Giving patients power over prices

The push for medical 'price transparency' is on, but some wonder if it really would lower costs

The true cost of health care remains a mystery to patients, but Dr. Lawrence Huntoon is trying in his own small way to change that.

He believes the best way to control the rising cost of medicine is for the buyers and sellers to interact directly, just as they do when purchasing stereos, furniture or food in stores.

So the neurologist recently posted the prices of his common services at his Derby office. In theory, other doctors would do the same and compete for patients.

An office visit costs $100. An electromyography to diagnose muscle weakness goes for $200. He'll make a house call for $150.

"You should know prices in advance. This is only fair. If mine are too high, you can go elsewhere. It's a free market. That's why we don't have $10,000 televisions or toilet seats," Huntoon said.

He's not alone.

Momentum is gaining nationally for more helpful public information from doctors, hospitals and health insurers about the price of health care.

The push for "price transparency" coincides with the Bush administration's agenda to expand tax-favored health savings accounts that require individuals to pay for a large portion of their care but allow them to build up whatever money remains unspent.

The thinking goes that patients will shop around for medical care and spend more wisely if they're responsible for more of the cost.

But as beneficial as comparison shopping for health care may seem, it also poses challenges.

What use is knowing the price of a service if it's not possible to tell a patient the total cost of treating a medical condition?

And what's the point, if patients don't know if one hospital or doctor is better than another?

"You need to know price and quality to make a decision. If the less-expensive hospital has bad outcomes, the savings isn't worth it," said Bruce Boissonnault, president of the Niagara Health Quality Coalition.

Data about hospitals

Price is getting a lot of attention for good reason.

The United States spends far more on medical care than any other industrialized country, $5,635 per person in the United States compared with $3,003 in Canada, $2,996 in Germany and $2,139 in Japan, according to 2003 data from the Organization for Economic Co-operation and Development. And, unlike those other countries, the U.S. has about 46 million people without health insurance.

Medical pricing got a boost in June when the Centers for Medicare and Medicaid Services disclosed on its Web site what it pays for 30 elective hospital procedures and other common nonsurgical admissions, including heart operations and knee replacements. The federal agency, which manages the two giant government health programs, plans to release similar information for ambulatory surgery centers later this year.

But just how valuable is the information?

Rates for Medicare, which covers the elderly and disabled, are determined by a formula, not by market forces.

Meanwhile, bills have been introduced in the Senate and House that would require reporting of average and median hospital charges for frequently performed procedures. Some states, as well as health organizations, also have made limited price information available.

The New York State Health Accountability Foundation in June published a hospital report card that, for the first time in New York, makes public the average charges for common procedures and conditions, such as heart failure and appendectomies.

But charges apply only to patients who pay their own bills - mainly the uninsured - and don't represent the true cost of care because health insurers negotiate discounted rates with hospitals and physicians.

Hospital charges are far higher than costs for patients with private insurance. New York State hospitals on average charge self-paying patients 2.3 times as much as the actual cost of providing inpatient care, according to a recent study by Citizen Action of New York.

Complexity of care

There has been little movement so far among health insurers to embrace price transparency.

As of Aug. 18, Aetna Inc. said it will provide online to members in six states and nine cities what it pays physicians for office visits, diagnostic tests and minor procedures, as well as some information on quality of care.

"We thought it was important to try to provide people with information that would allow them to choose physicians and understand what the costs of health care were," Dr. Charles M. Cutler, vice president and national medical director for Aetna, said at a panel discussion organized by the Kaiser Family Foundation.

But it's not clear if Aetna will represent the exception or the rule.

No one is going to compare doctor or hospital prices in a medical emergency. And much care is complex and customized, with doctors not knowing in advance what tests or treatments may be necessary.

If comparison shopping is to work, said James Kaskie, medicine must find a way to estimate the cost of commonly bundled services and to show patients that there are reasonable choices that can be made that influence cost.

"People should understand the cost of the products," said Kaskie, president and chief executive officer of Kaleida Health. "If they knew the alternatives, they might become partners with us in helping bring down the prices."

The design of many insurance plans discourages shopping by price. That's because a significant portion of hospitalized patients with large medical expenses quickly exceed their annual deductible, the amount of money they pay before the insurer covers 100 percent of the cost.

Even if high-deductible health plans catch on, critics worry that they will just cause individuals to avoid basic care, rather than shop by price.

Perhaps of greatest importance, experts say, is that knowing the price of a treatment is of little value if a patient doesn't know the quality of the outcomes at a physician's office, hospital or outpatient surgery center.

Information about quality of care is slowly becoming public thanks to groups like the Niagara Health Quality Coalition, which publishes a hospital report card. But even if quality data becomes more widely available, questions remain over whether it will make a difference when 70 percent of health care costs are spent on 10 percent of the patients, mostly at the end of life.

"We support the idea of price transparency," said Robert Doherty, senior vice president for governmental affairs and policy at the American College of Physicians, which represents more than 100,000 internal medicine specialists.

"But the idea that it will dramatically lower health-care spending - I'm a skeptic," he said at the Kaiser event. "So much money we are spending is on very sick patients with multiple chronic conditions and people at the end of life."

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