Hospital Price Transparency: The Long Road Ahead

On October 6, I collapsed on the golf course—the result of severe dehydration. It was a wake-up call in many ways. Among them, how virtually impractical hospital price transparency is in emergency situations.

I spent 8 hours in the emergency room. Following protocol, the ED team promptly completed the EKG to rule out a heart issue and then an MRI of the carotid artery (without contrast) to rule out a stroke before concluding I simply needed fluids.

On November 15 (5 weeks later), I received my hospital bill: $13,529.05 which included an eye-popping charge of $10,655.85 for the MRI test. Wow. Sticker shock!

Like every patient, the experience of being in a hospital was not on my short list of ways to spend a day or dollars. In retrospect, here’s what I have learned from the experience.

First, the hospital bill did not include the physician’s fee, which was $621.19—relatively modest compared to the hospital bill but sent separately. There may still be others to come; I have no way of knowing. It’s like an auto-repair shop that sends separate bills for parts, labor and a facility fee where the work is done. Piece work!

Second, the line-item charges listed on the hospital bill are meaningless. They are charges, not the price negotiated between my insurer and the hospital. To get a sense, I searched for prices of “MRI neck without contrast” as described on my discharge summary. I checked the websites for each of the three local hospitals. All directed me to call a representative to provide additional information, and none provided an estimated range. I also searched three price-shopper websites (below), each of which offered local and national price ranges and the number of provider locations where the exam could be done locally. But the estimates varied widely and weren’t based specifically on CPT 3100F, the one used by the hospital to receive reimbursement by the insurer.                                                                   

  Healthcare Bluebook                        
New Choice Health   
MRI Angiography of Neck w/o Contrast
CPT 3100F
Range: $430-$2409
$792 “Fair Price”                                                                            

Range: $303-505
Nat’l Avg: $834
MDsave Avg: $473
Range: $850-$2250
Fair Price: $1200                                                                           

Third, the hospital sent charges to my insurance company before I had a chance to review them. Amazing. It’s like a law firm drafting their fee directly from their client’s bank account without the client’s authorization. Is it consistent for hospitals to promote “patient-centered care,” and neglect to have patients verify the work and review charges?

Fourth, getting the hospital statement five weeks later…really? Why does it take so long to get a bill out? Hospitals invest heavily in information technology that assists in calculating their costs. Why does it take weeks, not days, to alert patients to their potential financial responsibility?

Fifth, in an emergency situation, is price transparency for a specific procedure or test useful? Even if I had been so inclined, I am not sure how it might have worked – should I have inquired while being wheeled into the imaging suite? My surmise: price transparency for a specific test is only relevant if it’s an outpatient non-emergency occasion where I am not directed to use a specific provider by my insurer.  

Notwithstanding the considerations above, I still find myself puzzled by the price tag for my MRI. It’s part of the bigger discussion about hospital price transparency that’s getting more attention these days.

Starting in January, a new law, the Hospital Price Transparency and Disclosure Act of 2018, requires hospitals to post their chargemasters in a "machine readable format." States have required hospital price transparency, but according to Catalyst for Health Reform, 45 states currently get a failing grade because the charges that are posted bear scant resemblance to prices patients will end up paying.

Presumably, anyone can download a hospital’s charges for comparison, but there three issues that suggest the road to hospital price transparency is likely to be long and bumpy:  

1.) Making accurate hospital prices easily accessible. Per Reuters, 49% of hospitals provide “some but not complete pricing information” and only 7% offer online estimates for common procedures. That’s because the overhead and indirect costs in each hospital vary so widely, and each prices its services accordingly.

Extrapolating accurate hospital prices and their underlying costs and making these accessible to patients in a timely and responsible manner is what patients and employers want. Accessing their underlying costs in the context of a specific hospital’s payer mix, cost structure, patient acuity and so on is tricky. Thus, hospitals have been slow to embrace price transparency, opening the door to outside developers and others noted above. And, in using tools developed by outside developers, understanding the methodologies on which price estimates are offered is key.

2.) Encouraging their use by consumers. According to a July 2018 analysis of lower limb MRI utilization by the National Bureau of Economic Research (Working Paper 24869), “Fewer than 1% of individuals used a price transparency tool to search for the price of their services in advance of care.” Aetna found its price transparency tool was used by only 3.5% of its enrollees though accessible to all. The State of New Hampshire’s price transparency portal has been visited by only 1% of its citizens in three years, similar to results in other states. And so on. By any measure, use of price transparency tools by consumers has been modest.

Some speculate that encouraging physicians to provide pricing information at the point of care might be the solution, but 18% of clinicians say they do not have a cost estimation tool, and 13% say they lack the staff to address price issues (Navicure).

Some are betting insurers and employers will drive hospital price transparency through their benefits designs; after all, more than half of the 157 million American’s under 65 years of age are covered by an employer’s plan that features a high deductible requiring them to monitor their out of pocket costs. But to date, use by employees/enrollees has been marginal.

Getting larger numbers of consumers to consider a hospital’s pricing along with its quality and accessibility in making decisions is the ultimate destination. It remains distant for most.

3.) The long-term relationship between hospital price transparency and health cost containment. Conventional thinking is that hospital price transparency will stimulate competition; economists and policymakers consider hospital lack of price transparency a fundamental flaw. But will increased attention to hospital prices translate to lower costs for hospital care?

Here’s the issue: hospital price transparency is a concern to hospital leaders, but reimbursement cuts in contracts with insurers, Medicaid and Medicare are more urgent concerns. Their operating costs for prescription drugs, labor and technology are increasing faster than their revenue growth and their physician relationships are strained. They recognize consumers want greater price transparency, but understand that the “shoppable services” for which consumers are attentive to are 7% of their revenues. They understand that employers are analyzing hospital prices promoting bundled payment reference prices for acute services vs. paying attention to prices for specific tests or procedures. They hear complaints from policymakers who muse that hospitals purposely drag their feet to avoid pricing transparency but know they have more to gain and much to lose if hospital price transparency becomes the Wild West.

Skeptics think the concept of hospital price transparency is a moot issue; they suspect the tide of public opinion will shift toward a Medicare for All model wherein all services needed by consumers will be covered by a single monthly premium in addition to taxes. States like Maryland are using a global capitation in tandem with their “Wear the Cost” campaign to  draw attention to hospital-specific prices for hip replacementknee replacementhysterectomy, and vaginal delivery.

Will posting a hospital’s chargemaster in "a machine-readable format" stimulate a decline in health cost? It’s unlikely. Market forces will likely play a bigger role.

My take:

More than 31% of total healthcare spending is spent in hospitals. They employ 5.2 million and 41% of the physicians in the country, so their role at the center of the health system is significant. The growing demand for greater hospital price transparency is understandable and how hospitals respond beyond “posting their chargemaster in a machine-readable format” January 1 will reflect the organization’s market strategy, not an aversion to transparency.

In all likelihood, the scope of hospital services for which private websites offer pricing comparisons will expand exponentially in the next 2-3 years—well beyond the “shoppable services” already available. It will be increasingly uncomfortable for many hospitals, especially those with high prices unjustified by their reputation for clinical performance.

Reflecting on my incident in October, I still don’t know what I will eventually pay out of pocket, and I am still shocked by the $10,655.85 price tag for my MRI exam. I know I need to drink more water. And I know the road to hospital price transparency is long and bumpy.