We’re missing the true point of hospital price transparency

Since New Year’s Day, the Centers for Medicare and Medicaid Services has learned the hard way that forcing hospitals to post their standard prices online brings as much confusion as insight to prospective patients. Rather than enlighten us on the cost of, say, a knee replacement, we must now parse the complicated medical jargon associated with knee replacement surgery — do I need the Component FML P-STB Cndlr Knee Ant-Pstr Pors 54x55mm for $42,011 at one Texas hospital or do I need its Implant TIB Knee MOST HNGD SZ 2 at $25,956? — while trying to figure out how much insurers will knock off the price.

This clearly wasn’t the intended result behind the CMS requirement that, as of Jan. 1, every hospital must post a “machine readable” copy of its chargemaster, a list of all charges the hospital can levy. Yet it shouldn’t have taken the actual implementation of this shortsighted policy to reveal it wouldn’t bring true price transparency into the cost of health care.

My nearly 30 years of working with hospitals as an executive with companies like Cerner, McKesson, and now Recondo Technology have given me an up-close look at the true mirage a hospital’s chargemaster really is. In the absence of information about a patient’s unique level of insurance coverage, or if the patient’s insurer will even authorize a certain supply or prescription associated with a procedure, the numbers on the list are largely arbitrary.

Moreover, this mandate is based on the faulty assumption that health care is one of the few professions that don’t publicly disclose their prices. That’s just not true.

Lawyers, accountants, mechanics, plumbers, electricians, and a vast range of other service providers don’t publicly disclose their prices for the same reason that hospitals and physicians don’t: the cost depends on the buyer’s unique needs.

So I’ll reframe the issue like this: Health care is one of the few professions that doesn’t give a reliably accurate estimate of costs before the buyer receives services. That is what really needs to change.

Some hospitals and health systems, such as Baylor Scott & White in Temple, Texas, and the Toledo, Ohio-based Promedica, are making it possible for patients to get accurate estimates from calculators embedded on their websites. (Full disclosure: These calculators use technology from my company, Recondo Technology.) You simply type in a few pieces of demographic data, the procedure and, if you’re insured, your insurance policy number. The calculator uses that information to generate an estimate based on the hospital’s chargemaster list, but adjusted to your insurance coverage, including deductible obligation, and then further tweaked to reflect the likelihood of what the insurance company will authorize under your specific plan.

These calculators can also direct you to payment assistance options. And here we get to what should be the true point of price transparency: helping patients actually pay for their health care.

The help is sorely needed. In a widely cited revelation last year, fully 40 percent of Americans are unable to cover even a $400 emergency. Square that with the average cost of a deductible, which now hovers at $1,573 for a single worker in an employer-sponsored health plan. That’s just the average; at least 26 percent of workers in such plans actually face a deductible of $2,000 or more.

And then there’s co-insurance, which routinely clocks in at 10, 20, or 30 percent of a health care bill for many health plans. Add in the stratospheric costs of some prescription drugs and procedures and the sum is a sadly predictable outcome: Even the insured are now putting off health care, including people with serious conditions like diabetes.

It bears repeating: People need help paying for their health care. A confusing list of charges that doesn’t reflect what they will ultimately owe won’t provide it.

However, some proactive steps by hospitals can give consumers the information they need. And here I can actually give a nod to CMS’ mandate that hospitals post their charges. It sets the stage for hospitals to provide the kind of information that prospective patients need to compare, or at least evaluate, hospital charges.

At this point, hospitals would be wise to direct visitors looking over the chargemaster to a price calculator that generates accurate estimates based on the visitor’s insurance coverage or ability to self-pay. Such calculators can also direct users to more information about the hospital’s payment assistance options.

As more hospitals include such calculators on their websites (and ideally make them mobile friendly), it will become easier for people to do what CMS originally envisioned with price transparency: shop around for the best prices.

Will this really lower the overall cost of care in America? Perhaps modestly. Health care remains local, and not every locality has a competitive market for health care services.

But what we do know is that when prospective patients understand in advance what they will pay, and have a payment assistance option, they are more likely to go ahead and schedule the health care they need instead of dangerously putting it off (at an even higher cost).

And that’s an outcome that price transparency should be aiming for.

Jay Deady is CEO of Recondo Technology, a Denver-based health care technology company that helps hospitals replace manual revenue cycle management tasks — from claim status inquiries to patient price estimates — using artificial intelligence-powered automation.