Availability of Consumer Prices From US Hospitals for a Common Surgical Procedure

By Jaime A. Rosenthal; Xin Lu, MS; Peter Cram, MD, MBA
JAMA Internal Medicine, February 11, 2013

Objective – To examine whether we could obtain pricing data for a common elective surgical procedure, total hip arthroplasty (THA).

We found it difficult to obtain price information for THA and observed wide variation in the prices that were quoted. Many health care providers cannot provide reasonable price estimates.

Comment (excerpts):

The results of this study provide insight into the availability of pricing information for a common elective medical procedure, THA. We found that only 16% of a randomly selected group of US hospitals were able to provide a complete bundled price, though an additional 47% of hospitals could provide a complete price when hospitals and health care providers were contacted separately.

First and foremost, understanding our results requires an understanding of the rationale behind calls for greater pricing transparency. The desire for pricing transparency is based in fundamental principles of economics; the assumption that if patients know the prices of medical services, they will make rational decisions by avoiding high-cost health care providers ceteris paribus.

Our results are somewhat remarkable considering the support expressed by virtually all stakeholders for pricing transparency.

Irrespective of the reason for the variation we encountered, we would actually view our results with a modicum of optimism. The nearly $100 000 range in pricing that we encountered suggests that a savvy and determined customer may find opportunities for significant savings with comparison shopping. Alternatively, it is equally possible to argue that our results suggest that less-educated or less-savvy patients could pay exorbitantly high prices.

http://archinte.jamanetwork.com/article.aspx?articleid=1569848

And…

What Does a Hip Replacement Cost?

Comment on “Availability of Consumer Prices From US Hospitals for a Common Surgical Procedure”
By Andrew Steinmetz, BA; Ezekiel J. Emanuel, MD, PhD
JAMA Internal Medicine, February 11, 2013

As Rosenthal and colleagues write, there are many potential solutions for reining in costs and improving quality in American health care, but they require access to reliable information on price and quality for patients to make informed decisions. Free markets need price and quality transparency to function properly.

The history of the automobile industry shows that information asymmetry is treatable. Health care will need to travel down a similar path. It is time we stop forcing people to buy health care services blindfolded — and then blame them for not seeing. The transparency imperative is here, and one way or another the public will soon be empowered to choose their health care based on reliable data on price and quality.

http://archinte.jamanetwork.com/article.aspx?articleid=1569849

There is a terrible epidemic of a mental derangement that has befouled the minds of not only those in the political, policy and academic communities, but also the minds of the public at large. This mass hysteria is exemplified by this statement extracted from the Rosenthal et al article: “Our results are somewhat remarkable considering the support expressed by virtually all stakeholders for pricing transparency.”

Almost everyone seems to be fixated on the concept that if we make health care pricing transparent, we will be able to place every individual in charge of getting the health care that they need while eliminating excessive prices and unnecessary care. The massive shift taking place to higher deductibles and other consumer-driven cost sharing is based on this principle.

Implementation of the Affordable Care Act is pushing us towards innovative changes in the way we pay for health care, such as this article which implicitly supports “bundling” as a means of obtaining a single price for complex services – to be used to shop around for cheaper providers.

With our current budgetary problems on the state and local levels, let’s look how this might play out if we expand the concept from health care to other social services.

Imagine creating price sensitivity for community fire services. Suppose we bundle the payment for putting out a house fire. Not only would we need competing fire services, but we would also need access, through a 911 call, for the various bundled prices. Or a car fire? You can be transferred to the 911 car fire operator who has the car fire bundled prices. Or a preventive fire safety inspection of your home – mandated by the Affordable Fire Act? Instead of 911, you can access eFireInspection providers for competitive fire inspection bundles, which provide basic inspection services, with options such as purchasing a place at the front of the queue in the event of multiple fires.

The police? Easy. Competing bundled prices on home invasion robberies. Murder? No problem – bundled packages with or without conviction and imprisonment of the murderer. Maintaining the peace? Are you kidding? With price transparency who would waste their money on that unnecessary service?

Education bundles? Park and recreation bundles? Public street and highway bundles? City sanitation bundles? How about bundles for politicians? You could buy only the politicians that you need.

Of course all of this is totally ridiculous. So why have we separated out our health care social services to be placed under the control of price shoppers? Isn’t there a better way?

Everyone recognizes the silliness of the examples above because we all understand that such social services are financed through global budgets established by the stewards of our taxes. With minor exceptions, the services are provided automatically without the necessity of establishing price sensitivity on accessing those services. Any additional funding requirements are addressed through the budget process.

Likewise, as in Canada, our hospitals should be globally budgeted. To do so would introduce administrative simplicity and lower costs due to greater efficiency. Physicians’ rates can be kept fair and reasonable through negotiation with the single public payer. Most other nations have shown that you can provide comprehensive care at much lower costs without requiring price transparency for health care shoppers.

Look again at the authors’ statement: “Our results are somewhat remarkable considering the support expressed by virtually all stakeholders for pricing transparency.” Price transparency as a solution for our outrageous health care costs? It’s time to bury this terribly unsound idea and move on with a system that works – a single payer national health program.