Healthcare Pricing

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Dear Friends and Colleagues:
Attached an article from todays Miami Herald discussing the issue of healthcare pricing. According to the reporter many health insurers and governments are already charging ahead to make information about hospital and doctor quality performance available to the public, but many believe the biggest push -- and the biggest battleground -- will be the revelation of healthcare pricing. It sis true that at the moment, healthcare prices are so convoluted that even experts struggle to make sense of them.At some point, however, this abstract knowledge will be used for specific economic ends. Insurers are already calculating the costs of care and comparing it with the quality of a provider's care. Some even start steering customers towards doctors who provide "cheaper"care by rewarding customers financially.
Even though I am supporting transparency in healthcare pricing and the patients right to receive high-quality care, I am concerned that insurers may just focus on cheaper and not necessarily better care.
This in the end will reward those docs that lowball others and comply with checklists and protocols to maintain their competitive edge.
The patients choice in physicians selection will thereby severely hampered.
Yours
Bernd



Posted on Sun, Dec. 03, 2006

HEALTHCARE | THIRD IN AN OCCASIONAL SERIES
Lifting veil on healthcare costs
Exposing the super-secret lists of healthcare pricing could lead to huge changes -- and give consumers a real understanding of the true costs of their treatment.
BY JOHN DORSCHNER
jdorschner@MiamiHerald.com

At Broward General or Mercy Hospital, a coronary bypass operation can be expected to cost $30,909 to $43,407. At Baptist Hospital, the cost is likely to be far more -- $43,070 to $58,271, according the health insurer Cigna.

For women ages 40-64 insured by Aetna, gynecologist Moises Lichtinger in Fort Lauderdale charges $86.93 for a comprehensive exam. In Miami Beach, gynecologist Pedro J. Brasac charges $106.99.

For the first time, insurers are starting to reveal some of the most deeply held secrets of healthcare -- what things really cost. Those revelations may ultimately change what providers charge -- and how much consumers pay.

''We're at the leading edge of a huge change,'' says Brian Klepper of the Center for Practical Health Reform.

Many health insurers and governments are already charging ahead to make information about hospital and doctor quality performance available to the public, but many believe the biggest push -- and the biggest battleground -- will be the revelation of healthcare pricing.

At the moment, healthcare prices are so convoluted that even experts struggle to make sense of them.

The list of prices for Baptist Hospital, for example, is contained in a foot-thick document called a chargemaster. No outsider is allowed to see it. What's more, virtually no one pays those prices. Medicare, Medicaid and consumers with private health plans all pay negotiated rates that may be only a third of the official prices. That means only those without insurance get hit with a full-price bill.

Uwe Reinhardt, the widely respected healthcare economist at Princeton, compares present hospital pricing to entering a department store blindfolded and shopping for a ``clothes benefit program.''

''Only months after a shopping trip would the employee receive . . . a statement explaining how much the employee had to pay for whatever he or she had stuffed, blindfolded, into the shopping cart,'' wrote Reinhardt in the January/February issue of Health Affairs.

That meant the department store/hospital had finally presented its charges, and the insurer then decided what was a ''reasonable'' rate for those charges that it deemed appropriate. Finally, the customer is told to pay a certain percentage of that mysterious figure.

At present, persons with insurance generally don't care about this mysterious pricing. For that coronary by-pass surgery mentioned above, for example, the Cigna patient in one typical high-deductible plan would have an out-of-pocket expense of $3,000 at each facility, regardless of the cost.

Knowing prices now ''helps provide clarity on how much things cost,'' says Joe Mondy, a Cigna spokesman.

''The more people understand the cost of healthcare, the better off we will be,'' says Charles Cutler, national medical director for Aetna.

At some point, however, this abstract knowledge will be used for specific economic ends. Insurers are already calculating the costs of care and comparing it with the quality of a provider's care. ''That's going to start a huge shift,'' says Klepper of the Health Reform group.

The Bush administration in Washington and private insurers believe that hospitals and doctors who do the best in this quality-cost scenario should be rewarded with higher payments -- the so-called ``pay for performance.''

The flip side is steering consumers to those providers who provide quality efficiently. Cigna is already starting to do that, with its Cigna Care Network, made up of doctors who score well for quality and cost-efficiency. Starting in January in 58 markets (including South Florida), members who use the Cigna Care doctors will be rewarded by saving $10 to $30 per office visit.

Doctor quality by itself is a complex issue -- as The Miami Herald discussed in a report last Sunday -- but efficiency may be even more complicated.

Spokesmen for programs like Aetna's Aexcel, UnitedHealthcare's Premium Physicians and Cigna's Care Network insist that efficiency ratings are given only to those physicians who have already shown quality performance, but none of them go into detail about what makes for efficiency.

Theoretically, efficiency could mean keeping patients out of expensive emergency rooms or not requesting unnecessary tests and procedures, but in practice, doctors are suspicious that it might mean simple cost-cutting.

''You have to look very carefully at those efficiency numbers,'' says Nancy Nielsen, a Buffalo internist who's head of the American Medical Association's House of Delegates. ``Some are only about costs. That's where it gets tricky. That's where the biggest fights and negotiations are.''

The AMA is so concerned about insurers forming networks using efficiency measurements that its delegates, meeting in Las Vegas in November, passed a resolution seeking laws to prohibit insurers from creating networks ''based solely on economic criteria.'' Last week, the national organization of doctors joined its first lawsuit on the issue, against Regence BlueShield in Washington state. Insurers insist it won't be ''solely'' on costs, but they say something must be done about cost disparities, many of which have nothing to do with quality of care.

In South Florida, Aetna reports, the negotiated rates -- the real rates insurers pay -- vary widely right now. Knee arthroscopy in an orthopedist's office can cost from $1,922 to $4,000. For a hysteroscopy (the insertion of a small telescope to study a uterus) at an OB/GYN office, the price ranges from $1,200 to $4,756. For a heart catheterization, at a cardiology office, the price ranges from $600 to $2,500.

Of course, top doctors charging more might explain those variations, but what explains differences in radiology tests, such as a magnetic resonance imaging?

''These are commodities,'' says Mondy of Cigna. ''An MRI is an MRI is an MRI.'' But Cigna's studies show that their costs vary by an average of 30 percent.

An MRI without contrast agent at the Cleveland Clinic in Weston costs $400 in Cigna's negotiated fees. Broward General's price is $450. Hollywood Medical Center charges $660.

Some insurers are more focused on advising consumers about estimates for procedures -- without showing the differences between facilities. Blue Cross Blue Shield of Florida, for example, tells its members that coronary bypass surgery for a 45- to 64-year-old in Miami-Dade will cost $55,562 to $80,257 in network, $124,260 to $179,488 out of network, for everything including hospital, surgeon and related costs. In Broward, it would be a couple of thousand less.

A Florida government website also offers pricing information, but it is based on hospitals' gross charges, which persons rarely pay. Still, an uninsured person who is likely to be charged full fare can learn from the website (floridacomparecare.com) that for coronary bypass surgery at Baptist Hospital is $135,573, well below Broward General's $140,227 and Mercy's $154,261.

But the data of Cigna and other insurers reveal that Baptist, which has a near monopoly on the affluent area of southern Miami-Dade, is able to negotiate a much better deal for itself than the others can.

When it comes to real prices -- the negotiated rates -- Cigna pays Baptist about 35 percent of its full charges (around $47,500), while Broward General gets about 26 percent ($37,000) and Mercy receives about 24 percent ($37,000). And, as Cigna members are told on the insurer's website, the three hospitals are all ranked at the top level of three stars for the quality of patients' outcomes.

Eric Shatanof, vice president of Baptist Health South Florida, says that the price of one procedure, such as coronary bypass, doesn't mean that the Baptist hospitals (which include Doctors, South Miami and Homestead) are more expensive in all charges. ``Pricing is pretty complex. We could be more expensive on heart surgery and less expensive on something else.''

However, executives of four other insurers have told The Miami Herald that Baptist is consistently and considerably higher in its pricing. The executives don't want their names used because they don't want to anger the hospital system, which the insurers regard as crucial to maintaining customer satisfaction.

Shatanof acknowledges that ''our cost structure is quite a bit higher than our competitors. We have a higher clinical staffing ratio. We have higher investments, like the remote [intensive care unit] monitoring. So it's not necessarily apples to apples comparisons'' on quality and price.

But if insurers go to tier systems, in which consumers would have to pay more to go to higher-priced hospitals, ''it could change the mix,'' said Shatanof. ``Then you have to change the pricing.''