Healthcare is a notoriously difficult thing to shop for. There a lot of reasons for that. For starters, we’re all squishy, warm, living breathing things. It’s rare there is a perfect solution to whatever ails us - that makes it hard to compare apples to apples when it comes to treatments and outcomes. On an even more basic level, the idea of consumerism in healthcare fails because we cannot shop by price. Marketplace Radio profiled L.A. Times columnist David Lazarus on his $55,000 cat bite. This is the first media coverage I’ve seen on pricing in healthcare which gets it absolutely right. Lazarus spoke with administrators at UCLA Medical Center who pealed back the curtain on how hospitals set prices.
At one point in my career, I was responsible for a large-scale project to recalibrate the pricing scheme for a health system. It was an effort which generated several million dollars in new revenue —without much, if any, out of pocket impact to patients, I might proudly add. Pricing and reimbursement isn’t a particularly special recipe. But yet, like laws and sausage, we rarely see how it’s made.
Lazarus explains the crux quite well:
“It all basically stems from the discounts that are contractually given to insurers in return for them bringing scads of patients into hospitals. So what do the hospitals do? They jack up all the prices so that the prices become so inflated, that once the discount kicks in, they’ll still be able make a profit,” Lazarus says. “You have no idea what any particular thing really costs.”
The audio is a great story, one I cannot recommend enough for any ePatient.
For us administrators, I challenge hospitals and providers to publish a few key numbers:
1) Gross charges on common procedures and diagnostics
2) Average contractual adjustment (the part Lazarus was told not to worry about - the “funny money”).
Will some see that level of transparency as a source of weakness in contract negotiations? Sure. But those are the providers who aren’t ready for accountable care and the impending at-risk payment structures based on population health Lazarus mentions.
And, by the way, Lazarus's mention of those population health measures is important. While our political attention was focused on the individual mandate, providers and CMS have been busy talking about accountable care.
Read the original and listen to the audio here:
The audio is available here: