Price Transparency is More than a Worthwhile Experiment

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Hospitals and insurers are doing everything in their power to force the Trump Administration and CMS to abandon their plan to force negotiated price disclosure. As Modern Healthcare recently reported, many hospitals and insurers believe President Trump’s proposal to make hospitals post prices for medical services would be bad for business and patients. But it isn’t just economists and other experts who view price transparency as a worthwhile experiment, but patients themselves. 

Across the nation, patients – frustrated with rising costs and the complexity of our health care system – are clamoring for transparency and choice.   

For instance, as CBS recently reported, James Schlieper of Central Texas drove five hours to the Surgery Center of Oklahoma to pay $3,000 for a hernia procedure his hospital back home said would cost $30,000. Schlieper asked: “Why can't we just know what it costs? ...Transparency would be great.”

The Schlieper example is not an isolated incident – not at all. It’s evidence – along with myriad other cases – of a deceptive pattern that hospitals and insurers ignore at their peril. Unnecessary, anti-competitive secrecy among hospitals and insurers is a serious structural problem in our health care system that deserves urgent attention. Recent research suggests that when patients have access to prices – so they can compare and shop for services – costs go down. 

Economist Larry Van Horn estimates that cash prices average nearly 40 percent below negotiated rates. When the state of California adopted a reference pricing model for state employees, they saw a 17 to 21 percent reduction in prices with transparency creating a positive “spillover effect” for other patients.

Likewise, businesses that embrace price and quality transparency have demonstrated impressive savings. Employers like H.B. Global of Pennsylvania and Employee Solutions of Texas have reduced health care costs nearly 50 percent for their employees and companies.

The successful regulatory reform of the airline industry offers insight to the current – untenable – situation with our health care system. After President Carter deregulated the airline industry in 1978, price transparency resulted in a 50 percent reduction in fares, more competition among new entrants, and – ultimately – broader access for millions of new airline passengers. At the same time, safety and quality improved across the industry. Such market-based reform can do the same for the American health care system – access to greater transparency, choice, and competition will ensure better outcomes for patients while lowering costs and fostering innovation.

Patients want a health care system that delivers the right treatment at the right time at the right price. Price competition works in all other sectors of our economy. Why not try it in health care? Health care spending accounts for nearly 20% of the US economy. It’s past time to introduce basic reform to usher in transparency – such reform would give patients more control over their health and their finances. Americans would no longer put off going to the doctor or hospital in fear of unknown, potential financial ruin.

This issue is gaining momentum not just among policymakers but the general public. Comedian Bill Maher recently satirized the massive price discrepancies around knee replacements, for instance. During an episode of his HBO show Real Time, Maher described how the cost of a knee replacement can vary from $17,000 to $61,000 in the same city. When Donald Trump and Bill Maher are on the same page on a public policy question, hospitals and insurance companies may want to rethink their position. To average Americans, the reflexive opposition to price transparency among hospitals and insurers begs the question: What are they trying to hide?

In every other area of our economy price competition is not merely a worthy experiment, it’s the way we do business and live life. It’s time to let America’s patients see the same level of transparency in health care. 

Cynthia A. Fisher is a life sciences entrepreneur, the founder & chairman of PatientRightsAdvocate.org, and the founder and former CEO of ViaCord, Inc.

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