Are Hospitals Finally Being Forced to Compete in the Bronze Age?
Medicine during the Bronze Age was not for the faint of heart. Overcrowding, lack of sanitation and communicable diseases were common. Foodborne and waterborne pathogens caused stomach ailments and dysentery killed more than one-third of children before their fifth birthday.
A recent article in Modern Healthcare discussed medicine in the Bronze Age. But not the classical period that ended 3,200 years ago. Rather, it discussed how hospitals are adapting to life when many of their customers are becoming price sensitive because they have high deductible plans (e.g. Bronze plans). The following is an excerpt:
“Some hospitals and health systems are starting to review and revise their prices to make themselves more attractive to individual consumers who increasingly experience sticker shock when they pay for services out of pocket under high-deductible health plans.”
Hallelujah!
The article was enough to send shivers up my spine. Modern Healthcare goes on to say that hospitals are feeling the heat as more and more of their potential customers are asking questions, such as how much does an MRI cost? According to the author:
“These efforts are at least partly driven by the growing prevalence of high-deductible plans, which prod consumers to shop around for the best price. Prices for office visits, diagnostic imaging, obstetric ultrasounds, colonoscopies and physical therapy — services that consumers increasingly must pay for themselves — especially are coming under the microscope.”
Of course, hospitals’ standard answer to questions about price are often “Gosh! We won’t know the price until we perform the service and we bill your insurer.” But that response is no longer going to fly with health care consumers. Patients have an increasing array of choices like Health Care Bluebook, Compass Professional Health Services, Vitals and Castlight Health. These firms’ business models involve assisting health plan enrollees to find cheaper prices for health care. Hospitals can no longer easily hide behind third-party payer contracts to shield them from price competition. Firms like Vitals and Compass can tell patients in seconds where the cheap MRI is; what various facilities charge for a colonoscopy and so on.
It’s about time. Free market heath policy wonks have long touted Health Savings Accounts (HSAs) as a means to lower the cost of health care. Little did they realize it would take an unpopular health care law that made insurance so unaffordable that people had no choice but to accept outrageously high deductibles. Of course, HSAs are a great way to save and pay for health care before a deductible has been met. But, then again, so is self-pay. Someone with thousands of dollars in an HSA has options; they can convince themselves medical prices are too difficult to compare and decide (just this one time) to go ahead and have the service done at the facility of their doctor’s choosing. Absent an HSA alternatives to shopping for the best price begin to disappear. A $6,000 deductible forces people to shop for care until they’ve gone through $6,000 in spending! When deductibles were only, say, $1,000 or $2,000, many consumers could merely accept high prices knowing they would likely never actually have to ask the price of a given medical service once through their nominal deductible. That is changing. Now that more and more people have deductibles large enough to purchase a used car, maybe hospitals will be compelled to rework their chargemasters so list prices are not be a multiple of what private insurers pay. It would also be nice for hospitals to inform all affiliated providers that each needs to communicate with patients prior to performing services, inform them which networks they participate in, and costs for out-of-network services.
A $4,000 to $6,000 deductible gives most consumers a significant reason to shop. This becomes even more important when entire families face deductibles of $10,000 or more. It’s becoming more common for patients to ask their doctors uncomfortable questions like “what does that cost?” or “do I really need that?” Once this becomes commonplace, doctors will begin to avoid the problem but disclosing prices up front and steering patients to facilities with reasonable prices. It may be as simple as letting patients know that a particular imaging center offers cash discounts or explaining how patients can inquire about the cost of a lab test prior to receiving it.
An important step is for insurers and health plans to implement cost control tools that create transparency. Millions of consumers with access to transparent pricing can do a lot to bring about competition. If we can get patients used to asking about prices, that will encourage doctors to help patients save on medical bills. That will, in turn, prompt hospitals to be more open about their prices and possibly compete for patients’ business.
An earlier version of this Heath Alert appeared in Town Hall.
What we sorely need is an International Healthcare Bluebook that lists the prices for treatment in Mexico, Costa Rica, Brazil, Argentina, Cuba and elsewhere, where the prices are rock-bottom and where cash is king.
In years past medical tourism facilitators had a business model of being the go-between and matching patients with foreign medical facilities. Now, many of the foreign facilities have the ability to reach out over the web and interact with patients directly.
The experts I’ve talked to say India is the price/quality leader but it’s a long trip. For cardiac surgery or a hip replacement, it’s worth the trek. However, Costa Rica is the place to go for most medical procedures. English is widely spoken and the quality at the private hospitals is comparable to the United States.
I’ve personally toured the three big private hospitals in San Jose’ Costa Rica. They were very modern. One of them is owned by a Dallas company whose headquarters is only about a mile from my office.
FORTIS was buying up the hospitals in India but when the markets crashed the governments of Europe swooped in and divided up the billions. FORTIS is Latin for Steadfast. Now FORTIS means here today gone tomorrow.
Jimbino is right. When you do your surgery in New Delhi or Dallas your surgeon is Indian either way. But if surgery is done in New Delhi or Calcutta you save enough money to spend a week in recovery around the pool at the taj Mahall drinking warsteiner dunkel.
I got cataract surgery done in Rio. It cost half what it would have cost here. The doc was trained in the US on the US equipment she used for the surgery.
It took 3 months in all, but I have a home there. Still, Mexico is only a few hours away for many Amerikans and Cuba is only 90 miles from Miami.
Amerikans reluctant to learn foreign languages and to travel are paying dearly for those deficiencies.
What’s with the K in AmeriKans?
I thought colonoscopies were now part of free preventive care.
There is no such thing as “free preventive care.” Enduring Obamacare will cost you a fortune. And the “free” colonoscopy offered for joining Medicare means you have to pay a few months of Medicare premiums, at least.
I believe the IRS offers complementary colonoscopies as part of their auditing service.
With no anesthesia 😉
But Nancy Pelosi said it was free.
Even though providers keep getting blamed for this, the cost of medical services in healthcare is actually controlled by insurance company contracts. Providers may bill insurance companies 1 million dollars but if the contracted rate is $40, that is what will get paid. Most of the cost transparency tools focus on the providers fees which is completely irrelevant when patients really care only about their out of pocket cost.
Most of the transparency services I’ve talked to attempt to calculate actual charges by facility and payer. Self-insured employer often provide claims history as part of the arrangement to provide decision-support assistance to workers. Adjudicated claims are also combined with an algorithm to predict costs.
Most transparency firms have huge databases with millions of adjudicated claims history. Some firms merely provide a website to clients, while others are high-touch and have a care coordinator advice the patient and even make the appointment to ensure the patient follows through.
Again, charges are irrelevant to a consumer, Annual Physicals may have a charge of $250-$800 depending on the provider but the out of pocket cost is Zero. An Office visit may have a charge range of $300-700 but the negotiated cost range is $75-$85. If you have insurance, showing charges is more confusing than helpful. Charges will only matter when the patient is self-pay. If my deductible is $500 with 20% co-ins and $25 co-pay and your deductible is $5000 with no co-pay, our out of pocket costs will be very different.
I believe we’re talking past each other. I agree list prices (i.e. charges) are not the negotiated rate. Transparency firms either know the negotiated rates, or can predict them based on historical adjudicated claims.
For example, the chargemaster rate for an MRI may be $3,000 at Hospital A, $2,500 at Hospital B, $1,500 at Clinic A and $1,000 at Clinic B. The negotiated rate at Hospital A may be $1,100, $900 at Hospital B, $500 at Clinic A and $350 at Clinic B.
Of course, there is not one negotiated price, but many depending on the number of payers, etc.
A firm that provides transparency tools to self-insured plans could advise an enrollee to choose Clinic B with an estimated out-of-pocket cost of $350 (assuming the worker’s deductible has not been met).
If the worker has met his deductible, an employer-plan TPA could say, “hey, if you choose Clinic B, we will waive your 20% cost-sharing!”
Because I have had a $5000 deductible for the last several years I routinely ask about the price of services and get blank looks, with near indignation. I stand by my comments the other day and this in fact validates the need for real change:
“For “fun” go check out cms.gov and try to get a straight answer. There are 4 variables with 3-4 options each. Imagine walking into MacDonald’s ordering a burger then having to sit down with a “billing advisor”. 15-20 minutes later you will have paid anywhere from 3-20 bucks for the same, now cold, burger. THAT is the problem in healthcare ”
What is needed is a price list of services and while I realize it could overwhelm patients, I for one would like one, at least on the services being considered – up front BEFORE I agree to the service. I would then to be able to compare prices with facilities often quite literally across the street. The model works in fast food. Why not medicine?
I’ve advised my wife on how to shop for medical goods. It’s been easier than she realized. But, then again, I often advise her not to ask the price of existing providers. Rather, we seek out services where prices are transparent. For example, last week my wife need a blood test. I told her not to allow the doctor’s office to do a blood draw and then trust (a big national lab) to had a competitive price. I suppose she could have tried asking the price. But as you know, that would have drawn blank stares. I quickly found a company online that would allow her to order her own test (from a competing big national lab). She paid for it ahead of time and used a 20% off online coupon.
After her deductible increased this past year (requiring some shopping), my wife is amazed how much cheaper services are when you know what you’re doing. A few days ago she needed a drug that cost $52 at a big national retail chain pharmacy. I found it for $8 at big national grocery chain pharmacy near our house.
I told you Devon that TIME Insurance would give you the cost of all PPO providers net cost for a service or supply within a radius of your zip code. Not only could you see the cost but the price was guaranteed for 90 days. You could go to the doctor’s office and tell them what the price was. You never replied, like usual, but just kept on saying we need transparency. TIME was so far ahead but of course now they are DEAD. Thank-you Obamacare for killing America’s oldest health insurance company. The 1st company to market tax-free HSAs in 1996 when they were called tax-free MSAs. Without TIME we would not have the tax-free HSA in the United States today.
This could be the beginning of the end of large vertically integrated hospital systems. The reason is that independent providers, both physician and non physician, will more and more compete for the lucrative business on price.- e.g. MRIs, ultrasounds and colonoscopies. The markup on many if not most hospital procedures is huge – 300-400 % or more. A nice fat target for entrepreneurs.
How do you get the referrals if the hospital systems keep buying up the primary care practices and then pressure them to keep as much care as possible within the hospital’s system whether it’s in the patient’s best interest or not while structuring bonus compensation to reward them for doing so?