also, most clinics these days employ an array of health care professionals, from nurse practitioners, to physician assistants, and licensed practical nurses, so seeing a doctor doesn’t necessarily mean an M.D. Being under the care of a good group practice will mean the organization has oversight and adheres to guidelines for primary health care treatments. And finally, since many of these people have not been insured at all, having access to a clinic is still an improvement in the potential for care. So, if in doubt on where to find a health care provider, look for a community health clinic or a group practice, like Group Health Cooperative or Virginia Mason as an initial point of entry.

Cost of Health Care and Individual Responsibility

Though the grousing about premiums has been somewhat minimized, U.S. health care is the most expensive in the world because we tolerate over charging and tremendous system inefficiencies. Because of these factors we have to pay taxes and premiums to finance our health care system, which is primarily based on user fees. Medicare recipients pay copayments and premiums for their plans, just like the private sector insured. This will not change in this country, you will have to pay for your insurance (unless you are very poor). So please consider whether you are better off paying for a higher insurance premium for a more comprehensive medical plan or a low premium for catastrophic coverage. In essence you are making a philosophical decision about how you want to spend your money and how much risk you are willing to take up front.

In the United States if you want health care, you must pay for it, via an insurance plan and/or at the point of service. To make this manifest you may actually have to do something, like read a brochure, complete an application, go to a free seminar at the library (which have had sparse turnouts), and make a decision to enroll. Failure to do so will result in a tax penalty in 2015, unexpected medical expenses, or the inability to obtain care. For those of you who still have questions on the 2014 health care mandates or the Gordian knot of U.S. health care system, pick up a copy of my book, Unraveling U.S. Health Care-A Personal Guide, published by Rowman & Littlefield in July. http://www.amazon.com/Unraveling-U-S-Health-Care-Personal/dp/1442222972 And if you can’t afford to buy it, your local library may have a copy to borrow.

And this is the healthpolicymaven signing off wishing you a safe and merry holiday season-lights up and on!

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[1] http://www.leapfroggroup.org/cp?frmbmd=cp_listings&find_by=state&city=&state=WA

Leapfroggroup.org Washington State Hospital Survey 2012 results