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Burgess Gets One Right: Healthcare Price Transparency

The Editor's Column
Posted by WhosPlayin on 2012/6/1 4:07:17 (3522 reads)

Open in new windowFor those who read regularly, you know that we're often at odds with the philosophy and votes of our Congressman, Dr. Michael Burgess (R, Lewisville). A fine example is his crusade to save antique light bulbs. Just today, the Texas Tribune posted an interview with Burgess, explaining his opposition to the provision of the energy act that required light bulbs to have increased efficiency. It's entirely reasonable for government to regulate energy efficiency, since we all share the same grid, and pay the costs of peak demand.

But this post is not about light bulbs, or any of the other loony bills the right-wing extremists have been pushing on Capitol Hill. This post is about healthcare.

Burgess, along with three cosponsors, all from Texas, have filed a bill (H.R.5800) that would increase price transparency in healthcare by requiring hospitals to provide price information to consumers. The cosponsors are Gene Green (D, TX-29), John Carter (R, TX-31), and Mac Thornberry (R, TX-13). The bill has been referred to the House Committee on Energy and Commerce, on which Burgess sits.

Although healthcare is not a market segment that responds well to classic free market inputs, and I'll argue forever that single-payer care would be more cost-effective, I do think that there are some decisions that consumers make that could benefit from transparency in pricing. None of us is going to comparison shop hospitals while being rushed to the E.R. after a heart attack or stroke. But for those who have a little more time to ponder medical decisions, it could be quite useful to have state-wide standardized pricing information that would allow consumers to comparison shop. In some cases, knowing the price up-front - even if the price is paid by insurance - might allow a patient to choose other less-costly alternatives, or pursue a second opinion.

The full text of H.R.5800 is available online and is only about three pages at this point. The bill would require the individual states to adopt rules of their own choosing that would require hospitals to disclose the charges for various procedures and services as determined by the state. It also requires hospitals to provide timely access to the information by individuals seeking care, including estimated out-of-pocket costs for patients with health insurance. The bill does not require that the final bill for the cost of treatment cannot exceed the estimate. The bill also requires the Agency for Healthcare Research and Quality to conduct or support research on what pricing information is useful, and how consumers use it.

The Devil is in the details, of course. Currently in Texas, hospitals report pricing and quality information to the Department of State Health Services. The Texas Hospital association maintains a website at to present that information to consumers. The site is somewhat useful, but the problem with healthcare costs presented there is that they are the billed cost rather than the average cost actually paid. Some information is provided about the overall percentage of charges paid after discounts, but not for the specific service. Further, the charges for doctors and anesthesiologists are also not listed, and those can be a substantial part of the cost of a hospital stay. The data is also not up-to-date. For example, the data shown for Medical Center of Lewisville is based on January - December of 2010.

One type of hospitalization that can be planned in advance is the delivery of a baby. So I used the PricePoint tool to try to ascertain what that would cost. I selected Lewisville as the city, and Medical Center of Lewisville as the hospital.
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The data shows that the average charge for a vaginal delivery without complications is $10,314, or $4,911 per day with an average stay of 2.1 days. It says that the median charge (half of charges higher, half lower) is $9,727. The chart also shows that MCL is about $1,200 lower than the average of all hospitals in Denton County, but that MCL is about $500 higher than other hospitals with similar patient care.

But those numbers don't tell the whole story. The pie graphs below show that on average for all billing for all procedures at MCL, the hospital only collects 27% of what it bills. What other business marks prices at four times what it actually will accept?

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Although the total billing is not listed above, simple addition gives $524 million. Of that, $381 million was unpaid. Another chart on the page indicates that of the $381 million, $29 million of that was related to charity care or bad debt. So the remaining $352 million represents discounts from the billed amount.
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Some of the discounts are because of government mandated payment amounts, and those are sometimes not enough to even cover the cost to provide service. So if you subtract the government payments from the "All Payers" amounts, you get the following for insurance and self pay:

Charges not paid: $186,274,239 (64%)
Charges paid: $105,001,441 (36%)
Total Charges: $291,275,680

But remember that the above "not paid" amount includes charity care and bad debt. If you are shopping for service, you want to exclude those amounts, because you want to know what you could expect to pay if you could get the average discount.

So if we add those two back to the charges paid, we get $134,076,142, which as a percentage of the total is 46%.

Back to our vaginal delivery, if you could get the 46% average private payer discount, you would be out of pocket $4,747. Of course, there is no transparency in this because you do not know what the discount might be unless you negotiate it in advance. And you probably won't get the deep discount that an insurance provider would get, because the hospital has to deal with the risk that you might not pay the bill - and lets face it, you don't have professional negotiators working for you unless you are insured.

So after doing all of this work, simply repeat for each hospital in the area, then know that what you have is basically useless because it's going to vary based on your insurance or lack thereof, your specific medical condition, whatever your doctors decide to charge (and they may only work with you at a certain hospital), and the type of discount you might be able to get by negotiating - if the hospital even does that. And don't forget to do the entire analysis again for the charges for your newborn baby. MCL's average charge for that is $3,752, compared to about $2,500 statewide. Just to be on the safe side, you may want to check the cost of a Cesarean section. ($14,598 average charge without complications)

Hopefully you are beginning to see two things:
1. Use birth control, so you can avoid this expense until you can afford it, and
2. Wouldn't it be easier if the pricing was more standardized, and more realistic?

At any rate, Burgess' bill is a good one, and it needs to be passed. It won't fix pricing transparency, but it may help. And consumers need all the help they can get when it comes to complicated products like healthcare.

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