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Jul
14
2006

Guest column
Joel Ario, administrator of the state’s Insurance Division
Cory Streisinger, director of the Oregon Department of Consumer & Business Services

The authors have submitted this Op-Ed (a version of which originally appeared in the
Oregonian)
for discussion on this blog.

You're about to have a baby and since your employer switched to a high-deductible health plan, you care about price a lot more than you used to. You're a savvy shopper, adept at using the Web to find the best deal. So you quickly discover www.orpricepoint.org, an Oregon hospital association Web site that tells you the statewide median charge for an "uncomplicated vaginal delivery" is $5,024. More clicking and you learn hospital charges are about 10 percent higher in the Portland area and vary by as much as 40 percent among local hospitals. You're disappointed the site doesn't rate the quality of services. You figure delivering a baby isn't all that complicated, so you're willing to decide based on price. Then things get really frustrating. You learn that the $5,024 is figured on so-called "billed charges" that nobody really pays, just like nobody pays a new car's sticker price, and that this amount might not include other charges, like the anesthesiologist's bill. Your insurer has negotiated a discounted rate, but it only applies to one local hospital. Even worse, the amount is a closely guarded secret - your hospital and insurer won't tell you what it is.

Welcome to the world of so-called "consumer-driven health care" where the rosy rhetoric is well ahead of the reality. You can't find out how much your hospital stay will cost you, but you know it will be expensive. You start to wonder just who can control costs like the multi-million-dollar hospital expansion projects busting out all over the Portland area.

Major hospitals are building ever fancier new units to attract the most profitable patients. Experts may disagree about the need for a hospital's particular project, but each one increases insurance premiums. Consumers want high-quality care, but many Oregonians would accept economy-style rooms, just like they do when picking hotels. Hospital pricing ought to facilitate such choices; instead it obscures them with a bewildering labyrinth of hidden cross subsidies. Who ultimately pays for all this? You do, in higher insurance premiums. If you can't understand the pricing, you can't make cost-effective choices. Your co-payments, a growing component of health care to help share expenses with your employer, are supposed to motivate you to make cost-effective choices. But how can you do that if you can't find out the real costs?

The Oregon Association of Hospitals and Health System's Web site is a good first step toward greater transparency, but it isn't enough. That's why Gov. Ted Kulongoski asked us to work with hospitals, insurers, large employers, unions and others to publish information about the discounted rates that insured patients actually pay, directly or indirectly, through their health insurance premiums. For the out-of pocket portion, we're also pushing health insurers to give you the information before, not after, you're billed. Making hospitals more accountable will stimulate some good old-fashioned price competition. That's how it works with cars, refrigerators and other products that have a lot less impact on your pocketbook than health care. Shopping for knee surgery might never be as easy as pricing TVs, but we can and must do better if we're serious about making health care affordable for all of us. 

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Join the dialogue here

Jul 14, 2006 4:20:53 PM
Jerris Hedges, MD says

This is an interesting post and consistent with an article by Michael Porter and Elizabeth Olmsted Teisberg in the Harvard Business Review entitled "Redefining Competition in Health Care". However, to make the economics of transparency work, Porter & Teisberg note that there must be transparency within the insurance industry and the removal of group discounts for insurers and large businesses. Further, one wonders about the medical legal liabiity of hospitals and physicians when patients as customers make treatment decisions solely on the basis of cost. Obviously the topic is complex and these postings only whet our appetite for more information.

Jul 16, 2006 2:37:21 PM
JDKB says

Hi, I saw the article in the Bend Bulletin & thought I would stop by. It's true this is a more formal blog than I'm used to, hope my comments aren't inappropriate.

I would love to know the cost of a basic visit to the doc for my kids, who are 4 and 2. I would like to have a two-tiered pricing regarding expertise. For example (this is invented): daughter has a rash which looks like diaper rash but after 5 days does not respond to off-the-shelf creams. I would like to see a nurse at a fixed cost of $X. The nurse can tell me if yes this looks exactly like a common diaper rash, try a different cream; or, no, this is more serious & you ought to see a doctor. Then I'll go to the doc for $2X. So many of my visits to the doc regarding my kids result in the doc saying, yep, they're sick, you have to wait it out. I would like to have a quick way of being reassured that what they've got is not serious & seeing a nurse would seem to satisfy that.

Jul 16, 2006 5:02:33 PM
Kathleen says

I think the tier idea is a great one whose time has come. Some groups already do similar things, like the advice nurse I can call as part of my health plan, but its not pervasive. Your idea is similar to an earlier post (The Computer Will See You Now, scroll down the blog, it was in April)which envisions a team approach to health care generally. Nurses, nurse practioners, physicians assistants and similar well-trained caregivers provide the first tier (with the aid of diagnostic software), and the (more expensive) physicians and specialists reserved for those who need them (based on results from the first tier). There are some good comments on that post, particularly about the obstacles to this because of how nurse practioners are (not) recognized and/or reimbursed by the health care financing system.

Jul 17, 2006 10:19:52 PM
Stephen Gregg says

My daugter in law had two c-sections, three year's apart under the auspices of two different insurers. The first insurer acquired slightly less that a 50% discount from billed charges and the second 25%. Not only do we have the confusion about selecting the highest value hospital, but how do we select the carrier with the best deals?

In some ways the authors' dilemma could be easily mastered by simply requiring all providers to prospectively estimate the cost of all elective care over $5000. Could all work very similarly to the old protocols of pre-admission certification and utilization review. Instead of proxies for costs, actual dollar estimates are prospectively stated and approved. Just takes a legislature and regulator willing to take it on.

Jul 18, 2006 11:30:29 AM
Sara says

The prospective idea is an interesting one. But what kind of administrative costs would that add to the system? A potential patient would ask maybe dozens of hospitals to fill out a prospective statement, then go to the least expensive/best quality one, but now the other 11 have done what is in effect "bidding" to provide a service for nothing. Magnify this by the number of patients accessing the system nationwide, and this is a big extra cost.

What about the possibility of assigning territories to hospitals? Similar to how regulated utilities used to operate? Hospitals and the providers living within those territories would be obligated to provide all services to all people living in the territories on cost plus 5 to 10 % "profit." The costs plus profit would be covered by the third-party payer/insurer assigned to that territory, who would also routinely audit the costs basis. This approach would also require outcomes transparency too, so that when the quality of a hospital or provider in a certain region dipped below some specified amount, people would be allowed to go to another facility...or something along those lines. Hmm, I wonder if hospitals would become like good public schools… a magnet for people to move into certain neighborhoods.

Jul 18, 2006 12:39:49 PM
Holly says

Let's please not model any of our essential public services after our current public school system. I'm not a policy or economics person, and most of this confuses me, which is why I'm on here trying to learn more. But, wouldn't a district or territorial approach just result in better hospitals in wealthier areas where the customer base was more adept at demanding quality and more philanthropically inclined, and wouldn't hospitals just end up shutting down in poorer areas, just as is happening with public schools?

Jul 18, 2006 4:09:59 PM
Sara says

A problem with our public school system is inadequate/unpredictable/irrational financing. But I agree, it is certainly not the greatest model for public services. Territorial health care could be financed in a way that kept funding attached to the individuals, as it is now, and thus providers would be assured (like a regulated utility) of certain amount of revenue from people in its service territory, thus, no reason to predict hopsitals would shut down in poor areas, although the hospital/number of providers would be sized to fit the need (Consider that sparsely populated areas have small power utilities, big cities get PGEs and PacifiCorps.) Sure, there are all kinds of sticky problems with this, and yes, wealthy people maybe would endow their neighborhood hospital, no way (or need) to ever prevent that. A key to this would be quality measures that are completely transparent and accessible to the public, along with cost transparency, so that when quality in one territory declined, people could go to another hospital, for instance. Probably territorial hospitals would eventually also become more efficient, and elect to cost-share some resources--one has neurology, another has some resources for cardiology--less overlap, no overbuilding of resources that drive up costs due to the need to compete for patients, because you are certain of a customer (patient) base to begin with.

Apr 9, 2008 5:55:36 PM
Missouribred says

Alijor.com allows hospitals, physicians and other healthcare providers to post their prices.

Apr 19, 2008 3:37:10 PM
Naples says

Since 2002, when the company was stated, Solantic, an urgent care center headquartered in Jacksonville, Florida, has posted its prices on the internet and on menu boards in their lobbies so patients always know what their visit will cost.

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