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.
3 comments:
Thank you for reading my post. You can learn more about individual health insurance in Nevada on its insurance exchange site http://exchange.nv.gov/ All states with their own insurance exchanges are operating more smoothly than the federal one.
Of note, I recently completed an article on pricing transparency and hospital charges and Nevada was the second most expensive place in the nation for routine orthopedic surgery. Consumers need to focus on health quality, cost of health care procedures, and an insurance plan they can afford. Insurance agents do not provide information on the first two items, which drive the latter.
Usually, the health insurance companies do not cover selective health treatments but some do like tubal ligation reversal surgery. Can you please suggest me an insurance company that covers these procedures?
Most of insurance companies do not cover Tubal Ligation Reversal costs. However, some adjust these additional procedures so, be careful while choosing a health plan of a company.
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