Will transparency in hospital pricing affect you?

August 21, 2006

The Centers for Medicare & Medicaid Services has joined a growing list of payers that are giving hospital patients and other medical consumers detailed price and quality information. In June, CMS posted its negotiated rates for 30 common hospital procedures at www.cms.hhs.gov/healthcareconinit/01_overview.asp. Other hospital data are at www.HospitalCompare.hhs.gov.

The Centers for Medicare & Medicaid Services has joined a growing list of payers that are giving hospital patients and other medical consumers detailed price and quality information. In June, CMS posted its negotiated rates for 30 common hospital procedures at http://www.cms.hhs.gov/healthcareconinit/01_overview.asp. Other hospital data are at http://www.HospitalCompare.hhs.gov/.

"CMS is trying to help people estimate their out-of-pocket cost for these procedures," explained Douglas Scheckelhoff, ASHP's director of pharmacy practice sections. "The information posted has generally been the cost per DRG [diagnosis-related group]. Drug costs are reflected in that total amount, so pharmacy pricing is probably not affected."

The lack of impact is no surprise. States and health plans have been disclosing usual-and-customary charges for different hospital procedures for several years. In Wisconsin, for example, the Wisconsin Hospital Association runs http://www.wipricepoint.org/. The Web site shows hospital charges required by state disclosure legislation. Consumers select a procedure and a hospital. The site also shows the number of discharges for that procedure, the average length of stay, average charge, average charge per day, and median charge per day.

Data are shown for the selected institution, all hospitals in the same county, all hospitals with similar patient volume, and all hospitals in the state. Itemized charges for drugs, devices, supplies, room and board, operating room use, physician or nursing care, and other components are bundled into a single estimate.

"We don't expect any impact on pharmacy," was the prediction from Tom Engels, VP of Public Affairs for the Pharmacy Society of Wisconsin, in 2005. When contacted this year, Engels said hospital pricing disclosure has not had significant impact on pharmacy utilization or pricing. Disclosing negotiated payment rates may eventually affect patient utilization choices, he said, but quality information is likely to be even more influential.

"We want to see more transparency in pricing and quality," Engels said. "Transparency will benefit plans and consumers. People will realize that price alone is not good healthcare information. Hospital pricing can change by the day depending on contract negotiations and other factors; quality indicators and patient outcomes are far more reliable guides."

Harvard Business School professor Regina Herzlinger is also pushing for greater disclosure. "Transparency will create a bigger demand for quality data and quality care," she said. "Physicians who've had their prices disclosed have already moved to talk more about the quality of the care they provide. As more information becomes available, providers will see the need to distinguish themselves."

Private payers are already experimenting with ways to use price and quality. Aetna revealed its negotiated physician rates in the Cincinnati area in 2005. The program is being extended to 11 states and the District of Columbia this year and will include quality information, said spokeswoman Elizabeth Sell.

The company is disclosing prices for the top 25 physician office services by specialty-about 600 services overall. Common surgical procedures such as cesarean section and tonsillectomy are next on the disclosure list. Between 600 and 1,000 patients are viewing price data monthly, Sell said, but Aetna has not been able to track any changes in utilization because of the small sample size.