The Trump administration has proposed that hospitals release their actual prices, including those negotiated with insurance companies for the cost of their services. This is supposed to help patients make more cost-conscious choices when it comes to health care.

After all, if you want to do a cosmetic procedure, which is not covered by insurance, your surgeon can give you an exact price for the services. It would make sense that the same could be done for covered medical procedures as well.

Will this work? Or will it result in higher prices for care, the exact opposite of what’s intended?

Time will tell, but it seems like the plan to lower prices is bound to backfire!

Queens Hospital Emergency sign. 14 feb 2017
The Trump administration is proposing hospitals be required to publicly post their prices, in hopes patients will become more cost conscious. Cory Lum/Civil Beat/2017

Hospitals are a business.

Regardless of their nonprofit or for-profit status, the goal is to stay open, provide care for patients, and pay the costs of those involved in the care – nurses, doctors, housekeeping, administrators, etc. That requires money.

If Hospital A charges $4,000 per day for their services – regardless of what is being done – and A negotiates a rate of $3,500 with Insurance Company D, both amounts are supposed to be posted for all to see online.

Hospital B may charge slightly less than A, let’s say $3,700, and suppose they have a negotiated rate of $3,000 with Insurance D. Once they find out that they are getting less than Hospital A, they will not accept the lower amount anymore. The rules of business suggested Hospital B will charge more and refuse to accept the lower reimbursement from Insurance Company D.

Although the hospitals might make more money, the costs will filter down to the patients in the form of higher premiums that go up each year.

Patients aren’t going to choose a different hospital based on the listed price, unless they are paying for their care themselves without insurance involvement. In many cases, patients don’t have a choice of where to be hospitalized, it’s either chosen for them in an emergency situation, or directly tied to the location where their doctor has privileges.

On the mainland, that’s led to the employers who have self-funded plans – insurance coverage that is paid directly by the employer for the cost of care of their workers – choosing certain locations for high cost procedures. This means traveling for care, potentially inconveniencing patients in an effort to get the best rate for the same surgeries that could be done locally.

Walmart has discounts for patients who need spinal surgery to go to the Mayo Clinic or other Centers of Excellence facilities. General Motors has linked up with the Henry Ford Medical Center in Detroit, and Ashley Furniture Industries of Wisconsin even has direct payments for patients who travel to Mexico for knee replacements.

All of these moves are designed to direct patients to locations where the cost of care is lower, because the employer is the one paying the bills. Knowing the cost of a hospital stay is important to these self-funded groups, but not necessarily helpful for the average consumer.

Patients Have Limited Choices

Finding a less costly option for care might be possible on the mainland, but here in Hawaii there are often limited locations to receive care, especially on the neighbor islands.

Knowing the cost of hospital care is not going to change the fact that on some islands, only one hospital is available, or choice is extremely limited. Sending patients elsewhere will not help the bottom line of any of our local facilities.

The other complication with the plan to publish negotiated rates for care relates to the goal that this will educate patients about how much they can expect to pay for their services. Although knowing the cost is helpful, this is different for everyone based on their insurance plan and cannot be determined on a hospital website alone.

Many plans have a deductible, an amount that has to be paid first before insurance coverage kicks in. This can be up to $6,000 for a family of four. All different types of services are included in this initial amount, such as doctor visits, emergency care, and hospital care.

Patients would have to know exactly how much of their deductible they have met thus far prior to applying any extra hospital costs to the limits. The amount starts over every year, and there are strict guidelines on how this is applied, which are often specific to different insurance companies. Company D might be different than Company E.

Those who have dual coverage have different rules to compare with two different companies.

Insurance companies also have a lot to lose in this new attempt at transparency. If one company finds out that another company can pay a hospital less for the same level of care, they may want to pay less as well.

Although that might result in lower costs for the insurance company for that procedure, it does impact the bottom line of the hospital facility, which will be forced to recoup the money from somewhere else. That means increasing another cost, delaying raises for employees, or cutting  services to the very patients that are supposed to benefit from this plan.

The end result is not going to be the lower costs that were the purpose for posting of rates.

The only outcome that seems plausible is a higher cost from hospitals for care, more confusion for patients and the lower reimbursement leading to less services available for our local patients in the islands.

Who loses? The sick. And helping them was the reason the transparency proposal was made in the first place.

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