Transparency in Healthcare: When Patients Act More Like Shoppers Than Sheep

A funny thing happened on the way to the Afforable Care Act implementation. Last May—less than seven months ahead of the Affordable Care Act’s (ACA’s) Jan. 1, 2014, main rollout—the Department of Health and Human Services posted an online spreadsheet showing what, exactly, Medicare pays to more than 3,000 hospitals for the 100 most common inpatient stays and 30 outpatient services. The Centers for Medicare and Medicaid Services (CMS) chalked up the unprecedented disclosure as “part of the Obama administration’s work to make our health care system more affordable and accountable.” Even ACA detractors applauded the move, while some of its supporters pointed to another possible motive: the publication, two months prior, of Stephen Brill’s landmark exposé “Bitter Pill” in Time magazine. The sprawling report, parts of which have been disputed by the American Hospital Associaton (AHA), documented the regularity with which not-for-profit hospitals maintain their positive margins, and then some, by massively marking up bills sent to insurers and patients.

Whatever CMS’ reasoning for its data release, the deluge of hard reimbursement numbers on top of possibly scandalous billing records has only upped the intensity of the national argument over the high cost of healthcare.

Meanwhile, Brill’s bombshell included a few lowlights for the medical-imaging community. Among the outrages uncovered were a bedside chest x-ray billed at $333—Medicare would have paid around $24—and three CT scans for which a patient was charged $6,538. Medicare would have paid closer to $825 for all three. The hospital likely marked up its price by almost 700 percent.

It’s possible that the market will achieve what watchdogging can only push for (and legislation can only leave open to loopholes). Transparency is already blossoming on myriad entrepreneurial fronts, from comparison-shopping websites directly serving consumers to data-analysis firms helping HR departments herd employees toward the most cost-effective practices. 

The virtues of value

The net result of all the movement has been added pressure on providers to explain their billing practices and, increasingly, to compete with one another on price. That goes for outpatient-hungry hospital radiology departments as well as freestanding imaging centers.

“Most people are still taking their doctor’s word and going wherever they’re referred, but we have seen a spike in the percentage of patients who are going online, price-shopping and finding us for themselves,” says Tony Giardina, marketing manager at Compass Imaging, an imaging center group with two locations in Gulfport, Miss. “We have people who choose to pay cash even though they’re covered by health insurance. They say it’s still cheaper for them that way.”

The patients are finding Compass primarily through one of the many price-comparison sites launched over the past few years by payers, providers, government agencies and internet companies. Since early 2012, Compass has been paying one of the latter,, a volume-based fee with a cap of around $300 per month. Giardina says the investment usually yields enough self-booked appointments to justify the cost while also freeing up time for busy office staff.

Giardina points to one of the business hazards that come with the territory when emphasizing price: the universal perception that lower cost necessarily correlates with lower quality. He says Compass’ presence on SaveOn–Medical, augmented by the 75 percent of weekly work hours he dedicates to calling on referring physicians in person, allows him to counter the skeptical reflex. “People can look at the site, see the range of services we offer, see that we have great radiologists and top-of-the-line equipment,” he says. “And yet we charge a fraction of what they would pay at a hospital.”

Costly Care

Hospitals have seen a steady rise in the cost of providing care to people unable to pay for it. It’s common practice to shift this expense to payment rates negotiated with insurance companies. That’s just one multibillion-dollar factor sure to frustrate hospitals that are willing to try for true price transparency.

costlySource: AHA Annual Survey Data, 1990-2012

Harder for hospitals 

Hospital executives open, in theory, to price transparency will have a hard time achieving it in practice. In fact, in its “Setting the Record Straight” response to Brill’s report and in other documents that followed, the AHA noted a number of extenuating factors inherent in hospital accountancy. Among them: the complexity of hospital budgets, hospitals’ broad role in serving their communities and the financial burden of caring for indigent and underinsured patients, especially in emergency settings. And then there’s the fact that many hospital bills reflect intricate pricing formulas negotiated with insurance companies.

Steve Sonenreich, CEO of the 955-bed Mount Sinai Medical Center in Miami Beach, puts a human face on the scope of the challenge. Last spring, in the wake of the CMS posting, he went on a local radio talk show and expressed his willingness to “put our prices to all the insurance companies out in public,” adding that he would “welcome that kind of transparency of everyone in the marketplace.” Heavy press followed, though, so far, the hospital hasn’t moved past the planning phase in its effort to make good on its leader’s pledge.

The clock is ticking. Some watchers predict that all hospitals will, at some point, have no choice but to put their prices where their patients are. Johns Hopkins radiologist Daniel Durand, MD, says American healthcare’s trudge toward transparency is going to “revolutionize the way things are priced within imaging and throughout medicine.” Durand co-authored a study, published last January in the Journal of the American College of Radiology, showing that physicians pay no mind to price when they send hospital inpatients for imaging procedures. Since last May, he has divided his time between Johns Hopkins and Evolent Health, a population health-management company launched two years ago in Arlington, Va., where he serves as managing director—and spends no small amount of time making sure quality of care doesn’t suffer as healthcare economics evolves.

“We don’t have a great way of measuring value in radiology,” Durand says, adding that the specialty has often been cited in the literature as the medical branch most in need of better quality metrics. He warns that the way many radiology benefit managers and data-analysis firms currently confirm quality for professional services—a simple checkmark on radiologists’ board certification—is woefully inadequate to the challenges ahead.

“Price transparency is here to stay. We need to study it and keep our eye on it,” says Durand. “But if we don’t supplement it with some type of quality system that reflects what radiologists do and how well they do it, we will become commoditized.” 

Outpatients are focused on both price and quality, says Howard Willson, MD, senior director of clinical design at 5-year-old Castlight Health, a San Francisco-based company that contracts with self-insured employers to steer their workers toward cost-effective healthcare providers. He adds that outpatients who are offered information on providers look closely at multiple factors—not just pricing but also convenience, quality, reputation and the experiences of other patients. “If a facility’s services are higher-priced,” says Willson, “consumers will scrutinize the non-price factors for justification for the cost, just as they would with any other important service they purchase.”

Business troubles may abound for practices unprepared to stand up to the scrutiny of the consumer.