‘The impenetrabilityof hospital bills islegendary,’ thuskeeping buyers frommaking informedchoices, states agov’t report.
Better Price Transparency May Help Lower Health Care CostsBy Cliff Montgomery – Sept. 29th, 2007Below we offer quotes from a very interesting July Congressional Research Service report, which proposes greater price transparency for health care prices as a means of lowering cost:“Price transparency helps consumers obtain price information easily, which allows them to make useful comparisons of costs of alternative choices.”In health care markets consumers often have difficulty finding useful price information. In particular, few consumers have a clear idea of what hospital stays or hospital-based procedures will cost, or understand how hospital charges are determined. Prices charged by hospitals vary significantly across hospitals and vary within hospitals across categories of patients.Special Characteristics of the Health Care Markets“Health care markets differ from markets for standardized commodities described in economics textbooks in several important ways.Health Care Is Complicated“By its nature, health care cannot be easily standardized, making price dispersion difficult to monitor. Different diseases affect different people in different ways, and treatments that work for one patient may fail to help another.”Hospitals are sometimes described as ‘job shops’ to emphasize their dissimilarity to assembly lines. Thousands of different types of procedures may be performed in an average general hospital, and even specialized hospitals must be equipped to face a wide range of conditions and complications.”Because hospitals produce many different outputs with many of the same inputs, allocating costs to particular outputs or to specific patients can be somewhat arbitrary. There is no unambiguous way to allocate the costs of employing nurses, pathologists, accountants, and billing clerks to specific procedures or patients.”Hospital management strategies that seek to assign such costs to specific ‘profit centers’ appear to rely more on rules of thumb than on precise economic calculations.Physicians as Agents“In most cases, physicians will make a preliminary diagnosis, recommend which specialists will be seen, and determine whether a patient is admitted to a hospital or not.”It is true that ethical and professional guidelines stress that physicians must act in the best interests of the patient.”Still, physicians may be swayed directly or indirectly by insurers, pharmaceutical companies, hospitals, and peers in ways that might not benefit patients.”While the vast majority of physicians feel a strong professional compunction to provide the best care possible, they also face pressure to reduce costs to patients or insurance companies. The problem of agents considering their own interests, along with those on whose behalf they act, exists in this market as well as many other markets.Patients Pick Physicians and Hospitals Pick Physicians“Because patients rely upon physicians as their agents, patients often do not choose which hospital they enter. Rather, patients choose a physician, and the physician’s admitting privileges determine where the patient goes.”Hospital credentials committees decide which physicians get admissions privileges based on a physician’s training, residency program, malpractice record, and other relevant information.”Although some physicians have admitting privileges at more that one hospital, the available evidence suggests that most physicians admit the bulk of their patients to one hospital.”A patient needing an operation may have some choice of hospital if her physician provides referral to more than one surgeon. While this provides the patient with some choice, the patient rarely has detailed information about cost and quality, and is rarely in a position to make an informed choice.”[…] Patients are usually in a poor position to choose a hospital which best suits their needs because they lack the right information and because they are shielded from information about cost differences among hospitals.Patients Have Poor Information About Hospital Quality and Costs“Patients may also be in a poor position to choose their own hospital because they have little access to information about hospital prices and quality or are not familiar with the information that is available (such as hospital ratings).”As with any other good or service, a good decision about hospital selection must be supported with adequate information on costs and quality. Hospitals in most states are not required to make public individual prices for items, and other resources for comparative pricing information are limited. Aetna, for example, has provided price information for physician services in selected areas, but this information is available only to its subscribers.”The impenetrability of hospital bills is legendary. Hospital bills for privately insured patients routinely run for pages and contain hundreds of individual items.”Hospital billing and coding have become arcane arts, practiced by highly specialized clerks and consultants. Insurers and government analysts have access to files that can be used to generate meaningful average costs, but this information is not available to patients.”Compounding the problems patients face, they generally have access to little useful information about health care quality. In part this is due to the inherent complexity of medical care and the difficulty of defining and measuring quality.”Like what you’re reading so far? Then why not order a full year (52 issues) ofe-newsletter for only $15? 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